Consumers

Alaska Consumer Guide

General Information

About the Division

The Alaska Division of Insurance is a State agency headed by the Director of Insurance. There are two offices. One is located on the 9th floor of the State Office Building in Juneau. The other office is located on the 15th floor of the Atwood Building in Anchorage.

The most important function of the Division is consumer protection, which includes oversight of the financial conditions of insurance companies. As insurance needs have grown, the need to assist Alaska consumers has also grown.

The Division consists of several sections: Actuarial, Administrative, Consumer Service, Financial, Form and Rate Filing Review, Investigation, Legal, Market Examination, and Producer Licensing.

  • The Actuarial Section provides technical support to other sections in the division. This includes assisting the Form and Rate Filing Review Section in monitoring the solvency of the insurers operating within the State of Alaska, and assisting the Market Examination Section in monitoring compliance with Alaska laws and participating in insurer examinations. This section also collects and analyzes data to aid in developing more effective regulation of insurance in Alaska and participates extensively in drafting insurance laws and regulations.
  • The Administrative Section directs, manages, supervises, establishes policies and procedures, and provides support services to the division.
  • The Consumer Services Section investigates consumer inquiries and complaints against insurance companies and producers in order to help ensure fair treatment to policyholders. Examples of complaints this section responds to include improper cancellation of insurance policies, misrepresentation of policy terms, improper claim denials, inappropriate delays in the claim settlement process, and other unfair marketing practices.
  • The Financial Section reviews insurance companies to help assure that the company has enough money to pay claims, and licenses the insurance companies to sell business in Alaska.
  • Form and Rate Filing Review Section reviews most policy forms to ensure that policy language is not deceptive or misleading and properly reflects the benefits under the policy. This section also evaluates premium rates for most property and casualty insurance policies to help assure that premiums are not excessive, inadequate, or unfairly discriminatory.
  • The Investigation Section investigates all areas of fraudulent insurance activities. This includes claimant fraud, agent fraud, insurance company fraud, medical care provider fraud, insurance document fraud, premium fraud, and agents/agencies/companies operating without a license or certificate of authority, and workers’ compensation fraud. The investigation unit also conducts background checks of insurance license applicants. The investigations may result in a referral to the Attorney General’s Office for consideration of administrative action as well as being sent to the divisions’ prosecutor at the Office of Special Prosecutions & Appeals for consideration of criminal charges.
  • The Legal Section advises division staff regarding the implementation of the policies of the Division of Insurance, assists in the legal education of division staff, and advises the division regarding statutory and regulatory matters.
  • Market Examination Section performs examinations on insurers and producers to assure that they are in compliance with Alaska’s insurance laws and regulations.
  • The Producer Licensing Section oversees the licensing of all insurance producers who are required to be licensed with the division in order to conduct business in the state. As of 2010, there were more than 35,465 insurance producers licensed with the division.
What is Insurance?

The most common method of providing for financial protection from potentially catastrophic losses is the purchase of insurance. Insurance allows a person, business, or organization to pay a relatively small fixed amount to an insurer in exchange for the promise that, in the event of a covered loss, the insurer will pay for losses up to the coverage limits of the policy. An insurance policy is a legal contract. In exchange for your payment of premium and fulfillment of your obligations under the conditions of the contract, the insurer promises to perform certain actions described in the contract.

Insurance companies have discovered that although individual losses are hard to predict, the total losses of a large number of people are predictable. Insurance premiums are developed by estimating losses that are expected to happen in the future for a group of people. Companies pool your premiums with premiums from other policyholders to pay claims.

How is Insurance Sold?

The term producer is used to refer to the person who sells an insurance policy. There are several different kinds of producers, and not all insurance companies use the same types of producers to sell their products. Insurance companies generally use one of four methods to market their products: direct marketers, independent agents, exclusive agents, or brokers.

  • Direct Marketers sell insurance through the mail, by telephone, and over the Internet. Insurance purchased from direct marketers may be less expensive because this method of selling insurance costs less to the insurance company and the insurance company may be able to pass some of the savings on to you.
  • Independent Agents often represent many different insurance companies offering different types of insurance policies and premium rates. Since the companies are in competition with one another for business, cost differences may result.
  • Exclusive Agents represent a single insurance company and provide premium estimates only for the policies offered by that company.
  • Brokers represent the policyholder rather than the insurance company. The broker may work for a fee, which is negotiated with the consumer, work on a commission-only basis, or a combination of the two.

All producers must be licensed by the Division of Insurance. To verify that the company and producer you have selected are licensed to do business in the state, and have not had disciplinary action taken against their license, you may call the division or access this information through the Division's website under the “Of Interest” section, by clicking the Insurance Company Query link for insurance companies or Search the Producer Database for producers. This information is updated in real time.

Tips on Buying Insurance

Before shopping for an insurance policy:

  • Determine what type of insurance policy you need.
  • Determine how much insurance you need.
  • Determine what you are willing to pay or can afford to pay for the insurance.
  • Determine how much insurance you already have.
  • Consider what insurance may be available through other sources such as your employer, spouse, professional association membership, and credit card companies.
  • Become familiar with insurance terminology.

After you have considered the above, you may want to consider the following guidelines in shopping for an insurance policy.

Seek Objective Information

Information is available to you from a number of objective sources. A search on the Internet can lead you to insurance companies’ websites and consumer websites with information about insurers. The website of an insurance company can provide you with general information about the company and its products. It may also provide options for customer service and premium payment. These sources include public libraries, consumer groups, consumer publications, and the Division of Insurance. On page 20 of this guide is the section titled “Where to Go for More Information,” which includes a list of companies for researching information that you may find helpful.

Check the yellow pages of your telephone book for insurance companies and producers in your area. You may also want to contact your relatives, friends, and coworkers for recommendations on insurance companies and producers. Ask them about the price of their insurance and the service they have received. Also, you may want to contact our Anchorage office at 269-7900 to find out if we have any complaints on record about your chosen insurance company.

Compare Premiums for Similar Policies

Companies may charge different premium rates for similar coverage, and the division suggests that you compare the prices of several insurance companies’ policies before actually purchasing a policy.

You may want to consider the following when comparing premiums:

  • Consult the current edition of the Division’s Automobile Insurance Guide or Homeowner's Insurance Guide for help in determining which insurers are doing business in Alaska. The premium examples in the guide can be used to make comparisons between companies, but should never be substituted for premium quotations made for you by an agent or insurer.
  • Contact several insurance companies or producers and provide the same information to each producer or insurance company. Ask them to provide estimates of the premiums for the insurance coverage you are interested in purchasing. If a particular company provides a premium estimate for a similar policy that is much lower than the estimates provided by other companies, be wary. Be sure to compare the coverage provided by the lower cost policy to the coverage provided by the higher cost policy to be sure that the lower cost is not due to less coverage. You may want to obtain additional information about the company before purchasing the coverage to assure that the company provides the level of service you want and is properly licensed by the Division of Insurance.
  • Price should be only one consideration in purchasing insurance. It is also important to consider the quality and level of service, as well as the coverage provided in the policy. Some consumers may be willing to pay a little more to stay with a company that has provided good service.
  • Many insurance companies let you pay on a monthly basis or have a payment plan that allows you to pay your premium over a period of time for a small service fee. In some cases, an entity called a premium finance company will lend you the money to pay the premium. If you finance the premiums, the total amount you pay for your coverage will be larger due to the interest charged on your loan.
  • If your producer is representing you as a broker, factor any broker fees contained in your written contract with the broker into the total cost of the policy. Once your policy becomes effective, no portion of the broker fee is refunded to you if the policy is cancelled.
  • Remember that premiums are only one component of the cost of permanent life insurance. Interest rates and methodology as well as mortality and expense charges are important components of the true cost of the policy.

Completion of the Application Form

  • Fill out your application completely and honestly. Omissions or untruths may allow the insurance company to turn down a claim or, depending on the consumer’s intent, may be a crime.
  • Read the application before you sign it. If your producer helped you complete the application, be sure nothing was overlooked. Your signature on the application certifies that the information contained in your application is accurate and that you know of the contents.
  • It is a good idea to keep proof of your payment for insurance premiums. Ask for a receipt and if mailing a payment, use check or money order. Never mail cash. Make sure that all receipts and checks show your policy number and the name of the insurance company providing coverage. All receipts should be signed and dated by the producer or insurance company representative receiving the payment from you. As evidence of payment, keep all your receipts and canceled checks in a safe place for the duration of the policy.

Ask for a copy of your application. When you receive your policy, compare your application and any premium quotation you received to the policy that was issued. If you discover any differences, contact your agent or insurance company immediately.

Insurance Binders

In property/casualty insurance, some producers are given the authority to issue binders. A binder is a temporary proof of insurance and is only valid for the number of days indicated on the binder. If your binder is about to expire and you have not received your policy, contact your agent or the insurance company to verify that you have coverage and obtain a replacement binder. Binders are not generally issued in life and health insurance.

An Insurance Policy is a Legal Contract

Your insurance policy is made up of two general parts. The first part of the policy (which is often the first page) is the declarations page. The declarations page lists your name and address, the name and address of the insurance company, and specific information about the policy you purchased showing what is being insured. It will list the liability or policy limits that were purchased, any deductibles, and each endorsement that is attached to the policy. The second part of the policy includes the actual contract language, which clearly describes both the insurance company’s rights and responsibilities as well as the policyholder’s. Certain general provisions are required by law, but policies can be very different. It is important to read any policy issued to you as soon as you receive it. If you have questions, contact your producer or the insurance company for clarification.

Some insurance companies allow a 10- to 45-day period in which to review the insurance policy and decide whether or not it is the policy you need or want (often called a free-look period). If you are replacing your policy, do not cancel the old one until the new one is in effect.

Be Aware. . .

Know your Rights

This guide summarizes some important Alaska insurance laws that protect you as a consumer of personal lines of insurance. Not all laws that pertain to you and your policy are mentioned here. It’s your responsibility to read and understand your individual policy. Ask your agent or company about anything in your policy that is not clear. If it’s not in writing, it doesn’t exist.

Know Your Rights: Applying For a Policy
  • If an Insurer Denies Your Application, You Have a Right to Know Why

    If an insurer decides not to issue you an insurance policy when you submit your initial application, the insurer must inform you that you have a right to know why you are not being offered a policy. To receive an explanation, you must submit a written request to the insurer asking to be provided with the reasons you were refused coverage. AS 21.36.440

  • Failure to Maintain Continuous Auto Coverage

    An insurer may not use your failure to maintain continuous automobile insurance coverage as a rating factor, unless this failure results in a violation of Alaska’s Mandatory Insurance Act. AS 28.22 (Alaska Division of Insurance Order R93-05)

Know Your Rights: Filing a Claim
  • An Insurer Has 10 Days to Acknowledge Receipt of Your Claim

    An insurer must provide you with a written acknowledgement of the receipt of your claim, including the name and contact information of the person who will be handling your claim, within 10 working days of receiving your claim. 3 AAC 26.040(a)(1) and (b)(1)

  • An Insurer Normally Has 30 Days to Complete Your Claim

    An insurer must complete its investigation of your claim within 30 working days, unless the claim cannot be reasonably completed using due diligence. 3 AAC 26.050(a)(7)

  • An Insurer Must Provide Written Explanation of the Value of Damages

    If you have a property or motor vehicle claim, the insurer must provide you with a reasonable written explanation of the valuation of damages to the property/motor vehicle. 3 AAC 26.080(a)(2), 3 AAC 26.080(b)(1), 3 AAC 26.090(a)(2), 3 AAC 26.090(b)(1)

  • An Insurer Can’t Deny a Claim Because A Secondary Factor is Not Covered

    An insurer may not deny your claim if a risk, hazard, or contingency insured against is the dominant cause of the loss and the denial occurs because another risk, hazard, or contingency excluded under the policy is also in a chain of causes but operates on a secondary basis. AS 21.36.096

  • When a Repair Contractor or Facility is Chosen For You, Repair Work Must be Guaranteed

    If a person adjusting or settling your claim chooses to have your property/motor vehicle repaired by a specific contractor or facility, that person shall guarantee the repairs and cause the damaged property/motor vehicles to be restored to its condition before the loss, at no additional cost to the claimant, and cause the repairs to be completed within a reasonable time. 3 AAC 26.080(f), 3 AAC 26.090(f)

Know Your Rights: First-Party Claims

    First-party claims involve claims for which you are seeking payment from your own insurance policy.

