INSURANCE IN CALIFORNIA
Once you have decided to relocate it is essential not to forget the importance of insurance which is often an over-looked task for most newcomers. It is understandable that making the journey from one city to another will mean attending to the most fundamental issues first to establish your new residence, but equally as important is protecting your belongings, financial interests, and family from unforeseen events. The information contained in this chapter is provided directly by the California Department of Insurance (CDI). The CDI’s Consumer Information Insurance Guides and other tools can provide valuable information on all types of insurance, including residential insurance, visit www.insurance.ca.gov to access these resources.

HOMEOWNERS INSURANCE
For most people, a home is their largest financial investment which means shopping for homeowners insurance is essential in protecting this valuable asset. Start by planning on taking enough time to conduct a thorough search of the insurance marketplace to find residential insurance that meets your specific needs. Whether you are interested in purchasing homeowners (including fire only), renters, condominium unit owners, or mobile home insurance, it is important to shop and compare insurance products just like you would when shopping for any other important consumer purchase. No matter which policy you choose, be sure to read the exclusions in your insurance contract.

What Is Covered By Homeowners Insurance?
The homeowners policy contains two sections. Section I provides property coverages (A, B, C and D) while Section II provides liability coverages (E and F). A brief description of the individual coverages follows:

— Coverage A – Dwelling
Coverage A provides major property coverage that protects your house and attached structures if it is damaged by a covered peril.

— Coverage B - Other Structures
This coverage provides protections to other structures on the residence premises that are not attached to the dwelling. Items covered include detached garages, tool sheds, etc. Coverage B is normally limited to 10% of the Coverage A limit. However, you may purchase more coverage for an additional premium.

— Coverage C - Personal Property
This coverage provides protection for the contents of your home and other personal belongings owned by you and other family members who live with you. Coverage C is normally 50% of Coverage A or is subject to an established amount agreed upon by you and the insurance company. Coverage is limited on certain types of property that are especially susceptible to loss, such as: jewelry; furs; fine arts; silverware; antiques; collectibles; firearms; and money. Additional amounts of insurance may be purchased. You may want to consider scheduling these items separately. Ask your agent for specifics.

— Coverage D - Loss of Use
This coverage will help with additional living expenses if your home is damaged by a peril insured against to the extent that you cannot live in your home. These expenses include, but are not limited to, housing, meals and warehouse storage. Coverage D is normally limited to 20 percent of Coverage A.

— Coverage E - Personal Liability
This section of the homeowners policy will provide coverage in the event you or a resident of your household are legally responsible for injury to others. Coverage E normally provides a defense and will pay damages, as the insurance company deems appropriate. There are some exceptions. The liability coverage will not protect you in all situations, such as an intentional act. All of the exclusions and specific language can be found in your policy.

— Coverage F - Medical Payments to Others
This coverage pays for reasonable medical expenses for persons accidentally injured on your property. For example, if a neighbor's child is injured while playing in your home, the medical payments portion of your homeowner's policy may pay for necessary medical expenses. Medical payments coverage does not apply to your injuries or injuries of those who reside in your household. It is not a substitute for health insurance. Business activities are also excluded. All of the exclusions and specific language can be found in your policy.

— Additional Residential Coverage
Earthquake, flood, mold, earth movement, and "wear and tear" are some of the perils that are usually excluded. When an insurer writes your homeowners coverage, the insurer is legally obligated to offer you earthquake coverage for an additional premium. The earthquake coverage may be written directly by the homeowner's insurer, by a separate insurer, or through the California Earthquake Authority (CEA).

You may elect to buy specialized homeowners coverage that provides additional protection for your dwelling and contents beyond the standard coverage limitations in most homeowner's policies. Ask your insurance agent or broker about available endorsements to extend coverage. Endorsements to coverage such as building code upgrade can greatly add to your protection in a loss.

In order to assist you further in shopping for residential insurance, the CDI provides a list of the current insurance companies licensed to sell residential insurance in California. You can contact the companies directly for quotation information by calling the phone number provided. Remember that licensed insurance companies come in many shapes and sizes. Whether large, medium, or small, licensed insurance companies are required to follow the insurance laws and regulations in California. When shopping for insurance choose the company that best meets your needs for service, coverage, and price. www.insurance.ca.gov

CALIFORNIA FAIR PLAN ALTERNATIVE
The FAIR Plan is an association located in Los Angeles comprised of all insurers authorized to transact basic property insurance in California. Coverage is available to all California property owners, provided basic underwriting guidelines are met. The FAIR Plan issues insurance as a last resort, and should be used only after a diligent effort to obtain coverage in the voluntary market has been made. The CDI recommends that all FAIR Plan policyholders shop for a different insurer at least annually in order to search for coverage that is more comprehensive than that offered by the FAIR Plan.

