Insurance administration

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1 Insurance Administration

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3 A CONSUMER GUIDE TO INSURANCE NEEDS FOR YOUNG FAMILIES INSURANCE ADMINISTRATION

4 Table of Contents About Insure U 1 Young Families Considerations 1 Who We Are 2 Resources for Maryland Consumers 2 Auto: And Baby Makes Three 3 Home: Owning Up to Your Home 4 Life: We Are Family 5 Health: I Do! - Insurance for Two or More 7 How to File a Complaint 9 i Maryland Insurance Administration

5 About Insure U Ever feel overwhelmed trying to figure out your insurance? Well, now you have help. Together, your state regulator of insurance (Maryland Insurance Administration) and the national organization for insurance regulators (National Association of Insurance Commissioners) developed a series of educational materials aimed at you, the consumer. The materials take into account your current stage of life and which insurance products you are most likely to need. Therefore, the material on Young Singles offers the appropriate guidance for those newly on their own. The material on Young Families will be most pertinent to those just starting to raise a family. Teenagers raise new insurance questions, so material is provided to address the needs of Established Families. However, Empty Nesters will find the material on Seniors most helpful. They say Knowledge is power, and you have it all right here in easy to understand, everyday terms. This brochure is a first step to feeling smart about insurance. The Maryland Insurance Administration is available to help, so visit our web site at or call us at Young Families Considerations As a newly married couple, perhaps with children under 5 years of age, your financial situation changes at this stage of your life. Your considerations include: purchasing a home, protecting your family in the event of a spousal death, and making sure you have adequate health insurance for you and your children. Consider these four types of insurance coverage: I. Auto Insurance II. Home Insurance III. Life Insurance IV. Health Insurance A Consumer Guide to Insurance Needs for Young Families 1

6 Who We Are The Maryland Insurance Administration (MIA) is the State Agency that regulates the business of insurance in the State of Maryland. If you are having a problem related to an insurance policy that is sold to you here in Maryland, the MIA will try to help you resolve that problem. If you have purchased the policy elsewhere, contact us and we can give you the contact information for the state that can help with your problem. We provide assistance to consumers, businesses, health care providers (doctors, hospitals), and producers (agent or broker) in all areas of insurance, including life, health, disability, automobile, homeowners, and property. The MIA is here to protect your consumer rights. If you feel that: the terms of any policy you receive are not what you agreed to; you have purchased additional unnecessary insurance; you have been charged for a policy that you did not authorize; please contact us at: or (Fax) When you contact us, it will be beneficial to know the name of the insurance company and who sold you the policy. Resources for Maryland Consumers The MIA produces consumer guides, rate comparisons and frequently asked questions related to various types of insurance. The following is a sample list of available publications: Consumer Guide to Homeowners Insurance Consumer Guide to Automobile Insurance Consumer Guide to Health Insurance An Insurance Preparedness Guide to Natural Disasters And more... 2 Maryland Insurance Administration

7 You can access this information in several ways: Download it from our web site, on the Consumer Publications page; or call or write the agency to have copies mailed to you. Visit our display at any number of community events around the State. Find these printed materials at various state and local agencies. Auto: And Baby Makes Three Having a child, of course, affects all of your insurance considerations. But focusing on the family car, here are some special concerns: At this stage of your life, you begin to interact with otherparents, perhaps driving their children in your car whilecarpooling. To protect yourself, you might want to considerincreasing your liability insurance in case of an accident. During this time you will likely be accumulating more assets, and therefore you might want to consider purchasing an umbrella policy that will better protect your financial resources in case of a law suit stemming from a car accident or an accident occurring in your home. As your family is expanding, you might be thinking about purchasing a bigger car to fit additional family members. Since auto insurance premiums are linked to the type of vehicle driven, check the insurance rates before you make your final choice of a car. SUVs, convertibles and performance vehicles typically cost more to insure than some other vehicles. And finally, if you haven t yet merged policies held by separate spouses, now s a good time to do it to control costs, as consolidation will potentially offer you a decreased rate in your premiums or enable you to acquire more insurance at the same level of spending. Key Considerations for Auto: Comply with Maryland s mandates for minimum auto insurance coverage. Consider what vehicle you drive. A Consumer Guide to Insurance Needs for Young Families 3

8 For more information about auto insurance, refer to the MIA s Consumer Guide to Auto Insurance and Auto Insurance Comparison Guide to Rates. Home : Owning Up to Your Home At this life stage, young families often take the big plunge into home ownership a step that instantly requires you to get smart about home insurance. If you are purchasing your first home, or reviewing a new homeowner s policy, remember that you only need to insure the home itself and your possessions not the land your house sits on. Thus, you should expect that the insured value of your home will be less than the market value. Growing families often find that their starter home needs improvement. Be sure to alert your insurance company when making any major home improvements usually anything over $5,000 as you will want to update your homeowner s insurance policy to reflect the new enhancement and prevent being underinsured. In maintaining your residence you must realize that you may be liable for things that happen on your premises. Your policy should protect you against lawsuits due to these types of liability issues. Also as you install backyard items for your active kids swing set, trampoline or swimming pool inform your insurance company. These items may require you to increase your liability coverage through an umbrella policy that protects you in the event that someone is injured while on your property. As you acquire more valuables jewelry, family heirlooms, antiques, art you might want to consider purchasing an additional floater or rider to your homeowner s policy to cover these special items. They re typically not covered by a basic homeowner s or renter s policy. 4 Maryland Insurance Administration