  • If a First-Party Claim is Not in Dispute, an Insurer Must Pay Within 30 Working Days

    For a first-party claim, if the claim or a portion of the claim is not in dispute, your insurer must pay you the portion not in dispute within 30 working days of receiving the properly executed statement of claim, proof of loss, or other acceptable evidence of loss. 3 AAC 26.070(a)(2)

  • In a First-Party Claim, an Insurer Must Disclose All Available Benefits

    For a first-party claim, an insurer must disclose to you all relevant benefits and other provisions of coverage under which your claim may be covered. 3 AAC 26.060(1)

  • First-Party Claims for Total Loss of a Vehicle

    For a first-party claim, if your motor vehicle is a total loss and your policy coverage provides for the adjustment of a total loss on the basis of actual cash value or replacement  with a vehicle of like kind and quality,  the insurer must utilize a settlement method that either 1) offers a comparable and available replacement vehicle including applicable taxes, license fees, destination or delivery charges and other fees incident to the transfer of ownership at no cost to you other than your deductable or 2) makes a cash settlement based on the actual cost to purchase a comparable vehicle. 3 AAC 26.080(a)(1)

  • First-Party Claims for Total Loss of Property

    For a first-party claim, if your property claim is a total loss and your policy coverage provides for the adjustment of a total loss on the basis of actual cash value or replacement with other property of like kind and quality, the insurer must utilize a settlement method that either 1) offers a comparable and available replacement property including all applicable taxes, charges, and other fees incident to the transfer of ownership at no cost to you other than your deductable or 2) makes a cash settlement based on the actual cost of comparable property. 3 AAC 26.090(a)(1)

Know Your Rights: Cancellation and Non-Renewal

Cancellation is the termination of a policy before it expires, at anytime during the policy term. Non-renewal, or failure to renew, is the insurance company’s decision to not issue and deliver a replacement policy at the end of the policy period.

  • An Insurer CAN Cancel a Policy in the First 60 Days

    If your policy has been in effect for less than 60 days, the insurer may cancel it for any reason. When your policy has been in effect for longer than 60 days, or your policy is a renewal, it may only be cancelled for a limited number of reasons.

  • An Insurer CAN Cancel an Auto Policy if

    1. You don’t pay the policy premiums.
    2. The driver’s license or motor vehicle registration of either you, an operator who resides in your household, or an operator who customarily drives an automobile insured by your policy has been suspended or revoked during the policy period, or if your policy is a renewal, during its policy period or the 180 days immediately before the renewed policy’s effective date.

  • An Insurer CAN Cancel Other Personal Policies if

    1. You don’t pay the policy premiums.
    2. You are convicted of a crime that by its nature increases the risk that your policy insures against.
    3. Discovery of fraud or material misrepresentation made by you or your representative in obtaining the insurance or by you in pursuing a claim under the policy.
    4. Discovery of a grossly negligent act or omission by you that substantially increases the risks your policy insures against.
    5. Physical changes in the insured property that result in the property becoming uninsurable. AS 21.36.210

  • An Insurer Must Provide Written Notice Before Cancelling Your Policy

    The insurer must provide you or, if you are 70 years or older, your named designee, with 30 days written notice prior to canceling your policy with the following exceptions: 1) if the policy is cancelled for nonpayment of premium, the insurer needs to provide you with only 20 days written notice; 2) if a policy is cancelled due to a conviction of a crime having as one of its necessary elements an act increasing the hazard insured against, or the insurer discovers  fraud or material misrepresentation made by you in obtaining insurance or pursuing a claim, the insurer needs to provide you with only 10 days written notice; 3) if a motor vehicle policy is cancelled due to the suspension or revocation of a driver’s license, the insurer needs to provide you with only 10 days written notice. AS 21.36.210 – AS 21.36.220

  • When an Insurer Must Notify You of the Auto Assigned Risk Plan Option

    If your automobile policy is cancelled other than for nonpayment of premium or is not renewed, the insurer must notify you of possible eligibility for automobile insurance through the automobile assigned risk plan. The automobile assigned risk plan is a way for drivers who would be denied coverage by insurance companies to get automobile insurance that is required by law. AS 21.36.25

  • An Insurer Must Provide Reason for Cancellation

    If the insurer cancels your policy, the cancellation notice must include or be accompanied by a statement giving the reason for the cancellation. AS 21.36.220(e)

  • Receiving Credit for Unearned Premium When an Insurer Cancels Your Policy

    Unearned premium refers to the premium paid in advance for insurance that will not be provided because the policy was cancelled before the end of the policy period.

    If the insurer cancels your policy, the insurer must return or credit any unearned premium before the effective date of cancellation, with the following exceptions.

    Premium must be returned within 45 days after notice of cancellation is given for any of these five reasons:

    1. You don’t pay the policy premiums.
    2. You are convicted of a crime that by its nature increases the risk that your policy insures against.
    3. Fraud or material misrepresentation made by you or your representative in obtaining the insurance or by you in pursuing a claim under the policy is discovered.
    4. You fail or refuse to provide the information necessary to confirm exposure or necessary to determine the policy premium.
    5. The driver’s license or motor vehicle registration of either you, an operator who resides in your household, or an operator who customarily drives an automobile insured by your policy has been suspended or revoked during the policy period, or if your policy is in renewal, during its policy period or the 180 days immediately before the renewed policy’s effective date. AS 21.36.220(c)

  • Receiving Credit for Unearned Premium When You Cancel Your Policy

    If you cancel your policy, the insurer must return or credit any unearned premium within 45 days of receipt of the request for cancellation or the effective date, whichever is later. A cancellation fee not to exceed 7.5% of the unearned premium may be deducted from the return premium if this is stated in your policy. AS 21.36.255

  • When an Insurer Can Choose Not to Renew a Policy

    An insurer may only fail to non-renew a personal insurance policy on the policy’s annual anniversary.  For example, many automobile policies are written for a term of six months.  If the insurer or insured do not cancel the policy during the six months the policy is in effect, the insurer must issue a renewal policy for another six months.  Only at the end of the second six month period, the policy’s annual anniversary, may the insurer decide that it will not issue a replacement policy. AS 21.36.240

  • An Insurer Choosing Not to Renew a Policy Must Give You 20 Days Notice

    An insurer must provide you with 20 days written notice prior to not renewing your policy. AS 21.36.240

Know Your Rights: Premium Changes
  • When an Insurer Increases Your Renewal Premium

    The insurer must provide you with 20 days written notice if the renewal premium is increased more than 10 percent for a reason other than an increase in coverage or exposure base, or if after renewal there will be a material restriction or reduction in coverage not specifically requested by you. AS 21.36.235

  • If You Receive a Moving Traffic Violation, But Have Not Been Convicted

    An insurer may not increase the premium or add a surcharge to your personal automobile insurance policy because of the issuance of a citation for a moving traffic violation unless you have been convicted of the violation or entered a plea of no contest to the violation. AS 21.36.305

Know Your Rights: Use of Credit History and Insurance Score
  • An Insurer Must Inform You if They Intend to Use Your Credit Information

    An insurer must notify you in writing, either on the application for insurance or at the time the insurance application is taken, if they intend to obtain and use your credit information in underwriting or rating a personal insurance policy. The required notice may be given in the same medium as the application for insurance. AS 21.36.460(a)

  • An Insurer Taking Adverse Action Based on Credit Info Must Provide Basis for that Action

    Adverse action includes cancellation, denial, or failure to renew personal insurance, charging a higher insurance premium for personal insurance than would have been offered if credit history or an insurance score had been more favorable, or any reduction or unfavorable change in terms of coverage or amount of insurance due to credit history or insurance score. AS 21.36.460(i)(1)

    If an insurer takes adverse action against you, based in whole or in part on your credit history or insurance score, the insurer must provide you with the opportunity to request reconsideration of the adverse action and provide you with written notice that states the significant factors of the credit history or insurance score that resulted in the adverse action, in a manner that allows you to identify the basis for the adverse action. AS 21.36.460(b).

  • An Insurer May Not Use Credit Information at Renewal

    An insurance company may only use your credit history or insurance score to rate your policy at the inception of the policy. They may not use your credit history or insurance score at renewal to calculate your rate, unless you waive this prohibition at each renewal. AS 21.36.460(d)

  • Credit Information an Insurer Cannot Consider

    An insurer may not cancel, deny, underwrite, or rate personal insurance coverage based in whole or in part on a variety of factors set forth in AS 21.36.460 including not having a credit history, being adversely affected by a joint account owner, or having a credit history or insurance score based on collection accounts identified with a medical history code. AS 21.36.460

  • Find more on Credit History.



If you have additional question or concerns, or would like to file a consumer complaint, our Consumer Services section is here to help.

Unfair Trade Practices

Alaska Statutes prohibit certain actions on the part of producers, insurers, and representatives of insurers. Among the most common type of unfair trade practices are:

  • Rebating – A producer who offers something of value to an applicant in exchange for their business or agrees to accept a reduced commission in exchange for an application may be guilty of rebating.
  • Unfair Discrimination – Treating similar applicants or policyholders differently is unfair discrimination. For example, unfair discrimination does not exist if an insurer refuses to issue policies to all drivers with a conviction for driving while intoxicated. However, unfair discrimination does exist if an insurer issues policies to some drivers with a conviction for driving while intoxicated, but declines to issue policies to other drivers who also have a conviction for driving while intoxicated.
  • Antitying – The sale of insurance may not be tied to another transaction. For example, your lender may not make the granting of your loan contingent upon your purchase of insurance from a particular agent or company.

If you believe you have encountered any of these practices, or are uncomfortable with any transaction with a producer or insurer, contact the Division of Insurance for assistance.

Cancellation or Nonrenewal of your Insurance Policy

Alaska laws forbid cancellation of your insurance policy except under certain circumstances. An insurance company may not cancel or fail to renew a health insurance policy after it has been issued unless you do not pay the premium.

Your insurer may cancel a personal automobile policy after it has been in effect for more than 60 days if:

  • you do not pay the premium, or
  • you, or any other operator who resides in the same house as the named insured and customarily drives the insured vehicle, drivers license or motor vehicle registration has been suspended or revoked.

Your insurer may cancel a homeowner's insurance policy if:

  • you do not pay the premium;
  • you are convicted of a crime which increases the risk insured against;
  • fraud or material misrepresentation made by either you or your representative is discovered when obtaining the policy or when pursuing a claim under the policy; or
  • significant changes in your property have occurred which result in your property becoming uninsurable.
Premium Refunds

If the insurance company cancels your property/casualty policy, you may be entitled to a refund of all the premium you have paid that was intended to pay for coverage in the remainder of the policy period. If you cancel your property/casualty insurance policy, the insurance company may, by law, retain a cancellation fee of up to 7.5% of the amount that they would otherwise have to return to you. This cancellation fee (if any) must be clearly disclosed in your insurance policy. If you have agreed to pay a minimum earned premium or a fully earned policy fee (which is shown on your application), your company will not refund these amounts to you.

Appraisal

Alaska law requires that disputes with your insurance company about the value of a property loss you suffer be settled using an appraisal process.

In an appraisal, you and your insurance company each select an appraiser to represent you. The two appraisers then select an impartial umpire. The two appraisers separately state the value they place on your loss. If the appraisers agree on the amount of your loss, the agreed upon amount will be binding on you and your insurance company. If the two appraisers fail to agree on the amount of your loss, then they are required to promptly submit their differences to the umpire. A decision agreed to by one of the appraisers and the umpire will be binding on you and your insurance company.

You and your insurance company each pay the expenses for your own appraiser. The umpire determines who is responsible for paying all other expenses.

The appraisal clause in your insurance policy provides a means of resolving differences between you and the insurance company regarding the value of your property.

Unfair Claims Settlement Practices

Alaska law sets out a strict timetable for insurers to promptly settle claims. An insurer that fails to meet the requirements under the Unfair Claim Settlement Acts and Practices faces disciplinary action including the possibility of fines or revocation of the insurer’s license to sell insurance in Alaska.

If you suffer a loss, immediately contact your local producer or company representative. The division recommends that you keep a record of your contact with your producer throughout the claims process. Make certain that you keep track of the specific information (whom you talked to, when, what was discussed, etc.). Follow your verbal claim notification up with written notice. Your insurer must acknowledge your claim notification within 10 working days.

Your company may acknowledge your claim by paying the claim, requesting additional information, or providing you information identifying the person responsible for handling your claim and information on how to contact that person.

Alaska law requires your insurance company to respond to your initial claim notification within 10 days and to each communication from you regarding your claim within 15 days of their receipt of your communication. Your insurer is expected to complete investigation of your claim within 30 working days. If the investigation cannot be completed within the time period (and the matter is not in litigation), your insurer must advise you in writing, explaining why, and the anticipated time to complete. Your insurer must update you every 45 days of any additional extensions required until the investigation of your claim is completed.

Civil Rule 82

Alaska is unique in that the Legislature has provided by statute for an award of partial attorney’s fees to a prevailing party in a lawsuit. This statute is implemented under Alaska Rules of Civil Procedures, Rule 82. The amount of attorney’s fees awarded is set out in a schedule in the rule.

If you are sued and an injured third party obtains a judgment against you in an amount that exceeds the limit of liability of your policy, you may be responsible for paying part of the Alaska Civil Rule 82 attorney’s fees and costs that are awarded by the court. The amount of Civil Rule 82 costs and fees you may be responsible for paying is calculated based upon the amount of the judgment in excess of the stated limit of liability in your policy.