The California FAIR Plan does not estimate the cost to rebuild your home, or the cost of labor and materials in your (or any other) area, or determine the appropriateness of the coverage you request. Instead, those are your responsibilities.

AUTOMOBILE INSURANCE
Now that you’ve relocated to the Bay Area, it’s a good opportunity to familiarize yourself with auto insurance requirements in California. It’s also important to know exactly what your auto insurance covers and in what circumstances the insurance provider will not cover damages.

Automobile insurance is simply a contract that helps pay for certain types of financial losses or obligations resulting from the use or ownership of an automobile. To obtain this contract (insurance policy), you pay a specified amount of money called a premium. In return for the premium paid, the insurance company agrees to pay certain expenses and legal liabilities depending on the terms of the insurance policy. Having the right insurance coverage may prevent you from suffering a large financial loss in the event of an automobile accident.

The responsibilities of owning and driving an automobile include following the financial responsibility laws under the Vehicle Code. The most common way to satisfy the financial responsibility for operating an automobile in California is by purchasing automobile liability insurance.
If you choose to meet your financial responsibility by purchasing liability insurance, the DMV outlines minimum limits that you must purchase under Section 16451 of the Vehicle Code.

FINANCIAL RESPONSIBILITY LAWS
The statutory minimum limits of liability insurance in California are as follows:

Bodily Injury Liability
$15,000 for death or injury of any one person, any one accident.
$30,000 for all persons in any one accident.

Property Damage Liability
$5,000 for any one accident.
There are four ways to accomplish financial responsibility:

1. Coverage by a motor vehicle or automobile liability insurance policy;
2. A cash deposit of $35,000 with the DMV;
3. A certificate of self-insurance issued by DMV to owners of fleets of more than 25 vehicles; or
4. A surety bond for $35,000 obtained from an insurance company licensed to do business in California.

All California drivers and owners must have at least the statutory limits of minimum liability insurance or an approved alternative way to pay for injury or property damage they may cause. Penalties are very severe for non-compliance with this section of the vehicle code.

When your car is in an accident for which you are found legally liable, bodily injury (BI) liability covers your liability to others for injuries to them. Property damage (PD) liability covers your liability for damage to someone else's property.

A policy with BI of $15,000/$30,000 and PD of $5,000 will pay out as follows:
The maximum limit for one person's injuries, medical expenses, etc. is $15,000 under the bodily injury portion; If two or more people are injured, the maximum limit for the accident will be $30,000;

The maximum limit for damage to other people's property (their car, their fence, etc.) is $5,000.
Comprehensive coverage (other than collision), uninsured motorist, medical payments and collision insurance are not required by law.

What Other Coverages are Available?
Insurance companies must offer the following coverage with every automobile policy:

Uninsured / Underinsured Motorist
Provides liability insurance when the party at fault does not have the state required minimum liability coverage, or the minimum liability coverage is insufficient to cover the injuries sustained in the accident. Likewise, uninsured
motorist property damage covers possible reimbursement for damages your car sustains (BI and PD). Most insurance companies will also offer the following optional coverages:

Medical Payments
Provides for the payment of medical and similar expenses without regard for liability.

Physical Damage (collision and comprehensive):
Neither of these cover mechanical breakdown or normal wear and tear. Collision covers damage to your vehicle caused by collision with another vehicle or with any other object, regardless of fault. Collision insurance covers vehicle upset (overturn), but does not cover bodily injury or property damage liability. Comprehensive coverage covers damage to your car caused by reason other than collision, such as fire, theft, windstorm, flood, vandalism, etc.

Endorsements/Riders
Special equipment (i.e. after-market additions such as premium stereos, tires, and other misc. equipment), towing, and rental reimbursement.

What Information do I Need to Have Ready When I get a Quote?
You need to know what coverages you want, what limits of liability you require,
and what deductibles you desire. Also, you need to have the following basic information available on all drivers in your household:

1. All drivers’ names, ages, sex, and marital status;
2. Driving record (accidents and moving violations);
3. Annual mileage; and
4. The following information on all cars:

Health Insurance
If you’re like other newcomers, a top priority is finding a new physician for you and your family. So, how do you learn about your health care options and find a family doctor? Of course, your employer should be your first stop. Your company’s human resources office can usually provide you with brochures about hospitals and doctors that will accept the company’s insurance. For more information about finding a doctor in the Bay Area area, see the Health and Wellness section.

— Shopping For Health Insurance
Be sure you understand the full extent of the coverage that is included in any health plan you are considering. If you have more than one option, choose the plan with the highest level of coverage you can afford. The higher a plan’s deductibles, co-pays, and coinsurance, the more you can usually save on premiums.

