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Q&A: Policies and premiums
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October 5, 2000: 5:57 a.m. ET
Tips on term life policies, condominium coverage, and uninsured motorists
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NEW YORK (CNNfn) - Consumers get the benefit of the doubt when battling an ambiguous insurance policy in court. And uninsured motorist coverage is worth considering in many parts of the country.
Navigating the ins and outs of your insurance policy can be tricky business. As such, homeowners and drivers frequently fail to realize they're underinsured, or overinsured as the case may be, until it's too late. Here's your chance to find out the facts from a group of long-time industry experts at the Consumer Federation of America, or CFA. Check back each week to read the latest Q&A on our Insurance page.
Send CNNfn your insurance questions at insurance@cnnfn.com. Don't forget to include your name and home town. And keep in mind, not all questions can be answered.
Question: My stepson drowned in June. He was spending the summer with his father and me. I have an insurance policy at the credit union where I bank. It covered dependent children. The insurance company is refusing to pay, stating the child was not considered our dependent because his mother has custody. We carry him on our health insurance and as a dependent on our income tax return. We also paid child support monthly. My question is - is  this legal? -- Rebecca
Answer: This is a legal question requiring a review of the specific language of the policy to determine the answer. However, here is some help: Look for the definition of "dependent" in the policy. If it clearly says, e.g., that you have to have custody, then you are out of luck. But, if there is no definition or you could reasonably read the definition to cover your child, then you would win in court and the company should pay. (The reason you would win in court is that the courts know that the insurance company wrote the policy and any ambiguity will be held against the company). This advice is good for all claim disputes involving interpretation of policy language. -- CFA
Question: Pros, cons and suggestions for whole life versus term life? - Jim
Answer: We prefer term insurance except in rare circumstances, usually relating to tax considerations. A good rule of thumb is don't consider cash value life insurance unless recommended by your fee-only financial adviser or tax adviser. (If you can't afford them, you probably should not consider cash value products.) Cash value products are complex, even actuaries need computer programs to tell a good one from a bad one, and there are many awful products due to lack of competition, because of lack of an informed consumer. -- CFA
Question: I was discussing uninsured motorists coverage with a co-worker the other day and said I didn't carry it. He was appalled. We do have lots of uninsured motorists in Tennessee. I do have collision coverage for my car, medical payments and extended benefits (disability) on my car insurance. To cover my other risks, I have medical insurance, disability insurance, and life insurance. Do I really need a policy for uninsured motorists? Do I have any gaps in coverage? If I am seriously hurt by an uninsured motorist or have an accident in my back yard, I still need to cover my loss of income and medical costs, so isn't uninsured motorists an incomplete specialized coverage. Also, if I need uninsured motorists coverage, then how much should I get considering that I do have the other listed insurance policies. -- James
Answer: Most people should probably get uninsured motorist and underinsured motorist coverage (UIM), which picks up the shortfall between the liability limits on your policy and the limit the person who hit you bought. That way, if you are hit by a person with either no coverage or inadequate coverage, you can collect as if the person had insurance, except from your own insurance company. So, if you need money for work loss, you can get it through UM/UIM protection. Also, it will pick up the tab for the expenses of hiring help in the home if needed, etc. You are taking a chance by not having it, since in some parts of the country up to 50 percent of drivers are uninsured. - CFA
Question: What is Error and Omission insurance? What does it cover? Who should carry this type of insurance, and how is its cost typically based? -- Peter
Answer: E&O insurance is for businesses. It covers mistakes a professional makes, like when an insurance agent sells the wrong coverage for a client's needs. When the client sues him/her to get the protection they thought they had, the insurance agent's E&O policy would pay. -- CFA
Question: I have a homeowner's policy for my condominium in the state of Connecticut. I filed a claim (washing machine overflow) and was told that my homeowner's policy was second to my master board policy for the entire condo unit. Is this common? If so, why did I need my homeowner's policy to begin with? -- Robert
Answer: Condo policies are complex. Normally the way they work is this: the Master Condo policy covers all jointly owned parts of the structure (i.e., common walls, the lobby) and your policy covers your property (i.e., walls inside your structure, contents). - CFA 
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