Simply put, your insurance company may not pay all Alaska Civil Rule 82 attorney’s fees in a lawsuit filed against you. You may be required to pay part of these attorney fees without the assistance of your insurer.

Personal Auto Insurance

Personal Auto Insurance Premiums Comparison Guide
Coverages in an Auto Policy

Liability Coverage

Liability coverage, the only coverage most people are required to carry under Alaska law, provides protection from claims by others for damages that might arise out of an accident for which you are found to be legally responsible. The owner or operator of a vehicle registered for use on the road must have liability coverage with minimum limits of $50,000 per person for Bodily Injury, $100,000 per accident for Bodily Injury, and $25,000 per accident for Property Damage. Bodily Injury is the portion of your Liability coverage that pays for expenses such as medical costs, loss of income, and funeral costs of others who are injured or killed as the result of your negligence. Property Damage is the portion of your Liability coverage that pays for expenses to repair or replace the property of others which is damaged as the result of your negligence.

Alaska Statute 28.22.019 requires that you must have a copy of your policy, certificate of self-insurance, or identification card in your immediate possession when you are driving a motor vehicle. Additionally, if you are involved in an accident that results in bodily injury, death, or property damage exceeding $501, you will be required to show proof of insurance. Failure to have insurance can result in the suspension of your driver’s license. Before your license can be reinstated, proof of financial responsibility must be supplied and reinstatement fees must be paid. An SR-22 filing, which provides proof of financial responsibility, may be obtained from your insurance company and must be filed with the Division of Motor Vehicles for three years following an accident in which the driver was uninsured.

Physical Damage Coverage

Physical Damage coverage is not required by Alaska law, but may be required by your lender if your vehicle is financed. Physical Damage coverage provides a method of taking care of damage to your vehicle and is commonly divided into Collision and Comprehensive coverages. Collision coverage pays for the replacement of your vehicle or the repair of damage to your vehicle that is caused by colliding with an object or by overturning. Comprehensive coverage, sometimes called “other than collision” coverage, pays for theft of your vehicle and types of physical damage not included in your collision coverage, such as broken glass, fire, collision with a bird or an animal, or vandalism.

You will be required to pay a deductible when you file a claim for physical damage coverage. A deductible is the portion of a loss that you agree to retain in the event that you have a covered loss. In the event of a covered loss, the insurance company will pay for any covered loss less the deductible. If you have a $250 deductible and suffer a $1,000 covered loss, the company will pay $750 and you will be responsible for the remaining $250.

Uninsured/Underinsured Motorists Coverage (UM/ UIM)

Uninsured/Underinsured Motorists Coverage, like Liability coverage, is divided into Bodily Injury and Property Damage sections. This coverage is designed to take care of your injuries and damage to your property. If you are in an accident and the other party is found to be responsible, but does not have insurance or does not have enough insurance to meet your expenses, this coverage is available to meet your needs. This coverage also applies to hit-and-run situations or when your vehicle is hit while parked and you are unable to determine the identity of the other party.

When you complete an application for auto insurance, you must be presented with a written offer for this coverage. Insurers must offer you a variety of coverage choices, including limits equal to the Liability coverage which you selected, as well as several optional limits up to $1 million per person/$2 million per accident for Bodily Injury. You must be offered Bodily Injury and Property Damage as separate coverages. You have the option of selecting both Bodily Injury and Property Damage at any of the available limits, rejecting both Bodily Injury and Property Damage, or selecting one coverage and rejecting the other. If your selection or rejection is not verified by your signature, Alaska law requires that the company issue your policy with coverage at limits matching your Liability coverage. If you reject this coverage, the company is not required to make another offer at renewal, but you may request that the coverage be added at any time.

Medical Payments

Medical Payments is an optional coverage that pays hospital, medical, and funeral expenses for you or others who are injured or killed while in your vehicle. Coverage also applies to you, your family members, or others insured on your policy when they are in another vehicle or when they are injured by a vehicle as a pedestrian. Unlike Bodily Injury Liability coverage, payment under this coverage can be made without a determination of negligence.

Rental Reimbursement Coverage

Rental Reimbursement coverage repays you for the cost of a rental car only when your vehicle is disabled after a covered loss. Reimbursement may be limited to a specific amount per day and for a limited number of days.

Towing and Labor Coverages

Towing and Labor Coverage, sometimes called Roadside Assistance or Emergency Services, pay for the cost of towing your vehicle to a repair shop. One way that towing costs are often covered is by providing up to a specific amount per use, but there may not be a limit indicated on the number of times this coverage may be used. This coverage may also provide payment or reimbursement for other types of assistance provided by a mobile service unit. Examples of the types of services that may be covered are locksmith, delivery of a part such as a fan belt, the cost to change a tire or jump start your vehicle.

Stereo Coverages

If you have added audio equipment to your vehicle, you may want to check with your agent or insurance company to see if you need this additional coverage. Most policies will only cover the theft of an audio system that was installed in your vehicle by the factory or that is permanently installed in the dashboard. Theft of CDs or cassettes may be included in this coverage or added as a separate coverage.

Things to be Aware of Regarding Auto Insurance

Deductibles

A deductible is the amount of money you pay as part of any loss you suffer. When shopping for collision and comprehensive coverage, you should consider your deductible. For example, if you carry collision coverage with a $200 deductible and you suffer a $500 covered loss, you would receive $300 from your insurance company and you would be responsible for the remaining $200 of the claim.

If you choose a higher deductible on your comprehensive or collision coverage, your premium will be lower. However, you will need to pay more in the event of a claim.

The Alaska Automobile Insurance Plan

If you are unable to obtain automobile insurance from a private insurer, you may be eligible for coverage under the Alaska Automobile Insurance Plan. The plan assigns applicants to private insurance companies doing business in Alaska. For more information, call AIPSO at
1-800-227-4659.

Motor Vehicle Reports

For automobile and boat insurance, most insurance companies order a Motor Vehicle Report (MVR) from the Division of Motor Vehicles for all drivers listed on your insurance application. The MVR will be used to verify any traffic violations, license suspensions, or revocations. Many auto insurers require you to name all licensed drivers in your household even if you do not intend to allow them to drive your vehicle. Your company may contact your previous insurance carrier and/or commercial reporting agencies. These organizations might contact you, your family members, neighbors, or employer.

Insurance for Rental Vehicles

Alaska Statute 21.89.020(f)(2)-(3) requires that your policy provide liability coverage at the minimum required liability limits when you rent a vehicle. Your policy must also extend your collision and comprehensive coverage to a rental vehicle. If you do not carry collision and comprehensive coverage, the company must provide the option for you to purchase coverage for physical damage to a rental vehicle.

Named Driver Exclusions

Before a company decides to insure you, it must consider the driving records of all members of your household. If one family member has a poor driving record, it could affect the auto insurance premiums for the whole family. Alaska law gives the named insured the right to specifically exclude a family member from coverage under the insurance policy. This is referred to as a named driver exclusion.

While it may be tempting to exclude a driver with a poor driving record from your insurance policy in order to reduce the premium (for example, if the driver is a student away at college for a large portion of the year), it is important that you be aware of the risks associated with the exclusion. Once a driver is specifically excluded from the insurance policy, any damages caused by that driver will not be covered by the insurance company. In the example above where a young driver is away at college, excluding the student from the parents’ insurance policy means that the student could not drive the parents’ car while home on vacation without becoming an uninsured driver. Similarly, the student would run the risk of being uninsured while driving any other car, such as one belonging to a friend. If an excluded driver drives without insurance, they would not only be in violation of the law, they would be exposing themselves and the named insured to a large, uninsured, liability.

What Affects the Price of Auto Insurance?

Classification

When determining the rate for an auto insurance policy, insurers separate drivers into categories called classifications. Drivers are classified based on a number of different characteristics, including but not limited to age, sex, driving record, type of vehicle, gaps or lapses in insurance coverage, amount of coverage purchased, and annual miles driven. History has shown that drivers with certain characteristics, such as a poor driving record, have a greater chance of being involved in an accident, and the drivers in those classifications must pay higher rates. While some of the classification criteria (such as age and sex) are out of your control, others, such as driving record and type of vehicle driven, are within your control.

Insurers have the right to decide what types of drivers they wish to insure, as long as they apply their criteria consistently and fairly. The eligibility criteria an insurer uses to select the drivers it is willing to insure are referred to as underwriting criteria. Some insurers specialize in adult drivers with clean driving records, and will turn down an application from a teen-aged driver, or an adult who has had several serious violations. Other insurance companies specialize in high-risk drivers and may accept individuals who have had several accidents or violations. The rates offered by the different insurance companies will vary, based at least partially on their choice of drivers to insure. If you are turned down by one insurance company, you should apply with another, since the two insurers may have different underwriting criteria. If you had a poor driving record in the past but it has improved over the last few years, it may be worth shopping around for another insurance company that has lower rates.

If you have trouble finding any insurer willing to sell you a policy, you should contact the assigned risk plan at the number given previously.

Discounts

Discounts are awarded because the insurance company sees certain types of drivers as “better risks.” Before purchasing auto insurance, be aware of discounts you may qualify for that are offered by your company. Here are some discounts to look for:

  • Multiple Vehicles - Most insurance companies offer a discount to customers who insure more than one vehicle with their company. Industry statistics show that individuals and families insuring more than one vehicle have better than average claims experience.
  • Driver Education Courses - Discounts for driver education courses are targeted primarily at younger and older drivers. Individuals may be able to lower their auto insurance rates by voluntarily participating in a state-approved course.

    Alaska law requires companies to give a discount to any primary driver who is over age 55 and who voluntarily completes a motor vehicle accident prevention course approved by the Division of Motor Vehicles. The discount must be applied for the three years following the successful completion of the course.

    For further information on driver education programs, contact the Division of Motor Vehicles Driver Improvement Bureau at (907) 273-2223.
  • Good Student - Many insurance companies have found that students who earn a B average or better tend to have fewer accidents. For this reason, many companies offer a good student discount.
  • Anti-Theft Devices - Devices or systems that deter theft or vandalism may also lower claim costs. Many companies offer discounts for anti-theft devices such as security alarms, combination door locks, etc.
  • Auto/Home Package - Insurance companies may offer a discount if they insure both your vehicle and home.
Auto Insurance Claims

Be familiar with your automobile insurance policy before you need it. Read the policy thoroughly so you know what is covered, how much is covered, and what is excluded. Knowing in advance what to do in the event of an accident can help you avoid expensive mistakes.

Before You Have a Claim

  • Carefully review your policy so you know how much liability coverage you have. This is the coverage that pays for damage you cause to other vehicles or injuries to other people.
  • Know if you have collision and/or comprehensive coverage. Know what your deductible is.

There are several steps you should take after an accident to help you avoid expensive, time-consuming mistakes. Be aware that Alaska law requires you to report to the police any accident that results in death, injury, or damages of $2,000 or more.

Filing a Claim

There are several steps to follow when filing a claim if your car is involved in an accident, damaged by fire, flood, vandalism, or stolen:

  • Telephone your producer or company as soon as possible, even if you are away from home or if someone else caused the accident. Ask your producer what forms or documents will be needed to support your claim. Your company may require a proof of loss form, as well as documents relating to your claim, such as medical receipts, auto repair bills, and a copy of the police report.
  • Supply any information your producer or company needs promptly. Cooperate with your insurance company in its investigation, settlement, or defense of any claim.
  • Keep records of all your expenses. Emergency expenses you incur as the result of an automobile accident may be covered under your policy.
  • Keep copies of all your paperwork. Store copies of all your accident-related paperwork with your other important papers.

Personal Home Owner's Insurance

Home Owner's Insurance Premiums Comparison Guide
Coverages in a Home Owner's Policy

A home owner's policy is a package of coverages for your property, medical payments for others, and personal liability. This type of policy is available for homes occupied by the owners as their primary residence. Companies may offer coverage for single family homes or homes with up to four living units. The company may provide this coverage through an industry standard policy form called an HO-3 or they may have designed their own policy. If you have a mortgage, your lender will usually require that you have home owner's insurance for no less than the current appraised value of your home. A permanent structure on your lot which is used as your primary residence will be covered by your home owner's policy, but there is no coverage afforded for the land on which this structure is located.

Types of Coverages in a Home Owner's Policy

Dwelling Coverage provides for the repair or replacement of your home. Most home owner's policies provide for replacement cost for your home if the limit of coverage is equal to at least 80% of the amount it would cost the insurance company to rebuild it. Some policies may provide for an additional percentage in value above the policy limits which guarantees that the insurer will bear a limited additional amount of the cost to replace your home if that cost exceeds the policy limits. An insurer that offers this limited guaranteed replacement coverage will generally offer 20%-25% additional coverage over the policy limits. However, a policy with guaranteed replacement cost may also require that the limit of coverage is at least equal to 80% or more of the amount it would cost the insurance company to rebuild it.

Most home owner's policies will offer Dwelling coverage for all perils. An all perils policy does not list the types of losses insured against, but will cover all losses or all physical damage not otherwise excluded by the policy. Common exclusions are for flood, earthquake, and maintenance related losses.