Consider factors other than cost. A carrier’s financial rating and history of consumer complaints are important considerations. Ask your friends, family and physician for recommendations. Be sure you learn the answers to these questions about any health plan you are considering:

1. Does the plan cover your choice of physicians and hospitals?
2. Are there limits on medicines, referrals to specialists, or the types of treatment or surgery that is available?
3. Are there benefit limits per person, family, illness, treatment and/or hospital stay?
4. What is the procedure for out-of-network emergency care?
5. Does the plan have yearly or lifetime maximums?

— Health Plan Basics
Health care plans pay for most, and sometimes all, of the treatment costs for illnesses and injuries. Many people obtain health coverage as part of a group – such as an employer, professional association or other organization – that offers health coverage to its employees or members. Others may buy individual health coverage directly from an agent or insurer. The type of plan you have and how you obtained it usually determines the benefits included, how you access and receive medical care and what you will have to pay out of pocket.

— Preferred Provider Plans (PPO)
Health insurance companies contract a network of doctors and hospitals that are “preferred” by the company. These network doctors and hospitals charge a contracted fee for their services and when you choose to see one of these “preferred providers,” the amount you pay out of your pocket is usually quite low. There is typically a small co-payment (a fee per visit or service), which may be $15 or $20. It is important to keep in mind that since the insurance companies keep prices lower by contracting specific doctors and hospitals, there is a higher charge for going out of the healthcare provider’s network. However, the PPO is a more flexible arrangement than many other plans because the plan will pay some of the costs if you choose to visit a doctor, specialist, or clinic outside the network.

— Point of Service Plans (POS)
POS plans have similarities to both PPO and Health Maintenance Organization (HMO) plans. As with Preferred Provider (PPO) plans, you are directed toward a network of contracted doctors, hospitals and clinics for your healthcare, but you can pay a larger out-of-pocket fee to visit an out-of-network provider. In line with the managed care policies of an HMO, your healthcare is administered according to a healthcare professional. With a POS plan your primary doctor oversees your medical care and refers you to contracted specialists when the need arises. Similar to the philosophy of an HMO, POS plans promote health and wellness through prevention and education, in addition to treatment.

The upside to a POS plan is the freedom to go out on your own and choose your own providers, even specialists, outside the network. You are never limited to medical providers your primary care physician refers. However, be aware, the dollar amount the plan will pay decreases when you go outside the network.

You will pay approximately $600 a year for the privilege of being allowed to self-refer to out-of-plan practitioners, and your out-of-pocket contribution will be greater. It is wise to consider if it is worth it to you, as a consumer, to pay a higher monthly payment for the freedom to access specialists, physicians and clinics of your choice. If you are relatively healthy and do not have a special relationship to a specific physician, then you might consider a managed care program that will charge you less to exercise less freedom in choosing a healthcare provider. If the freedom to self-refer to any healthcare practitioner or hospital you want is important to you, a POS plan may be your ideal fit.

— Health Maintenance Organization (HMO)
An HMO provides “managed care” in return for a monthly or quarterly premium. You pay a fee, the amount depending on the specifics of your coverage, and are offered a range of health care benefits that cover the entire spectrum from preventive care and education to physician care, surgery and hospitalization. An HMO is a one-stop shop for all your healthcare needs. Your healthcare is “managed” by your primary care physician, usually a general practitioner.

Typically, you must receive a referral from your physician before visiting a specialist outside the provider network. With rare exceptions, such as when you are away traveling, you are limited to seeking care completely within the network of providers, doctors, hospitals and labs with whom your HMO has negotiated a fee schedule.

Since contracting discounts from a network of providers is one of the primary ways an HMO maintains cost effectiveness, the plan only works when you stay within the network. In addition to your premium, an HMO generally charges a co-payment (a way of sharing per visit costs between the consumer and the plan) of, for example, $10 or $20 for certain services or prescriptions. One of the unique features of an HMO is that they typically deliver care directly to patients. Patients visit an HMO’s medical facility to see the physicians. Most HMOs own their own hospitals and clinics and directly hire physicians who work only for them.

While an HMO is more restrictive than other plans, it can be a convenient and cost effective solution for an insurance consumer that does not have ties to a doctor or medical facility outside of the HMOs network. If the organization is well run, doctor visits and healthcare can be simple, hassle-free and reliable. If the need arises for you to see a specialist, your doctor will handle the research for you, all you will need to do is show up for your scheduled appointment.

— Health Savings Account (HSA)
As of January 1, 2004, healthcare consumers have a new way to help manage their own healthcare. Health Savings Accounts (HSAs) provide consumers with added insurance coverage and control. Flexibility is the key component of an HSA. Anyone with a high-deductible health plan can set up a health savings account to save money on medical care now, as well as save for future medical expenses. You may use HSA funds to pay for expenses that must be met before your deductible, to pay for services not covered by your health care plan (such as alternative therapies or out-of-network providers), or insurance coverage during periods of unemployment.