9 Finally, we all know that raising kids can be tough on your budget. One way to keep your yearly premium costs down is to consider increasing your homeowner s deductible. Bear in mind that raising your deductible increases the out-of-pocket costs you will have to pay in the event of theft or damage to your home. Most Standard homeowners insurance policies do not cover losses from flood. Therefore, you may want to consider purchasing flood insurance even if you do not live in a flood zone. You can purchase a flood policy to cover your home and a separate flood policy to cover your personal belongings; a standard flood insurance policy does not automatically provide both coverages. Please note that flood insurance is underwritten by the federal government. Key Considerations for Homeowners: Keep your policy limits current as you make improvements. Consider flood insurance and appropriate riders for protection of your belongings. For more information about homeowners insurance, refer to the MIA s Consumer Guide to Homeowners Insurance and Homeowners Insurance Comparision Guide to Rates. Life: We Are Family Having children is often the catalyst for buying life insurance, as young parents recognize the awesome, life-long responsibility theyhave assumed. When purchasing life insurance, consider covering both spouses even if one stays at home and is not employed. In the event of the stay-athome parent s death, the surviving spouse will need to shoulder all the responsibilities of the household. In determining the amount of life insurance to purchase, make sure to take into account your full childcare costs especially for children under 5 years old and for kids with special needs. Take the time to estimate these costs carefully, and factor them into your decision-making process. A Consumer Guide to Insurance Needs for Young Families 5

10 Weigh the costs/benefits of purchasing whole life vs. term life insurance as part of your financial planning strategy. Whole life insurance policies build cash value and also pay a death benefit. But they are more expensive. If you can t afford whole life insurance right now, but think you may want it in the future, you may want to consider term life insurance with a conversion option that will let you change to a whole life policy for a fee when you are ready. Or you may want to purchase term life insurance, which offers death benefit protection for a specified time period. For example, term life insurance may be appropriate to provide coverage during your childrearing years or while paying off a mortgage. Term life premiums increase as you age. Term life is typically less expensive in your younger years than permanent life insurance, which covers you for your entire life and typically has level premiums. You may also want to consider purchasing a combination of term life insurance and whole life insurance. Remember to update your policy to include your children as beneficiaries, especially in the event of a divorce. You might want to consider naming a trustee for your children in the unfortunate event that both parents die before the children turn 18. Some people purchase life insurance for healthy newborn babies because their insurability is high and the premium costs are low. If health issues develop later in life, individuals may not be eligible for life insurance coverage. Here are some tips to prudently control life insurance costs: Many life insurance plans offer discounts for improved health (quitting smoking, lowering cholesterol, etc), so make sure to inquire about these potential benefits. If you are in the military, consider Serviceman s Group Life Insurance (SGLI) a program of low cost group term life insurance automatically available to all military members. This policy is automatically activated unless the service member opts out. - If you have decided to purchase additional life insurance outside of the SGLI, review the list of exclusions to the policies, and make sure 6 Maryland Insurance Administration

11 that the benefits will be payable even if the death is a result of war, the action of a military force or traveling on a non-commercial aircraft. - Individuals who sell life insurance at military installations are required to obtain authorization from the Department of Defense, so ask to see the agent s permit or license. Finally, remember the impact of key factors that can affect your life insurance premiums. These include: - Pre-existing and/or chronic health problems, such as diabetes, heart disease or cancer - Poor health habits, such as smoking and excessive drinking - Your driving record - Engaging in dangerous hobbies, such as skydiving, skiing or rock climbing Key Considerations for Life: Calculate the full costs of raising children when determining the amount of coverage. Consider the affordability of Term versus Whole Life policies. Avoid lifestyle habits that increase your risk. For more information about life insurance, refer to the MIA s Consumer Guide to Life Insurance. Health: I Do! - Insurance for Two (or more) Here are some special considerations for young families: If both parents are working in full-time jobs, it is recommended that you compare these health insurance policies to see which best fits the needs of your family: - Employee - Employee and Spouse - Employee and Family - Employee + one, where the spouse has separate coverage A Consumer Guide to Insurance Needs for Young Families 7