Other Structures Coverage provides for the repair or replacement of other permanent buildings on your building site. While this coverage will protect your detached garage or personal workshop, it usually won’t provide coverage for other buildings on your property occupied by a tenant or buildings used for business. Your policy will usually include coverage for Other Structures in an amount equal to 10% of the Dwelling coverage. If you have several outbuildings on your property or an unusually large detached garage, you may want to purchase additional coverage. Other Structures coverage usually provides protection against the same perils as those covered under the Dwelling coverage of your policy.

Personal Property Coverage provides for repair or replacement of your furnishings and personal effects. Your policy will usually include coverage in an amount equal to 50% of the Dwelling coverage. This coverage extends worldwide, but will usually only provide up to 10% of the coverage limit for personal property while it is away from your home.

Personal Property coverage is usually on a named perils basis. A list of perils that the company insures these items against will be included in your policy. The named perils will usually include fire, lightning, windstorm, hail, explosion, riot or civil commotion, aircraft, vehicles, smoke, vandalism and malicious mischief, theft, and falling objects. However, there may be limits to the amount available for recovery under some of these perils. For example, your policy may provide up $50,000 in Personal Property coverage, but your policy may have a limit of $200 for theft of money.

As with the Dwelling coverage, there are exclusions with which you need to be familiar. Personal Property coverage will not cover the property of roommates or boarders. There is no coverage for your automobile. A small boat or kayak may be covered under this section of your policy, but coverage is usually restricted by the length of the boat and the presence of, or horsepower of, a motor. Property used for a business will not be covered, but you may be able to purchase additional coverage for some types of business property or inventory.

Loss of Use or Additional Living Expenses provides for the increase in your housing expenses when you are displaced because of a covered loss. For example, if a fire damages your home and you need to relocate until the damage is repaired, this coverage will pay reasonable costs to temporarily live at another location. Your policy will usually include Loss of Use or Additional Living Expenses coverage at 20% of the Dwelling coverage limit without additional cost. There may be restrictions regarding the amount payable per month or a time limit that applies to this coverage. If you rent out part of your home and it is uninhabitable after a covered loss, this coverage will provide payment for the rental value of the unit.

Medical Payments provides for the medical expenses of others when they are injured on your property. Most policies include at least $1,000 of coverage, but higher limits may be available. Payment under this coverage is made without a determination of negligence. Any non-resident on your property with your permission is eligible for coverage under this section.

Personal Liability provides for expenses of others for which you are determined to be responsible. Most policies include at least $100,000 of coverage, but higher limits may be available. When deciding how much coverage to purchase, consider the value of your total assets and how much you might lose if another person sued you and you lost the case.

Personal Liability coverage extends beyond the boundary your property. In addition to providing coverage against negligence that occurs on your property, this coverage can provide coverage if your child damages a neighbor’s property. If an incident involving family members occurs, as defined in your policy, at other locations, the liability of your family members will also be covered by the policy.

Optional Coverages

The following coverages are not part of a standard home owner's policy, but are examples of some of the common optional coverages which may be included in your policy or are available for an additional charge.

Earthquake or earth movement coverage provides for repair or replacement of your home following an earthquake or earth movement, as defined by your policy. Some companies may require that your property meet certain criteria, such as having a secured hot water heater, in order to purchase this coverage. The amount of this coverage will match your dwelling coverage, but you will have a separate deductible for this coverage, which is usually 10% of the dwelling coverage amount. Your policy will define what situations are included in this coverage and will include any limitations which may apply to this coverage.

A common definition of earthquake or earth movement includes aftershocks for up to 72 hours after the initial event. Check your policy for the period of time which your insurer uses to define an earthquake or earth movement.

Flood insurance is available as a separate policy and provides coverage for direct physical losses caused by flood, flood-related erosion, abnormal tidal surges, and mudslides. The National Flood Insurance Program provides these policies through an arrangement with private companies. If your property is located in an area with a high likelihood of flooding, your lender may also require that you obtain this coverage.

There are several policy forms available and the policy you will be offered, and the price you will pay for it, will be largely determined by the location of your home. Your agent should be able to determine what flood zone applies to your property or you may be able to obtain this information from your city planning or engineering department. You may also be required to obtain an elevation certificate, a document from an engineer that shows the relative elevation of different areas of your home.

More information is available from your insurance agent, by calling 1-888-FLOOD-29, or on-line at http://www.fema.gov/business/nfip/ or http://www.floodsmart.gov/. Additional information on flood insurance and flood mitigation in Alaska is available by calling (907) 269-4567 or at related links.

An inflation guard endorsement is available to help maintain an adequate level of coverage on your home. This endorsement allows your insurer to automatically increase your policy limit based upon the insurer’s estimate of increases in building material and construction costs. Even if you have an inflation guard endorsement, you should still check the limits of your coverage periodically to make certain you are adequately insured.

Other Types of Home Owner's Policies

Tenant’s Policies

If you are renting an apartment or home, your landlord’s property insurance policy does not cover your furniture or other personal property, nor will it protect you if you are sued. The owner of the dwelling you rent is responsible for insuring the structure and obtaining liability coverage to cover the owner’s acts of negligence. However, you will need to insure your personal property by purchasing a tenant’s policy. A tenant’s policy provides coverage similar to that described under the personal property, loss of use, medical payments and personal liability coverages of the home owner's policy.

Condominium Owner’s Policies

Your condominium association should purchase an insurance policy to cover property damage for the building and all common areas and coverage for liability associated with common areas. The condominium association policy does not provide coverage for the personal property of the individual unit owners nor for the building structure inside each dwelling unit that is not owned by the association. As individual unit owner, you will need to insure your own personal property and ownership interest in your own unit by purchasing a condominium owner’s policy. A condominium owner’s policy provides coverage similar to that described under the personal property, loss of use, medical payments and personal liability coverages of the home owner's policy. In addition, the condominium owner’s policy provides limited dwelling coverage for the parts of the individual dwelling unit that are owned by the condominium owner.

Things to be Aware of Regarding home owner's Insurance

How much insurance do you need?

When determining the amount of insurance to purchase, there are several different limits to consider. The policy limit that is generally selected first is the amount of insurance on your house. This amount should equal the cost of rebuilding your home in the event that it was destroyed, and may be less than the market value of your home, since the market value includes the value of the land. Your producer may be able to help you determine the amount of insurance that is appropriate for your home. If you have a mortgage on your home, the lender will probably require that you carry an amount of insurance that is it at least as high as your mortgage.

The limits of insurance on other structures and on the contents of your home are generally expressed as a percentage of the limit on your house. You should check with your producer as to what those amounts are. If you have a particularly expensive detached garage or if you have a house full of antiques, you may want to raise the limits on the other structures or contents coverages.

The other significant policy limit to consider is the liability limit. This limit should be high enough to protect you from lawsuits resulting from your negligence. If you carry an umbrella policy, that policy probably specifies minimum liability limits for your home owner's policy.

Flood and Earthquake Damage Not Covered

It is important to be aware that a standard home owner's policy does not provide coverage for damage due to floods or earthquakes. Insurance for these two perils may be purchased separately and as discussed earlier in this section.

What Affects the price of Home Owner's Insurance?

Classification

There are a number of things that affect the price of a home owner's insurance policy. These include:

  • The Type of Construction—Frame houses usually cost more to insure than brick houses because they are subject to more extensive damage in the event of a fire. Earthquake insurance is much more expensive for brick homes than frame houses because brick houses are more susceptible to extensive damage from earthquakes.
  • The Age of Your Home—Some insurance companies may not be willing to insure older homes or may offer limited coverage. Having a new home may qualify you for a discount on your insurance.
  • Available Fire Protection—The quality of your fire department and your home’s distance from a fire hydrant determine the fire protection class of your home and in turn affects the rate.
  • The Amount of Coverage—The amount of coverage you decide to buy for your home, personal belongings, and personal property liability will affect the price of your insurance.

Discounts

Insurers often offer discounts on home owner's insurance. Some commonly found discounts are:

  • Dead Bolt Locks or Safety Alarms—Insurers frequently offer a discount if you have dead bolt locks or fire and burglar alarms in your home.
  • Fire Resistant Material—A home constructed of fire resistant material reduces the risk of a significant fire loss and may qualify you for a discount.
  • Multi-Policy—If you buy your automobile, home, and umbrella insurance policies from the same company, you may be entitled to receive a larger discount. Check with your producer.
  • Senior Citizen—If you are retired, you may qualify for a discount. Some insurance companies believe that retired persons are around the home more and can prevent potential losses.
  • Nonsmoker’s—Some insurance companies believe that there is more of a chance smokers will have a fire than nonsmokers, and offer nonsmokers a discount.

Credit Information or Insurance Score

You may be asked to provide information regarding any bankruptcy, judgments, or credit problems. The insurance company may also ask your permission to obtain a credit report or will disclose to you that an insurance score will be used to complete the premium quote. An insurance score is a number defined by each individual insurance company that is based on information regarding your credit history. Alaska law allows insurers to consider credit information in the selection of applicants and setting of rates. Alaska Statute 21.36.460 sets limits on the types of credit information that may be used, what consideration it may be given, and how often it may be considered.

To obtain your credit history, you may be asked to supply your date of birth, social security number, and current or prior address. A credit score, insurance score, or rating is assigned to you based on information contained in your credit report. More information on insurance scoring and credit scoring is not available from the Division of Insurance or can be found on the following websites:

Deductibles

The higher your deductible, the lower the price of your insurance. Deductibles reduce your premiums because you agree to pay a part of each claim that your insurance company would otherwise have to pay. Insurance companies offer deductibles because deductibles reduce the number of small, covered claims that are costly for insurers to handle. Most insurers sell policies with $250 deductibles, but the higher the deductible you choose, the lower your cost will be. For example, a policy you buy with a $250 deductible will cost more than one you buy with a $500 deductible. Determine how much you can reasonably afford to pay out of pocket if a loss occurs. Your deductible applies only to the coverage you have for your personal property (known as contents coverage) and your home. You are not required to pay a deductible for your liability coverage.

Home Owner's Claims

Be familiar with your home owner's insurance policy before you need it. Read the policy thoroughly so you know what is covered, how much is covered, and what is excluded.

Before You Have a Claim

Use a video recorder or camera to document your belongings in a room-by-room inventory, with all closet doors open. Visual proof of your belongings will verify the items were actually on your premises and ensures you won’t forget anything in the event of a claim. Providing you with this kind of documentation will also help determine how much personal property insurance you need. If you cannot make visual images of the inside and outside of your home, keep a written inventory of the contents, including the date purchased, where it was purchased, the cost, and a receipt. Obtain appraisals of your special valuables such as antiques, jewelry, stamp, coin, and other collections. You may want additional coverage if the value of these items exceeds the limited coverage in your policy. You may want to maintain this information on a computer disk that can be easily updated. Store your records in a safe deposit box, at a relative or friend’s home, or at your office.

Contact your producer for a home inventory form to complete or request one from the Insurance Information Institute at the address on page 20. Free home inventory software is available on the Internet at the Insurance Information Institute and other websites. .

After a Loss

As soon as possible after the loss, you need to notify your producer or insurance company. Follow up any conversation in writing. Losses that involve theft, or which cause you to suspect arson, should also be reported to the police. If your home is damaged and it is safe to do so, make temporary repairs to protect the house and your belongings from further damage. For example, if the windows are broken due to a burglary, you should cover them with plywood or other material to protect your home from weather damage and further vandalism. Expenses for temporary repairs are covered under your policy; be sure to save receipts or bills.

It is important that the repairs be temporary and not permanent. If you make permanent repairs before the insurance company inspects the damage, your claim may be denied. In addition, you should preserve all evidence of the loss, including the damaged property, so that it can be inspected by your insurance company. If you have any doubts about whether the repairs will be considered permanent, check with your insurance company before work begins.

Soon after you report your loss to the insurance company, an adjuster will be sent to inspect your property. Insist on being present during the inspection, so that you can assure that the adjuster does not fail to notice any damage. During the inspection, the adjuster will assess the damage to your home and estimate the costs of repairs. The adjuster will also determine whether the damage is covered under the terms of your policy. You may want to bring your own contractor to inspect the loss and act as your representative during the inspection.

Replacement cost payments for small building damage claims will be made whether or not actual repair or replacement is complete. For large losses, insurance companies will only pay the difference between actual cash value and replacement cost when the property has actually been repaired or replaced.

If, at the time of loss, the amount of insurance purchased does not equal the specified percentage, usually 80%, of the full replacement cost of the building before the loss, the insurance company will pay less than the replacement cost. The amount the insurance company will pay is the greater of the actual cash value or the replacement cost less a penalty specified in the policy. The policy will never pay more than the stated policy limits.

Complete a Proof of Loss Statement. In some instances, your insurer will request a signed, sworn statement called a Proof of Loss. Your company will provide you with a standardized form to use. You must file a Proof of Loss if the company requests you to as it is the basis for determining the value of your claim.

