Identity Fraud – an everyday threat

So far I have been very fortunate regarding identity theft or fraud.  While my actual identity (meaning social security number, drivers license, etc) have not been stolen, I have had three different cases of fraudulent charges on my credit cards.  And that doesn’t include a couple of cases where internet based scammers “slammed” my card with bogus charges.

Imagine my surprise one evening when someone called regarding a Visa card that I still had active but had not actually used in several years.  The service representative from Visa wanted to know if I had been in Spain recently and had used my card.  At that time I had not even been out of the US for three years!  Apparently someone had run up charges in Barcelona and Madrid to the tune of nearly $8,000 over a span of two weeks!  The sudden activity on the card had alerted Visa’s fraud department which prompted their phone call.  That was pretty easy to fix.  I just had to sign an affidavit that the charges were not mine and, since my passport clearly showed that I had not been in Spain, that was pretty much the end of it.

True identity fraud, however, is much more complex, damaging and hard to fix.  This is where someone gets your SSN and/or driver’s license number and begins opening accounts in your name and running up all sorts of bills.  By the time you find out, you have a string of creditors coming after you and the burden of proof falls on you establish your innocence.  Some people have been financially destroyed by the time they could straighten it out because the legal actions against you naturally affect everything you do from getting a mortgage, a car loan, a job and on and on.

Many homeowner insurance companies are now offering some type of identity fraud coverage to help with expenses and, just as important, information on what to do to mitigate the damage.  Most of the optional coverages are pretty cheap — I have one from Safeco in front of me that costs $12 per year, and another from Hartford for $24 per year.  Yes, that’s one or two dollars per month!  Other companies have similar costs for comparable options.

The coverage varies from company to company but most concentrate on the expenses you will incur trying to correct the fraud rather than the actual financial damage which is sometimes hard to determine exactly.  Safeco, for instance, covers up to $25,000 in expenses you incur plus the assignment of a Case Manager to help you through the process.  Hartford’s coverage for expenses is limited to $15,000 and both policies have certain limitations and conditions.  For instance, both require that you notify them of the identity fraud within 60 days after it is discovered.

As important as these coverages are, it is critically important that you take certain steps to avoid making yourself more vulnerable to identity fraud.  There are common sense things like not carrying your Social Security card with you (you do have the number memorized by now, don’t you?), shredding certain documents and only carrying the credit cards you think you’ll need.  Additionally, you should occasionally check your credit file that is kept by the three major credit reporting agencies.  One of our companies, Safeco, has put together a 2-page pdf file that you can download and print out with all this information and more.

The additional insurance coverage is pretty inexpensive so if you are interested, be sure to contact your homeowner, condo or renters insurance agent for more information.  Beyond that, though, taking a few precautionary steps can go a long way toward making sure that you never become a victim of identity fraud.

Rental Car Insurance – Do you have it?

Does your auto insurance policy cover the cars you rent while on business or vacation?  Really?  The fact is, for many policies the correct answer is “partially”, and the part they don’t cover can cost you plenty!

In 2007, the National Association of Insurance Commissioners conducted a survey and found that 42% of consumers were “either thoroughly confused or had only a rough idea about insurance” pertaining to rental cars, and a significant number bought the extra-cost insurance from the rental car company just to be sure.  If you call your insurance agent and ask if a car you rent is covered, you are very likely to get a casual answer like, “Sure, it’s covered just like your own car”.  While this is probably true, in most cases it is simply not the whole story. 

Most insurance companies do extend the Comprehensive and Collision coverage you have on a full coverage automobile to a car you may rent.  If you suffer damage to the car, your policy will normally cover the damage just as it would to your own car subject, of course, to your deductible.  So far, so good.  But you soon learn that damage to a rental car involves costs that do not occur when your own car is in an accident.

Most rental car companies, following an accident, will charge you one or more of the following types of charges: Administration Fees, Loss of Use and Diminution of Value.  Some of these charges may be regulated by the state in which you rent the car, but don’t count on it.

An Administration Fee is often charged just for processing the paperwork for the claim.  It may be a set amount like $100 or it might be calculated as a percentage of the damage, say 5%.