Even if you purchase your insurance plan or your health savings account through your employer, you still own your account. You make the decisions on how much to contribute to your account and which medical expenses you will use to pay the funds. When you change jobs or move, the account remains intact. Any unspent balances remain in your account earning interest until you spend them on medical care.

An HSA can be a comforting safety net if you have a high deductible plan (remember, your plan won’t begin paying out until your financial responsibility is met). In the event that you lose a job, must seek uncovered medical services or just want to exercise your right to seek a specialist not contracted with your insurance plan, the funds in an HSA may one day be your saving grace. If you are a consumer who desires security and values freedom, an HSA is an option you should research.

— Self-Directed Health Plans (SDHP)
These can also be called consumer directed health plans, and they are a way to organize, purchase and finance health care services. These plans succeed in providing consumers with a method by which they can design and implement their own healthcare plans that can be customized to their specific needs, healthcare philosophies and circumstances.

Since January 1, 2002 insurers began offering plans that give patients and their physicians the autonomy to make decisions about what medical services they want and who they want to administer these services. Familiar elements of managed care, including gatekeepers (administrators who define what is “medically necessary” and thus covered by their plans), pre-authorization processes and network provider limitations, are replaced with self-directed health plans that make consumers the controllers of their own destinies. Patients and their doctors decide how insurance funds should be spent.

Self-directed plans represent a new direction in healthcare that utilizes the new technologies of today’s world. With self-directed plans you keep your medical records on special software and research medical services, medical providers and fees using the Internet. Self-directed plans may be a new, exciting solution for those with the time and the desire to manage their own healthcare, tailored to their own healthcare needs and philosophies.

Dental Insurance
Consumers can choose a plan in which their dental care is managed by a Dental Health Maintenance Organization (DHMO). DHMOs typically charge the lowest premiums and provide the most comprehensive coverage. Fee for service, or direct reimbursement, plans provide the most freedom of choice for consumers. With this type of plan a patient may pick any dental practitioner and clinic of their choosing. The plan pays a percentage for the service and the patient pays the remainder of the fee.
Whether you choose to use a plan or pay out of pocket, you will save more money over the long term if you routinely visit your dentist for check-ups and cleanings.

Life Insurance
Many financial experts consider life insurance to be the cornerstone of sound financial planning. If you have dependents or other people with whom you share your life, life insurance can play a vital and valuable role at virtually every stage of your life.
If people depend on your income, life insurance can replace that income if you die. The most commonly recognized case of this is parents with young children. It can also apply to couples in which the survivor would be financially stricken by the income lost through the death of a partner and to dependent adults, such as parents, siblings or adult children who continue to rely on you financially. Other reasons for buying life insurance can include:

• Provisions for funeral and burial costs, probate and other estate administration costs, debts and medical expenses not covered by health insurance.
• You can create an inheritance by buying a life insurance policy and naming them as beneficiaries.
• A policy can help pay federal “death” taxes and state “death” taxes.
• Life insurance benefits can pay estate taxes so your heirs will not have to liquidate other assets or take a smaller inheritance.

— Types of Life Insurance
Before meeting with your insurance agent about coverage, here is a summary of the two major types of life insurance.
Term insurance is the simplest form of life insurance. It pays only if death occurs during the term of the policy, which is usually from one to 30 years. Most term policies have no other benefit provisions.

Whole life insurance pays a death benefit whenever you die – no matter what your age is upon death. It’s sometimes called permanent life insurance, and it encompasses several subcategories, including traditional whole life, universal life, variable life and variable universal life. Ask your insurance agent for more details on these subcategories.

Selecting an Insurance Company
Insurance companies generally use one of three methods to market their product: 1) direct marketing; 2) independent agents; or 3) exclusive agents. The type of marketing method may be good or bad for a consumer, depending on the type of services offered. Therefore, consumers should be aware of each of the three methods and may want to consider them in their purchase decision. When calling agents for quotes, ask how many companies they represent and how they operate.

Direct marketers sell insurance through the mail and by telephone. In some cases, consumers can save money with direct marketers because these companies do not have to pay insurance agents commissions to sell their policies. Companies can pass along some of these savings to the consumer. However, some consumers prefer to pay an additional premium for the opportunity to have a local agent available to them.
Independent agents represent several companies. Therefore, you can get quotes for more than one company from one agent. This is considered an advantage to many consumers.

Exclusive agents can only offer you coverage from the company they represent. Therefore, you can only get a quote from one company. Sometimes exclusive agents may work for a lower rate of commission than independent agents. This is because companies do not have to give the agent an incentive to write their product over another company’s product. The lower commission structure, especially commissions for renewal business, can represent significant cost savings to the insurance company and often a portion of that savings is passed along to the consumer in lower premiums. Before signing any application for insurance coverage, you should verify that the company and the agent you are dealing with are licensed in California.