In most cases, you will be asked to estimate the actual cash value of the household items you have lost and the cost to repair your home. You must provide the company with evidence if you have purchased a replacement item. Contractors, catalogs, and local stores are good sources of current cost information. Be sure to find out from your insurer if you should include sales tax in your cost estimates, and whether you should use exact costs or round numbers to the nearest dollar. Do not forget to include small items such as kitchen utensils or clothing accessories, as the replacement cost of these items can add up.

Negotiate the Final Settlement. After the adjuster has reviewed the damage to your property, the adjuster will prepare or obtain an estimate of the cost to repair or replace your home and personal belongings. If you disagree with the adjuster’s estimate, explain your reasoning to your company. It is possible your company has overlooked something and is willing to make adjustments. If you continue to disagree with the company’s valuation of your loss, you are entitled to resolution of your dispute through a process called appraisal. See page 4 for an explanation of the appraisal process.

Home Inventory App and Checklist

One of the best ways to ensure you have the right amount of home insurance is to keep a detailed and up-to-date inventory of your possessions.

The National Association of Insurance Commissioners (NAIC) created a free app, called myHOME Scr.APP.book to help consumers document their valuables, update their inventories, and store the information for easy access after a disaster. The app is free and available for both iPhone® and Android® smart phone users.

For those without a smart phone, a downloadable home inventory checklist with tips for effectively cataloguing your possessions is also available.

Both the paper and app version of the checklist allow you to record possessions in each room of your house. You can include the item’s manufacturer, model or serial number, date of purchase and purchase price.

You are encouraged to include any sales receipts of items listed, and you may want to include pictures of items.

Once completed, the home inventory should be kept in a safe, fireproof place. The checklist can be revisited and updated when new purchases are made.

Personal Umbrella Insurance

What is Covered?

Although home owner's policies provide liability coverage for injuries or property damage for which you are legally liable, this coverage is limited. You can buy additional liability protection through a separate umbrella policy. Umbrella policies provide higher insurance limits (frequently of $1 million and higher) as well as expanded protection for a variety of losses. The coverage on an umbrella policy becomes effective if you are sued for an amount greater than the limits of your auto or home owner's policy.

In addition to protection for bodily injury and property damage claims against you or a family member, coverage may be provided if you are sued for false arrest, wrongful eviction, libel, slander, etc. Policy provisions vary so be certain you receive a full explanation of coverage. The cost of personal umbrella insurance is relatively low.

Things to be Aware of Regarding Umbrella Insurance Policies

Umbrella policies generally carry requirements that you purchase specific policy limits on your auto and/or home owner's policies. Be sure to check with your producer to verify that you have purchased adequate underlying limits.

Business Owners Insurance

If you own a small business, a Business Owners Policy or BOP is a way to purchase a variety of property and liability coverages as a package.

Most but not all small businesses are eligible for this insurance, with typical coverages that include buildings such as apartments and offices; Personal Property, in offices, apartments, and connection with mercantile operations; Service and Processing businesses such as bakeries, barber shops, funeral homes; with certain limits, Contractors; Restaurants, including fast food; Convenience Stores with gas pumps; Laundries and Drycleaners; and with certain limitations, Wholesalers.

Eligible businesses can get two basic types of Property coverage with the BOP, one on the standard, “named peril” form and on the special “all risk” form. The main difference between the forms lies in the breadth of coverage. The standard form covers a list of causes of loss, “named perils” and the special form simply covers any loss that is not excluded or limited. Examples of causes of loss covered on either policy form are Fire, Lightning, Sprinkler Leakage, and Smoke to name a few. Additional coverages may also be offered depending on the insurance company. Business Income coverage is a common form of additional insurance, purchased as a way of covering the actual loss of income if operations are suspended while the business recovers from another cause of loss. Property coverage is generally available on a replacement cost or actual cash value basis on both forms with replacement cost the more expensive of the two.

Liability coverage under the BOP protects the assets of a business when it is sued for something the business did or failed to do that caused property damage or injury to someone else. The insurance company also defends the policyholder in a suit and pays legal costs. Liability coverage in the BOP is generally on an “excess” basis meaning that if other coverages such as from a general liability policy are available for a particular loss the BOP will pay after the other policy has paid. The BOP has combinations of separate and aggregate limits for liability and medical expense, product-completed operations, damage per fire, and general aggregate limits.

Although it provides a good general package of coverages for the small business, the BOP does not provide all the insurance a business owner typically must purchase. Auto Liability, Workers Comp and Health Insurance must also be considered.

Workers’ Compensation Insurance

If you are a business owner, Alaska law requires you to obtain workers’ compensation insurance coverage for your employees in the event of injury or death on the job. In exchange for providing coverage for medical expenses and compensation for lost wages, you as the employer are protected from lawsuits from your employees should they be injured on the job. Without the protection provided by your workers’ compensation insurance policy, a single serious injury to one of your employees has the potential to financially ruin your small business, either because of high medical bills or because of the time and expense that you must expend to defend and pay for any judgments against you should your employee sue you over his or her injury.

Life Insurance

Types of Life Insurance Policies

The primary purpose of life insurance is to provide financial security for your family. Life insurance provides cash that can help to ensure that, when you die, your family will have the financial resources necessary to protect their home, assets, and to provide additional income.

In choosing a life insurance policy, the division recommends that you consider the following:

  • the type of insurance product that best suits your needs
  • the length of time you need insurance
  • how much insurance you need, considering current and future debt, income, and expense requirements such as burial, hospital, taxes, college tuition, and any others
  • what you can afford to pay

After you have purchased a life insurance policy, the division recommends that you:

  • periodically review your policies and the selection of your beneficiaries, keeping in mind that your financial situation and family needs change
  • be aware that revising your will does not revise your life insurance policy and death benefits will be distributed according to the provisions in your insurance policy and not according to the provisions in your will
  • request any change of beneficiary in writing and keep a copy of the request until the requested change has been made

Types of Life Insurance Policies

Described below are some of the most common types of life insurance policies. It is important to keep in mind that the life insurance policies offered by an insurer frequently change. Policy terms can vary significantly from one insurer to the next.

Term Life

Term life insurance pays a predetermined death benefit if the insured dies during the period of time the policy is in effect. The term can range from a single year to a period ending at a specific age, such as 65 or 70. If the insured does not die during the term of the policy, the policy expires with no payment. The amount of death benefit can be a level, decreasing or increasing amount to match your insurance needs. For example, a decreasing term policy may provide a death benefit that matches the decrease in your mortgage loan balance.

Term life insurance is generally less expensive than other forms of life insurance, since a benefit is provided only upon death and only for a limited period of time. Also, unlike many other life insurance policies, no penalties are assessed if you decide to terminate the policy before the end of the term. Since term life policies provide no accumulation of cash values or dividends, they can generally be compared to one another on the basis of their premium.

Term insurance allows a higher death benefit to be purchased for less money than other types of life insurance policies. This may be particularly important for young families with limited income and a higher need for insurance. Term insurance is also useful for protecting the family members in the event of the death of a wage earner during periods of high debt, such as during the terms of a mortgage or car loan.

You may want to consider the following when shopping for a term life insurance policy:

  • Most shorter term policies offer an option to continue or renew the policy for an additional period of time. One advantage of this option is that the insured does not have to show evidence of insurability in order to maintain the policy for additional periods of time. The premium charged each renewal will be based on the insured’s age at the time of the renewal.
  • Most term policies also offer an option to exchange or convert the term policy for a cash value or whole life insurance policy without providing evidence of insurability. This option provides flexibility to those who may have preferred a policy with cash value accumulation, but could not afford it at the time of purchase. This option becomes valuable if an insured develops a medical condition during the policy term which renders them uninsurable or insurable but only at a higher premium rate.
  • Credit life insurance is a type of term insurance that pays the balance due on a loan or debt if you die. In Alaska, the death benefit on a credit life insurance policy is required to match the remaining balance of the loan. Credit insurance is usually sold through a bank, store, or auto dealer at the time of a loan transaction. If you purchase credit life insurance and decide to pay off your debt early, the insurer is required to give you a refund of unearned premium. Note that a standard term life policy can be used for the same purpose as a credit life policy, but often at a much lower cost.

Permanent Life

Permanent life insurance provides insurance protection for the entire life of the insured, unlike term policies that expire after a predetermined period of time. As long as you make the premium payments, the policy will pay a death benefit. Most permanent life insurance policies build cash value which can:

  • provide a lump sum of money, if you cancel your policy.
  • pay premiums, if you need to stop paying premiums on the policy.
  • be used as collateral for a loan from the insurance company.

Cash values develop from the premiums that you pay for the insurance policy. The premiums you pay are generally higher than the amount needed to cover the risk of your death and the insurance company’s expenses for acquiring and maintaining your policy. The amount of this excess premium is accumulated with interest. Generally, interest earnings are based on your insurance company’s investment experience. Most policies will have little or no cash value in the first few years due to the large expenses involved in acquiring and setting up your policy.

Permanent life insurance policies are intended to be kept for a long period of time. Premiums for permanent life insurance policies are higher than term insurance policies in the early years of the policy. Therefore, if you do not intend to keep the policy for a long period (at least 15 years), term insurance may be a better choice.

Permanent life insurance takes on many different forms with a variety of features. Following is a brief description of the most common forms.

  • Whole life insurance policies have fixed level premiums and level death benefits for the life of the insured. This type of policy generally provides no flexibility for adjusting the premiums or the amount of death benefit. If premiums are not paid, the policy terminates. Cash values are predetermined and will not vary over the life of the policy based the insurance company’s experience. Whole life is often referred to as ordinary life or straight life.
  • Participating whole life insurance policies have the fixed level premiums, level death benefit, and predetermined cash values of a whole life policy. However, participating whole life provides a return of some portion of the premium, called a dividend, if the insurance company’s investment, mortality or expense experience is better than expected. These dividends provide flexibility to the policy, since they can be used for a number of purposes. Dividends could be used to purchase additional insurance, pay premiums, or just accumulate with interest. Note that there is no guarantee that you will actually receive a dividend.
  • Variable life insurance policies have a fixed level premium with a death benefit that varies based on the experience of a selected set of investments. You may specify which investments your cash value is to be invested in. Most insurance companies offer several investment options, including money market funds, common stock funds, and bond funds. A higher rate of return on the selected fund will cause the cash value and death benefit to increase, while a low or negative rate will cause the cash value and death benefit to decrease. These policies provide a guaranteed minimum death benefit, but no guarantee of cash value. Therefore, variable life is more risky than other permanent life insurance policies because it is an investment-type product. Variable life policies are subject to federal securities laws.
  • Universal life or flexible premium life insurance policies allow you to pay premiums at any time, in any amount, subject to certain maximums and minimums. These policies also allow you to adjust the death benefit. With a universal life policy you will be able to actually see the interaction of premiums, death benefit, interest credits, mortality charges, expenses, and cash values. A presentation will generally be given to you at the time you purchase the policy and at least annually showing how the cash values and death benefits develop. In general, a universal life policy will develop cash values as follows:

    Cash value = cash value from prior period + premiums paid – expense charges – mortality charges + interest

In a universal life policy, the insurance company generally guarantees that it will not charge you more than the stated maximum mortality charges. Most insurance companies charge less than the stated maximum mortality charges. Universal life policies provide a guarantee that not less than a stated minimum interest rate will be credited. These rates are low and insurance companies generally credit a higher rate based on their investment experience or some-times based on the performance of a stock market index such as the S&P 500. It is important to remember that in most cases the higher interest rate is not guaranteed to be credited in the future.

As long as the cash value is large enough to cover the mortality charges and expenses, no premium payment is required. However, you may still make premium payments which will be added to the cash value. Federal law includes some restrictions on how high your cash value may be in relation to the death benefit before your policy will become subject to certain federal taxes. Your insurance company will generally verify that your cash value is within the federal standards and if it is not they will adjust the death benefit automatically.

Under a universal life policy you are able to choose between two primary death benefit options. One option is a level death benefit and the other is a death benefit that increases with the increase in cash value. Regardless of the death benefit chosen, you will be allowed to adjust the death benefit at a later date. If you decide you want to increase the death benefit at a later date, you will likely be required to provide evidence of insurability.

If you decide to cancel (referred to as surrendering) your universal life insurance policy, your cash value may be reduced by surrender charges. Surrender charges are specified in the insurance policy and will vary significantly from one policy to the next depending on what expense charges were already assessed on your policy. Surrender charges help the insurance company offset some of the expenses of acquiring and maintaining your policy. You will generally pay for the flexibility provided by universal life policies. In order to assess the actual cost of these policies, the expense charges including surrender charges, mortality charges, and interest crediting rates should be reviewed. One of the most important considerations will be what the insurance company’s historical experience has been. Do not just compare the interest crediting rates since mortality and expense charges can easily offset any additional interest credits.