12 Make sure to review the co-pay amounts and different options carefully to see exactly what is covered and what isn t for both parents and children. Check to see if your employer offers a flexible spending account. These plans, which allow you to set aside pretax dollars for medical expenses and childcare, are a good way to reduce your out-of-pocket medical costs. When expecting a child, review the coverage options available to you, and find out exactly how your healthcare plan handles the costs. Remember to consider the costs of prenatal vitamins, prenatal and neo-natal screenings and tests, emergency procedures, delivery C-section and traditional and pediatric care. Also, make sure you are aware of the deadline to register your newborn with your health insurance company. Consult with your employer and health insurance provider regarding the requirements before your child is born. If you decide to adopt a child, consult with your employer and health insurance provider regarding the requirements for obtaining health insurance coverage in advance, and also check with your state health department. Key Considerations for Health Insurance: Learn about your options to get the best coverage for the premiums. Check your coverage before having a child. Be sure to register new children with your insurance company before the deadline. For more information about health insurance, see the MIA s Consumer Guide to Health Insurance. 8 Maryland Insurance Administration

13 How to File a Complaint The Maryland Insurance Administration s (MIA) primary role is to protect consumers from illegal insurance practices by making certain that insurers and producers doing business in Maryland act in accordance with state insurance laws. You may contact the MIA to file a complaint against an insurer or producer who you believe is not acting in accordance with Maryland law. Maryland s insurance laws not only govern insurers conduct -- they also protect Maryland consumers. Insurers are prohibited from settling claims in an arbitrary and capricious manner. This means that insurers claim settlement practices must be fair, nondiscriminatory and adhere to Maryland insurance laws. If you feel that your insurer has acted improperly, you have the right to take action by filing a complaint with the MIA. However, some disputes may be governed by your policy s terms and may not be a problem the MIA can resolve for you. Complaints must be received in writing. Please provide as much detail as possible, including copies of pertinent documents. A trained, professional investigator will handle your complaint. The investigator will contact the insurer/producer to try to resolve the issue. Meanwhile you will be advised of the steps being taken on your behalf. Complaint files are not closed until the MIA has made a determination regarding the complaint. The MIA also established a Rapid Response Program designed to help certain consumers resolve property and casualty claims (such as auto and homeowners claims including those made under commercial lines policies) quickly and without having to file a formal written complaint. For more information about this program, please contact us at or ext Participation in the Rapid Response Program is voluntary and does not affect your right to file a formal complaint. For additional information or if you have a complaint, please contact the MIA s Consumer Complaint Investigation Division at or toll-free at Consumers may also file their written complaint in person or by mail. Consumers may also file a complaint by going online to the MIA s web site at and under For Consumers, click on File a Complaint. A Consumer Guide to Insurance Needs for Young Families 9

14 Filing a Civil Action for a First Party Property & Casualty Claim A Maryland consumer who believes that their property and casualty insurer failed to act in good faith in refusing to settle their first-party insurance claim may seek special damages against the insurer, both in a private civil lawsuit against the insurer and in an administrative consumer complaint made with the MIA. If a consumer alleges that the failure to pay the first party property and casualty claim was made in the absence of good faith, then the consumer can file a civil law suit seeking to recover, in addition to the value of the claim, up to the policy limits: the costs of litigation, including attorneys fees up to 1/3 of the amount of the actual damages, plus interest at the post-judgment rate. Some lawsuits that allege the absence of good faith and seek these special damages must first be submitted to the MIA for review and decision before the suit can proceed in court. An explanation of when a consumer can seek these special damages, when a lawsuit has to be filed with the MIA, and how to make that filing are explained in a separate MIA publication: Filing a Civil Action for a First Party Property & Casualty Claim - Insurer s Civil Liability for Failure to Act in Good Faith (Section Complaint). In addition, a Maryland consumer who believes their insurer did not act in good faith in denying their first-party property and casualty claim, may submit an administrative consumer complaint to the MIA. If the Commissioner finds that the insurer did not act in good faith with regard to the first-party claim, the Commissioner may sanction the insurer by imposing a financial penalty and, in addition, ordering the insurer to pay: the value of the claim, up to the policy limits, the costs of litigation, including attorneys fees up to 1/3 of the amount of the actual damages, plus interest at the post-judgment rate. 10 Maryland Insurance Administration

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16 This consumer guide should be used for educational purposes only. It is not intended to provide legal advice or opinions regarding coverage under a specific insurance policy or contract; nor should it be construed as an endorsement of any product, service, person, or organization mentioned in this guide. This publication has been produced by the Maryland Insurance Administration (MIA) to provide consumers with general information about insurancerelated issues and/or state programs and services. This publication may contain copyrighted material which was used with permission of the copyright owner. Publication herein does not authorize any use or appropriation of such copyrighted material without consent of the owner. All publications issued by the MIA are available free of charge on the MIA s website or by request. The publication may be reproduced in its entirety without further permission of the MIA provided the text and format are not altered or amended in any way, and no fee is assessed for the publication or duplication thereof. The MIA s name and contact information must remain clearly visible, and no other name, including that of the company or agent reproducing the publication, may appear anywhere in the reproduction. Partial reproductions are not permitted without the prior written consent of the MIA. Persons with disabilities may request this document in an alternative format. Requests should be submitted in writing to the Director of Public Affairs at the address listed below. Insurance Administration 200 St. Paul Place, Suite 2700 Baltimore, MD TTY Lawrence J. Hogan, Jr. Governor Boyd K. Rutherford Lt. Governor MIA-IU-2 (01/15)