Loss of Use is based upon the theory that if the car had not been in the body shop being fixed, the rental car company could have rented it to someone else.  This theory often applies even if the particular rental car location has 20 other similar cars sitting idle on the lot!  Depending on the extent of damage to your rental car, this can add up to a lot since it is charged for every day the car is out of service.

Finally, Diminution of Value is the loss in the resale value of the car due to the damage even after the repair.  Often, major damage must be disclosed by state laws and, even if not, services like CarFax can often discover when vehicles have been in accidents and this can lower their value.  The rental car companies sometimes calculate this as a percentage of the total amount of damage.

So, the question is, “Does your auto insurance company cover these charges?”  You can either read your policy (horrors!) or call your agent to find out.  I have a policy sitting in front of me right now from a company  that does cover a rental car for Liability, Comprehensive and Collision (provided, of course, that you have a vehicle similarly insured on the policy).  However, you read on to discover that it will only pay up to $1,000 for damage you may be legally obligated to pay under a rental car contract (so that’s your limit for Loss of Use and Administration Fees) but another section absolutely excludes coverage for Diminution of Value. 

Another policy on my desk from a different insurance company also covers damage to rental cars as well.  With regard to Loss of Use and Administration Fees however, it will only pay them up to $25 per day to a maximum of $750.  And, once again, coverage for Diminution of Value is absolutely excluded.

There was a good article in the Denver Post last year about this very subject that also addressed how some credit cards may or may not help pay for some of these charges.  Additionally, in 2007, there was an article in USA Today about a business traveler who routinely declines the additional cost insurance coverage from rental car companies and explains his reasons for doing so.  If you are a person who occasionally rents cars for either business or pleasure, I suggest you read both articles and don’t skip the responses to those articles listed below them — they include some horror stories about rental car damage.

It is not unusual to hear someone at a rental car counter, in a hurry and with a line of people behind them, utter something like “I’m pretty sure my auto insurance covers this” and with a quick initial decline the Collision Damage Waiver (CDR).  If it is truly an informed decision and you know what you are doing, fine.  But you’d better be sure before you end up with several thousand dollars in bills from a rental car company as an unwanted memory from your last vacation.

The Case of the Neighbor’s tree

After almost every serious windstorm, we get this question: “If the neighbor’s tree falls on my garage, his insurance will pay, right?”  The answer often surprises people.  In most cases the answer is “No”, and the person with the crushed garage has to rely on his or her own insurance to repair the damage.  On the surface, it would seem logical that the neighbor’s insurance should pay — after all, it was his tree and it did fall on someone’s garage.  So why doesn’t that happen?

First, it is important to understand that there are two primary parts of your homeowners insurance policy.  The first is Property and this covers your home, additional structures and contents.  The second part is Liability and this pays for your “legal liability” for certain things pertaining to a home such as someone slipping on your icy sidewalk or your dog taking a bite out of the mailman.

With that in mind, what part of the neighbor’s policy might pay for the damage to your garage?  Obviously, the neighbor does not insure the garage on his own Property portion since he does not own your garage.  That leaves only the Liability portion and now we have to look at the concept of “legal” liability.

The key word in almost all liability claims is “negligence”.  Was the neighbor somehow negligent in causing the tree to fall on the garage?  Well, we know the neighbor did not initiate the windstorm, so is it possible in any way for him to be negligent?  The anwers is “Yes”, but this occurs rarely.  If the tree was obviously diseased, or if it leaned perilously over the garage there may be a case for negligence.  I use the word “may” very carefully here.  The tree may be discovered after the accident to be diseased, but was this a condition that the neighbor was aware of?  If the tree was leaning over the garage, is there any reason the neighbor might have thought it would actually fall?  Additionally, did the owner of the garage ever express concern to the neighbor about the health of the tree or its position over his garage?

You see, this is where it gets sticky.  To make the case for negligence, there has to be some indication that the neighbor did not act in a reasonable and prudent manner with regard to the tree.  And the fact is, in most cases I have seen, there simply is not evidence of negligence.  Most of the claims of this nature that I have seen over the past 25 years are trees that no one suspected of being a problem, not the neighbor and not the property owner.  Sometimes stuff just happens, and that’s why you want to make sure your insurance adequately covers your garage.