  • Universal Variable Life is a variable life policy but with the flexible premium structure of a universal life policy. Unlike a universal life policy that provides a guaranteed death benefit if premiums are paid, a universal variable life insurance policy pays a death benefit that varies with the experience on the selected fund. Universal variable life may be appropriate, if you are looking for a life insurance policy that treats cash values more as an investment than a savings account.
Things to be Aware of Regarding Life Insurance Policies

Important Policy Provisions

  • Most permanent life insurance policies provide that the insurance company will give you a loan of a portion of the cash value. The insurance company will charge interest on the loan as specified in your policy. If you borrow from the insurance company and the amount exceeds the cash value over time due to interest, your life insurance policy will terminate within a specified number of days unless a payment is made. Any remaining portion of the loan unpaid at death will be deducted from the death benefit.
  • Life insurance benefits can be paid in various ways called settlement options. Some of the options generally available include: a cash or lump sum payment; interest only option where the insurance company keeps the benefits and provides payment of the interest; fixed period option where benefits are paid out over a predetermined number of months or years; fixed amount option where the death benefit or cash value is paid out in a specified amount each period; life income option where the benefits are paid for the life of the beneficiary. Combinations of these options are also available.
  • Cash values provided upon termination of your policy can be generally paid out in cash; as reduced paid up insurance where the cash value is used to purchase a permanent life insurance policy that is paid up (i.e., no premium payments are required); or as extended term insurance where the cash value is used to purchase a term insurance policy.
  • A grace period is defined as the additional number of days beyond the due date of the policy when you can pay the premium without interest or fear that the policy will terminate (lapse). If your policy has enough cash value and you have elected on the application to have an Automatic Premium Loan, then any available cash value will automatically pay for the premium. An automatic premium loan can prevent the policy from lapsing.
  • In the event you die during the grace period, the death benefit will be reduced by the amount of premium due.
  • All life insurance policies contain an incontestability clause. This clause will not allow an insurance company to deny a death benefit or terminate a life insurance contract after a specified period of time, usually two years. This clause has the effect of requiring the company to thoroughly investigate the information provided in an application during the first two years.
  • Most insurance policies contain a suicide clause. This clause allows the insurance company to refuse payment of a death claim if the insured commits suicide within the first two years of the policy. The insurance company must return premiums paid on the policy.
  • In most cases, cash value and policy loan requests are granted quickly. However, all life insurance policies contain a delay clause that allows the insurance company the right to wait up to six months before providing a cash value or policy loan.

Multiple Life Policies Vs. Single Life Policies

  • Multiple life policies insure the lives of more than one person on a single policy. There are two types of multiple life policies. A joint life policy pays a death benefit when the first person dies. Since joint life policies are less expensive than purchasing two individual policies, they are commonly purchased by a husband and wife who are each other’s beneficiary. A second-or-later-to-die policy pays a death benefit when the last person insured under the policy dies. Second-or-later-to-die policies are often purchased by married couples who want to protect their assets from federal estate taxes.
  • Single life policies insure the life of only one person and pay a death benefit when that person dies.

Group vs. Individual Policies

Life insurance is sold on both an individual and group basis.

  • Individual policies provide coverage to a specific individual under a policy issued solely to that individual. In order to be considered for individual insurance coverage, you will be asked several medical questions and may be required to undergo a medical examination. The insurer will use the results to determine whether to sell you the policy. This is called medical underwriting.
  • Group policies provide coverage to individuals under a single master policy issued to the group policy owner. The policy owner may be an employer, an association, a labor union, or other entity. Unless the group is small, generally ten employees or members or fewer, no individual medical underwriting is performed. Instead, insurers require employee or member minimum participation levels and minimum employer contribution levels in order to assure that there are sufficient individuals in the group in good health to balance those in the group in poor health. One drawback to group life insurance is that it will often terminate when you leave the group unless there is a conversion option to an individual policy.

Replacement

Your insurance producer may suggest that you replace an existing life insurance policy with a new one. The suggestion to replace a policy may be made because your life insurance needs have changed, a new policy has some additional features that would be useful for you, or for another reason. Before you agree to replace a policy, you should understand the advantages and disadvantages of replacing your current policy.

Replacing a current policy may mean giving up certain valuable benefits and rights that may not be available on a new policy or may not be available for a number of years. Review your life insurance policy incontestability period. Before purchasing, compare your current policy with the new policy and consider the guaranteed benefits, cash values, and your rights under both policies.

Riders

A rider is a written agreement that attaches to a policy to add, subtract, or modify insurance coverage. A rider takes precedence over the original provisions in the policy.

  • An accelerated death benefit rider is often available at no extra charge, and will allow you to take all or a portion of the death benefit early if you become terminally ill or have a specific disease. Some of these riders also provide you with a monthly payment if you require long-term care due to a medical condition as defined in your policy. The death benefit and cash value of your policy will be reduced by the amount you have received plus incurred interest on the paid out amount. It is important to consider that the amount of death benefit taken early will likely be considered income. This means that the benefit will be subject to federal taxes and will also be included in any income calculation for purposes of determining eligibility for government programs such as Medicaid.
  • A waiver of premium rider will pay your life insurance premiums if you become totally and permanently disabled according to the disability definition in your policy. The insurance policy continues just as if you were paying the premiums. This rider can generally be purchased for a small extra premium.
  • An accidental death benefit rider doubles or even triples the death benefit if you die from an accident. This rider can be purchased for a small extra premium. The division recommends that before purchasing this rider you carefully consider that the amount of coverage you need does not depend on cause of death.
  • A guaranteed insurability option allows you to purchase additional amounts of death benefit at stated periods of time without providing evidence of insurability. This rider may be of value to those with a family history of significant medical problems who currently have limited income and cannot afford a larger death benefit.
  • A family rider allows you to provide term insurance on all or certain members of your family under your policy.

Taxes

The division recommends that you consult with your tax advisor regarding the taxability of life insurance benefits. However, the following are some tax rules that generally apply to life insurance policies that meet the federal definition of life insurance:

  • Death benefits are not subject to federal income taxes.
  • Dividends are considered a return of excess premium and are therefore not taxable. If dividends are left with the insurance company to accumulate interest, the interest is taxable.
  • Interest credited on life insurance cash values is not included in current taxable income.
  • Cash value payments that exceed the sum of premiums paid, less any dividends paid, are subject to federal income taxes.
Life Insurance Claims

When you purchase an individual policy, your producer will be able to assist your beneficiary in filing a claim. Your producer should have a supply of claim forms and can help your beneficiaries fill in the forms and meet any necessary proof of loss requirements. If your beneficiaries do not know who your insurance producer was at the time the policy was purchased, then they may want to contact another producer who is licensed with the insurance company or call the insurance company directly. Most insurance companies have consumer service representatives that would be able to provide assistance.

Your beneficiaries will receive a settlement from your insurer upon receipt of due proof of your death and upon surrender of the policy. What constitutes due proof may differ from company to company. However, a death certificate from the Office of Vital Statistics, a Coroner’s Report, an attending physician’s statement, or a hospital certificate of death is sufficient for most death claims.

Viatical Settlements

A viatical settlement is the sale of a life insurance policy to a third party. The owner (viator) of the life insurance policy sells the policy for an immediate cash benefit. The buyer (the viatical settlement provider) becomes the new owner of the life insurance policy, pays future premiums, and collects the death benefit when the insured dies.

The Alaska Division of Insurance regulates viatical settlement transactions. Brokers and their representatives as well as viatical settlement providers must be licensed in Alaska in order to engage in viatical settlement transactions. In Alaska, viatical settlements include what is commonly referred to as “life settlements,” in which the viator is not terminally ill. If you have questions or concerns regarding viatical settlements, contact the division.

Annuities

Types of Annuities

An annuity is a contract that guarantees to provide you with periodic income payments for your lifetime, for a fixed period of time, or both. Annuities may be purchased with a single lump sum of money, with fixed periodic premium payments, or with premium payments made at your discretion. Periodic income payments may begin almost immediately (called an immediate annuity) or may be deferred until a specified time (called a deferred annuity). The person who receives income payments under an annuity is called the annuitant.

Immediate Annuities

Immediate annuities are purchased with a single lump sum of money (premium). Income payments begin within one payment interval from the date the premium was paid. For example, if you are to receive annual payments under the annuity contract, you will receive your first periodic income payment one year after paying the premium. The following are common types of immediate annuities:

  • Joint and last-survivor annuities provide periodic income payments for as long as any of the people insured under the contract are alive. These annuities are commonly used in husband and wife relationships.
  • Life income annuities are also called straight life annuities and provide periodic income payments for as long as the annuitant lives and terminate on the annuitant’s death. This type of annuity provides the largest payment of all the immediate annuities, because no matter how few income payments have been made when the annuitant dies, no refund of the premium is made.
  • Installment refund annuities provide a periodic income payment for as long as the annuitant lives and then continue payments to the annuitant’s beneficiary after the annuitant’s death until the total of all income payments made equals the premium.
  • Cash refund annuities provide a periodic income payment for as long as the annuitant lives. Upon the death of the annuitant, they provide a lump sum payment to the beneficiary equal to the difference between the premium and the total of all income payments made prior to the annuitant’s death.
  • Certain and life annuities provide a periodic income payment for as long as the annuitant lives or for a specified (certain) period of time, whichever is longer. The certain periods are usually 5, 10, 15, or 20 years. The longer the certain period, the lower the periodic income payments.

Deferred Annuities

Deferred annuities may be purchased with a single premium or with periodic or flexible premiums. Periodic income payments begin at a specified date, often age 65. The period between the purchase date and the date the income payments begin is called the deferral period or accumulation period. During this period the insurance company treats your premium payments much like deposits to a savings account. Premium payments are reduced for expenses and any withdrawals you may make and are credited at an interest rate declared by the insurance company. The balance in the account is called the account value. At the end of the accumulation period, the insurance company purchases an immediate annuity using the account value less any expense charges. A deferred annuity contract provides a guarantee that a minimum income payment per dollar of account value will be paid.

Things to be Aware of Regarding Annuities

Interest Rates

The interest rate credited during the accumulation period of a deferred annuity is subject to a stated minimum range as required by state law, usually between 1% and 3% per year. Insurance companies determine the actual rate of interest to be credited on a periodic basis. The method of determining this crediting rate varies among different annuity contracts and insurance companies but is generally based on the company’s investment experience and competition. It is important to remember that current crediting rates are generally guaranteed only for a short period of time, often one year.

Surrenders and Withdrawals

  • Upon death or cancellation (surrender) of a deferred annuity, the insurance company is required to provide you with the cash value remaining in the annuity contract. The cash value is generally the account value less the surrender charge, which is an expense charge for surrendering the contract. Surrender charges are often waived if the policy is terminated due to the death of the annuitant. Surrender charges are usually a percentage of the account value and decrease with time. State law establishes minimum cash values. Immediate annuities do not develop cash values.
  • Most deferred annuity contracts allow you to withdraw a portion, usually 10%, of the account value without a surrender charge. This is called a free partial withdrawal. The amount that is withdrawn is deducted from the account value.
  • Many single premium deferred annuity contracts have bailout provisions. This is a provision that allows you to withdraw the account value without a surrender charge, if the interest rate credited falls below a set rate.

Bonuses

Insurers frequently offer bonus interest as an incentive to purchase an annuity or to retain an annuity to the end of the term of the annuity or maturity. In some cases, a bonus may only be credited if the annuity is retained for a minimum number of years. It is important to carefully review how any bonus feature impacts other features of the annuity particularly the interest rate credited to the annuity. For example, the interest rate for annuities with a bonus may actually be lower than the interest rate credited to an annuity without a bonus. The result may be that the annuity without the bonus feature provides a greater benefit than the annuity with the bonus feature.

Market Value Adjusted Annuities

Market value adjusted annuities guarantee a crediting rate over a specified period above the state minimum guaranteed rate, but if you decide to surrender the annuity, the account value is subject to both surrender charges and an adjustment based on current interest rates. This adjustment is intended to protect the insurance company from the tendency of annuitants to surrender during periods of increasing interest rates.

Variable Annuities

Unlike the annuities described above, a variable annuity contract does not guarantee a minimum interest crediting rate, nor does it guarantee the amount of income payments per dollar of cash value. A variable annuity generally offers you the option to invest your premium payments in many different investment funds such as money market funds, common stock funds, bond funds, and others. During the accumulation period of the variable annuity, premium payments less expense charges are used to purchase units in a selected fund. The number of units purchased depends on the value of a unit in that fund, much like purchasing shares in a mutual fund. Cash values and income payments then depend on the number of units purchased and the value of each unit at the time the payments are made. Variable annuities are more appropriate for people looking for an investment product without the long-term guarantees provided by other annuity products.

Equity-indexed Annuities

Equity-indexed annuities credits interest or provides benefits that are linked to an external equity index such as the Standard & Poor’s 500 Composite Stock Price Index (S&P 500). Interest credits are determined using a formula based on charges to the index. Two significant features of the formula are the indexing method and the participation rate. The indexing method determines how the amount of change in the index is determined. Examples of indexing methods are:

  • Annual reset: the change in the index value from the beginning of a contract year to the index value at the end of the contract year. Interest is added to the annuity each year to reflect the change.
  • Point to point: the change in the index value from the beginning of the term of the contract to the end of the term of the contract. Interest is added to the annuity at the end of the term of the contract to reflect the change.
  • High water mark: index values at various points during the term of the contract are compared with the index value at the start of the term of the contract. Interest added to the annuity at the end of the term of the contract is based on the difference between the highest index value and the index value at the start of the term of the contract.
  • Low water mark: index values at various points during the term of the contracts are compared with the index value at the end of the term of the contract. Interest added to the annuity at the end of the term of the contract is based on the difference between the lowest index value and the index value at the end of the term of the contract.

The participation rate is the percentage of the change in the index that will be used to credit interest to the annuity. Insurers generally guarantee the participation rate for a specified period of time and after this period, a new participation rate will be applicable.

Other Features of Equity Indexed Annuities Include:

  • Cap on interest credited to the annuity.
  • Floor on interest credit to the annuity. The most common floor is 0%, so that if the index decreases in value, the annuity would be credited with 0% not negative interest.
  • An average the index values rather than the actual value of the index on a specific date is used in determining the change in index values.
  • A spread in which a specified percent is subtracted from the change in the index. For example, if the change in the index is 4% and the annuity contracts provides for a 2% spread, the interest credited to the annuity would be 4%-2% = 2%
  • Loss of interest credits if money is withdrawn from the annuity before the end of the term of the contract.
  • Interest is credited to the original premium amount not to the amount accumulated during the term of the contract.

Important Considerations in Considering the Purchase of an Equity Indexed Annuity

  • Term of the contract, guaranteed interest rate, minimum participation rate, and length of guaranteed participation rate, interest rate cap and floor, indexing method, spreads, level of surrender charges, and how long the surrender charges apply.
  • In addition to surrender charges, some equity indexed annuities credit no or only partial interest, money is taken out of the annuity before the end of the term of the contract.
  • Stock dividends are generally not included in the value of the index used to determine interest credited to the annuity. For example, the S&P 500 is the most common index used by insurers and this index is a stock price index that does not include any dividends paid on the stocks that make up the index.

Taxes

Annuity contracts contain an important tax benefit. Federal income taxes on interest earnings that accumulate during the deferral period are deferred until the annuity is paid out. This can result in a significant saving over a long period of time relative to other methods of saving. If a deferred annuity is surrendered before age 59 1/2, the amount of the cash value that is larger than the total premiums paid is subject to a 10% federal tax penalty in addition to the required income taxes. The tax penalty generally does not apply if the annuity is surrendered due to death or disability, nor to equal periodic payments made over the lifetime of the annuitant. Consult a tax advisor before you purchase or surrender an annuity in order to thoroughly understand the tax consequences.

Long-Term Insurance Policies

Things to be Aware of Regarding Long-Term Insurance Policies
  • Since policies can vary in coverage, you should read the policy and make sure you understand what it covers before you buy the policy and make sure the benefits of the policy are expected to continue to meet your needs into the future.
  • You should not buy this insurance unless you know that you can afford to pay the premiums every year. Remember that companies can increase premiums in the future.
  • Medicare does not pay for most long-term care.
  • Medicaid will generally pay for long-term care if you have very little income and few assets. However, your choice of long-term care services may be limited if you are receiving Medicaid. To learn more about Medicaid, contact your local or state Medicaid agency. You should not buy a long-term care policy if you are now eligible for Medicaid.
  • You can obtain a copy of the “Alaska Long-Term Care Insurance Consumer Guide” from the division or access the publication available on the Division of Insurance website at www.commerce.alaska.gov/insurance/. Read this guide carefully and complete the personal worksheets in the guide. The worksheets include questions designed to help you and the insurer determine whether a long-term care policy is suitable for your needs.
  • If you decide to apply for long-term care insurance, you have the right to return the policy within 30 days and get back any premium you have paid if you are dissatisfied for any reason or choose not to purchase the policy.
  • Free counseling and additional information about long-term care insurance are available through the Alaska Commission on Aging in the Department of Health and Social Services.

Replacement of a Long-Term Care Policy

Note that health conditions that you presently have (preexisting conditions) may not be immediately or fully covered under a new policy. This could result in denial or delay in payment of benefits under the new policy, whereas a similar claim might have been payable under your current policy.

If you are considering replacing your current long-term care insurance policy, you should seek the advice of your present insurer, a producer, or financial advisor regarding the proposed replacement of your present policy. This is not only your right, but it is also in the best interest to make sure you understand all the relevant factors involved in replacing your long-term care insurance policy.

If you decide to terminate your current long-term care policy and replace it with a new policy, make sure that application is complete and truthful concerning your medical/history. Any material medical information that was inaccurate or omitted may affect how the insurer pays a claim under the policy or provides a refund of premium in the future.

Health Insurance

How Health Insurance Policies are Sold

Everyone runs the risk of becoming ill or suffering an accident that results in doctor or hospital bills, and sometimes in loss of income. Most Alaskans need protection from unexpected and sometimes devastating expenses associated with an illness or accident.

Before buying a health insurance policy, know what insurance or other benefits you already have. This will help prevent duplicating coverage and will help you determine if you have enough coverage, inadequate coverage, or no coverage at all. Make sure you have up-to-date information on medical insurance, disability benefits, and sick leave benefits provided by your employer. Your first priority should be assuring that you have comprehensive health insurance coverage.

Individual Insurance

An individual insurance policy provides coverage to a specific individual or to an individual and their family under a policy issued to that individual. In order to be considered for individual insurance coverage, you will be asked to provide evidence of insurability that may require you to undergo a medical examination. This is called medical underwriting. The same requirements would apply to any dependents you may insure under the policy.

Group Insurance

A group insurance policy provides coverage to individuals under a single master policy issued to the group policy owner. Certificates of insurance are provided to the individuals. The policy owner may be an employer, an association, a labor union, or other entity. Unless the group is small, generally no individual medical underwriting is performed. Instead, insurers require minimum employee or member participation levels and minimum employer contribution levels in order to assure that there are sufficient individuals in the group in good health to balance those in the group in poor health.

Considerations in Purchasing

Whether you have individual or group health insurance coverage, it is important to understand what your coverage is and what charges you may be responsible for paying. Read your policy or certificate thoroughly and consider the following:

  • What services and supplies are covered?
  • What limits are set on the benefits for these services and supplies?
  • What are the deductible, coinsurance, and other charges you will be responsible for paying, including amounts billed above the insurer’s allowed amounts (i.e., UCR charges)?
  • How are benefit payments coordinated with other health coverage you may have?
  • What are the managed care features and requirements of the plan?
  • What level, type, and quality of service can be expected from the insurer?
Types of Health Insurance Plans

Following is a summary of several types of health insurance plans sold as group and individual health insurance. The actual health insurance benefits will vary from policy to policy. Therefore, it is important to read and understand your insurance contract. The term provider is commonly used in health insurance and in this guide to refer to physicians and other providers of medical care.

Comprehensive Health Insurance

Two categories of services and supplies covered by all comprehensive health insurance policies.

  • Hospital Benefits include expenses associated with stays at hospitals and other covered facilities, such as skilled nursing facilities, nursing homes, and outpatient surgery centers. Benefits for hospital services often require that the individual or their physician contact the insurer or the employer to obtain prior approval for the number of days of hospital stay. Without this approval, the benefits may be reduced.
  • Physician or Provider Benefits include services provided by licensed physicians and other medical providers.

There are a number of other charges and services generally excluded from coverage under most health insurance plans. Following are examples of common exclusions:

  • Services determined by the insurer to be medically unnecessary.
  • Services considered experimental by an accepted medical authority.
  • Services related to cosmetic surgery.
  • Services for mental or nervous disorders, vision, hearing.
  • Services that are provided without charge.
  • Services provided due to war.
  • Services provided as a result of a work-related injury.
  • Services provided by a relative.
  • Services related to normal pregnancy and routine well-baby care (these are generally excluded from individual policies and included in group policies).

Alaska law mandates that the following specific charges or services be covered in health insurance plans sold in Alaska.

  • Coverage for newly born or adopted children for at least 30 days, if coverage includes dependents.
  • Low dose mammography screening if the contract covers mastectomies and prosthetic devices and reconstructive surgery.
  • Treatment of phenylketonuria.
  • Coverage for not less than 48 hours after vaginal birth and 96 hours after a cesarean birth, if the contract covers the costs of childbirth.
  • Prostate cancer screening and cervical cancer screening.
  • Colorectal cancer screening.
  • Diabetes treatment and education.
  • Reconstructive surgery following mastectomy.
  • Well baby exams.

Limited Benefit

Limited benefit plans are offered as independent, noncoordinated benefits provided under a separate policy and paid without regard to any other insurance plan. Examples of these types of plans include hospital indemnity policies that pay a fixed amount for each day of hospital confinement, and specified or dread disease policies that only pay for medical expenses associated with a specified disease (such as cancer or heart disease).

Specified Disease

These types of insurance policies typically offer a lump sum payment to offset medical or incidental, non-medical, expenses associated with a first occurrence of cancer or other dread disease such as heart disease. Benefits are not usually designed to directly cover actual medical expenses, although hospital confinement coverage may be available. These policies require you to wait a certain period of time after purchasing the policy before benefits will be paid and they also generally require that you survive a certain period of time (usually 30 days) after the initial diagnosis before benefits will be paid. Specified disease insurance is not a substitute for comprehensive medical insurance.

Medicare Supplement

Medicare supplement (also called Medigap) insurance is sold to people covered under Medicare helps pay for medical costs that Medicare Parts A & B do not pay, such as the deductible and coinsurance amounts. Medicare supplement insurance is regulated by both state and federal laws. This coverage can only be provided through standard health plans that vary in the amount and type of coverage provided. Coverage is available to individuals without medical underwriting beginning on the first day of the first month in which the individual is both 65 or older and enrolled in Medicare Part B. The Division of Insurance produces, on an annual basis, a rate comparison guide that outlines the basic characteristics of Medicare supplement insurance, describes the standard health insurance plans, and shows the current premium rates charged by the insurers selling this insurance in Alaska. There is also a pamphlet entitled “A Guide to Health Insurance for People with Medicare” produced by the National Association of Insurance Commissioners and the federal government that summarizes the Medicare and Medicare supplement programs. Both publications are available from the Alaska Division of Senior & Disability Services, Medicare Information Office, or the Alaska Division of Insurance.

Comprehensive Major Medical

A comprehensive major medical policy provides coverage for almost all types of medical care services and supplies and has high benefit limits. These policies cover hospital, provider, and other services subject only to the required deductible, coinsurance, and benefit maximums. Unlike basic medical, individuals are required to share in the cost of their medical expenses. These policies have replaced most of the basic medical insurance policies.

Long-Term Care

Long-term care insurance policies provide nursing home or home health care benefits for individuals with a prolonged physical illness, disability or mental disorder, medical condition, or a deficiency affecting activities of daily living or lifestyle. Benefits are provided as a reimbursement for services, but subject to a fixed dollar maximum per day. Usually a waiting period called an elimination period of 0, 30, 90, 180, or 360 days is required before the plan will pay benefits. Long-term care insurance may be available as a rider to a life insurance or annuity policy, as well as a separate health insurance policy.

Dental Insurance

Dental insurance covers costs associated with the care of teeth. Benefits for preventive services, such as cleanings and exams are generally limited to once every six months. Most plans contain coinsurance and deductible cost-sharing requirements. The coinsurance provisions will vary based on the type of procedure.

Vision Coverage

Vision coverage provides benefits for glasses, contact lenses, and eye examinations up to a specified amount per year. Vision benefits are often subject to a set schedule of benefits and limits on the frequency of services. A typical vision plan covers the cost for one examination per year, with coverage for glasses and contact lenses limited to once every two years.

Things to be Aware of Regarding Health Insurance Policies

Benefit Limits

  • Most health insurance plans set a maximum benefit amount that will be provided for all covered services and supplies over the lifetime of the covered individual. This is called a lifetime maximum. This maximum is often set at $1,000,000.
  • Most health insurance plans set a maximum benefit amount that provides for particular services and supplies, such as a maximum benefit of $250,000 for organ transplants.
  • Some health insurance plans limit the benefit that will be provided per day for a covered service. This is called a daily maximum. They may also limit the number of days that a service will be covered. These types of limits are generally used for services including mental and nervous disorders, skilled nursing facilities, and home health care.
  • Many health insurance plans limit the total benefit that will be provided per year for covered services. This is called an annual maximum. These limits are generally used for those services where it is difficult to assess whether the service is medically necessary.
  • Most health insurance plans exclude or limit coverage for a period of time for medical conditions that existed within a certain period, commonly six months, prior to the date coverage began for which medical advice, diagnosis, care or treatment was recommended or received. This is called a preexisting condition waiting period. The waiting period is commonly 12 months. In most cases, insurance companies must reduce this waiting period by the number of days you were covered under prior health insurance plans, as long as you had no more than a 90-day break in your health insurance coverage and the current plan is an employer health plan.

Deductibles, Coinsurance, and Other Charges

  • A deductible is a specified dollar amount an individual must pay in each policy period before reimbursement for expenses begin. The primary purpose of the deductible is to encourage individuals to use health care services only when necessary. A separate deductible may be required for specified services such as hospital admissions or prescription drugs. Some health plans may include a provision that allows any claims incurred in the last quarter of the policy period to be carried over and applied to meet the deductible in the next quarter.
  • Coinsurance is that percentage of covered services and supplies the insurer will pay for after the individual pays the de-ductible. The individual is responsible for the amount the insurer does not pay. A common coinsurance arrangement is for the insurer to pay 80% of charges for covered services and the individual 20%.
  • Out-of-pocket maximum is the maximum dollar amount the individual pays for covered services and supplies during a specified period, generally a calendar year. This maximum may be defined to include or exclude the deductible. Once the out-of-pocket maximum is paid, benefits are paid at 100% of covered charges. However, if covered charges are less than actual charges, you may be responsible for the difference between covered charges and actual charges, regardless of whether you have met the out-of-pocket maximum.
  • A copayment is the fixed dollar amount that the individual is required to pay at the time each covered service takes place. Copayments vary by type of service. They are commonly used with emergency services and prescription drugs.
  • A usual, customary and reasonable (UCR) charge is an established maximum amount that an insurance company will reimburse for a medical expense covered under your health insurance policy. UCR charges are generally determined based on charges that are actually billed by providers for each medical procedure or service in a geographical area. In order to determine a reasonable charge, UCR charges are commonly calculated as a percentile of the charges billed by providers. The percentile must be at least 80% under Alaska regulation. The 80th percentile is the billed charge amount for which 80% of all charges actually billed by providers for a service or supply are less than or equal to that amount and 20% are greater than that amount.
  • Under most health insurance plans, you will be responsible for paying any amount billed by a hospital or physician that is larger than the insurer’s established UCR charges for the service or procedure unless under the insurer’s contract with the hospital and provider, the hospital, or provider agrees to accept the insurer’s payment as payment in full. In this case, you would not be responsible for paying any amount that exceeds the insurer’s UCR charges.
  • The following is an example of how the various charges described above impact the amount you may be responsible for paying for medical services:

Coordination of Benefits

This provision applies to the situation where an individual is covered under two or more different health insurance plans. It must be included in all insurance plans. This provision sets forth the rules under which benefits under the plans be coordinated so that the individual does not receive duplicate payments for a service, thereby being reimbursed more than what was spent. Duplicate coverage frequently occurs when an individual is covered under both their own and their spouse’s insurance plans. Most coordination of benefits provisions require that the individual’s own plan pay first on a claim, and the other plan only pay the amounts not covered by the first plan. It is important that this provision be reviewed so that misunderstandings can be avoided regarding the benefit payments each insurer will make.

Managed Care

This is a common term today and there is no one generally accepted definition. For insurance companies, the term is often used to describe the many cost and care management features of health insurance plans. The most significant managed care feature of health insurance plans is utilization review programs that evaluate the appropriateness, necessity, and quality of health care provided to the policyholders. These programs include requirements (as described below) for hospital preadmission authorization, second surgical opinions, hospital stay reviews and planning, and case management. Utilization review is provided by nurses or physicians employed by or contracted with the insurer. Other examples of managed care features are centers of excellence, preferred provider arrangements, and prescription drug copayment plans.

Hospital Preadmission Authorization

Hospital preadmission authorization requires that the insured individual receive authorization to be admitted to a hospital in nonemergency cases. If the individual fails to receive prior authorization, benefits will be reduced.

Case Management

Case management is used for individuals with high-cost illnesses such as cancer, heart disease, and diabetes. Usually a nurse employed by the insurer monitors the individual’s treatment and helps develop a treatment plan to achieve the best outcome and the most cost effective use of health care services for the patient.

Concurrent Hospital Review and Discharge Planning Reviews

Concurrent hospital review and discharge planning reviews take place for any hospitalization, not just high cost illnesses, and involves monitoring the necessity of continued hospitalization. They are intended to ensure the individual stays in the hospital only as long as medically necessary and when discharged, receives appropriate care.

Centers of Excellence

Centers of excellence are specific providers selected by the insurer that provide fairly low volume, high risk procedures such as transplants and heart surgery at reduced costs. These providers have an expertise in the procedure, and therefore provide high quality care, with fewer complications and shorter hospital stays.

Preferred Provider Arrangements

A preferred provider arrangement is a contract, agreement, or arrangement between an insurer and a health care provider in which the health care provider agrees to provide services to individuals covered under the insurer’s health plans and the benefits of the health plans include incentives for individuals to use the service of that provider.

Incentives generally include lower deductibles and coinsurance payments and, therefore, it may be to the individual’s advantage to use preferred providers. In Alaska, insurers are prohibited from refusing to pay any benefits for the use of providers that have not entered a contract with the insurers.

Prescription Drug Copayment Plans

Prescription drug copayment plans encourage the use of generic drugs, which can be as much as 50% less expensive than brand-name drugs. The individual will generally be required to make a higher copayment if they choose to use a brand-name drug when a generic version is available.

Alaska Health Insurance Laws

Small Employer Health Insurance

Alaska Statute requires insurers who offer health insurance coverage to small employers in the state to offer each small employer (defined as those with 2-50 employees) all the health insurance plans that they offer to other small employers in the state regardless of the health or claims experience of the group. They must offer coverage to all eligible employees and not deny coverage to an employee. This law does not require an employer to purchase coverage for their employees. Alaska law also requires that insurance companies providing coverage to small employers adhere to certain rating restrictions including a maximum annual rate increase of 15% for poor group claims experience.

Large and Small Employer Health Insurance

According to Alaska law, insurance companies that offer health insurance coverage to large and small employer groups:

  • May not base eligibility for coverage on health status, claims experience, medical history or condition, disability, receipt of health care, genetic information or any evidence of insurability.
  • Must continue to renew the coverage, except in certain specified circumstances such as a failure to pay premiums.
  • May not require a preexisting condition waiting period that is longer than 12 months for a health condition that existed prior to the effective date of coverage which is called a preexisting condition waiting period. Pregnancy and genetic information cannot be considered preexisting conditions and therefore no waiting period may be applied.
  • Must reduce any preexisting condition waiting period by the amount of time an individual was covered under prior health insurance coverage. However, the insurer is not required to reduce such a waiting period by any periods of health insurance coverage before a 90 day or more break in health insurance coverage. For example:

An individual is covered under employer A’s health insurance plan for 6 months before terminating coverage. The individual then terminates employment and is not covered under any health insurance plan for 100 days. The individual then becomes covered under employer B’s health plan and remains covered for 5 months. The individual terminates employment and is not covered under any health insurance plan for 45 days. The individual then enrolls in employer C’s health insurance plan which has a 12 month preexisting condition waiting period. Since the individual had a break in coverage of more than 90 days between employer A and employer B, the 6 months covered under employer A’s health insurance plan are not used to reduce the 12 month preexisting condition waiting period. Therefore, only 5 months of coverage with employer B will be used to reduce the 12-month preexisting condition waiting period. Employer C’s health insurance plan may only apply a 7-month waiting period (12-months – 5 months).

Patients’ Bill of Rights

This Alaska law applies to health insurance plans that require a covered person to comply with utilization review guidelines. Utilization review is a system of reviewing medical necessity, appropriateness or quality of health care services, and supplies. Examples of utilization review include pre-authorization requirements for services, retrospective claim reviews, preadmission certification requirements, and those items described under the Managed Care section.

The Patients’ Bill of Rights provides significant consumer protections including the following:

  • A health care provider cannot be penalized or a contract with an insurer terminated because the provider acts as an advocate for a covered person.
  • A contract with a health care provider must protect the ability of the provider to communicate openly with a covered person about appropriate diagnostic testing and treatment options.
  • The predominant purpose of a contract with a provider cannot be the creation of direct financial incentives to withhold covered services that are medically necessary.
  • An insurer may not retroactively deny a claim for a covered procedure if the insurer preauthorized the procedure on the basis of medical necessity.
  • An insurer must make a decision on pre-approval or coverage determination within 72 hours after receiving a request for non-emergency services and no later than 24 hours for emergency services.
  • An insurer may not deny payment for a service on the basis of medical necessity unless the decision is made by a licensed health care provider that is an agent or employee of the insurer.
  • Emergency room services must be covered if any coverage is provided for treatment of a medical emergency.
  • Covered health care services must be reasonably available in the community in which a covered person resides, or, if the health care service is not available in the community, adequate referrals outside the community must be provided if referrals are required.
  • If a contract between a health care provider and an insurer is terminated, a covered person may continue to be treated by that health care provider with respect to continuing treatments already being provided at the time of termination as if the contract were still in effect.
  • An insurer must provide an internal appeal mechanism for a covered person who disagrees with a decision.
    • The insurer must decide within 18 working days after notice of appeal for non-emergency services and within 72 hours for emergency services.
    • The decision must be made by a health care provider with same professional license as the provider that treated the covered person.
  • A covered person has a right to an external appeal by an independent external appeal agency for claim denials on the basis that an item or service is not medically necessity or appropriate, investigational or experimental or where medical judgment is involved.
    • External appeal conducted by a panel of 2 clinical peers.
    • A decision must be made with 21 working days after the appeal is filed for non-emergency and 72 hours for emergency care.
    • The decision is binding unless the covered person appeals to superior court.
  • Coverage may not be limited to services performed by providers under contract with the insurer, but an additional deductible, copayment, or premium may apply for services performed by non-contracted providers.

Comprehensive Health Insurance Association (CHIA)

In 1992, the Alaska legislature established a health insurance program for high-risk individuals. This law allows all individuals who have been refused coverage by at least two insurers, who have a specified medical condition, or who meet certain other criteria, to purchase coverage through the CHIA. Individuals who meet the state definition of a federally defined eligible individual or an individual eligible under the Trade Adjustment Assistance Reform Act of 2002 can receive coverage through the CHIA without a waiting period. A federally defined eligible individual is an individual whose most recent coverage was under a group health plan; who had at least 18 months of health insurance coverage; who has exhausted any available COBRA coverage; whose most recent coverage was not terminated due to nonpayment of premiums or fraud; who does not have other health insurance coverage; and who is not eligible for other coverage.

The premium rates for the program are approximately 145% of the average standard risk rate for health insurance plans sold in Alaska with similar benefits.

For information on this program, contact the Division of Insurance in Anchorage at 1-800-467-8725 (in Alaska only) or (907) 269-7900.

Federal Laws Affecting Health Insurance

COBRA

COBRA is the federal law that requires employers to continue to provide their health insurance coverage to employees who have been laid off or terminated. The coverage may extend from 18 to 36 months. To obtain coverage under COBRA, the employee or their dependent must apply to the employer within 60 days of termination of their employment. The U.S. Department of Labor handles all inquiries regarding COBRA coverage. Inquiries should be sent to:

Office of Program Services
Pension and Welfare
Benefits Administration
U.S. Department of Labor
200 Constitution Avenue, NW
Washington, DC 20210
(202) 219-8776

ERISA (Employee Retirement Income Security Act)

Many people who believe that they have a health insurance policy through their employer are actually covered under what is called a self-insured health plan. A self-insured health plan exists when an employer chooses to pay for medical bills directly, instead of purchasing insurance for that purpose. Most self-insured plans are regulated by the federal government through the Department of Labor under the authority of ERISA and are exempt from state regulation. Most large employers have self-insured health plans.

Many employers use insurance companies to administer their self-insured health plan, including paying claims and, therefore, it may not be apparent that a plan is self-insured. An employer’s employee benefits administer should have this information.

Employers choosing to self-insure their health plans are not subject to state insurance laws such as benefit mandates, state premium taxes, capital and surplus requirements, and reserve requirements. They are also able to gain more control over their cash flow and have more freedom in determining benefits to be provided to their employees. Most employers with self-insured health plans purchase stop-loss insurance from insurance companies to protect themselves against large losses.

Employees who receive health coverage under a self-insured plan are not afforded the protections of state insurance laws and regulations. These protections include financial solvency requirements as well as requirements applying to the payment of claims. If a self-insured plan fails, Alaska benefits and managed care protections, such as standards for grievance procedures, fair disclosure of plan provisions, fair claims settlement practices and consumer services, are not available to employees. The federal laws governing these self-insured plans limit damages to actual costs and may not even cover attorney fees. Individuals covered under a self-insured plan must assume responsibility for all claims if the plan fails. Also, individual employees are required to obtain their own legal counsel to settle disputes, since the U.S. Department of Labor will not become involved in individual disputes over coverage. One other important consideration is that a self-insured employer may make material changes to the health plan (such as reducing or eliminating benefits) without providing advance notice.

HIPAA (Health Insurance Portability and Accountability Act of 1996)

This Act establishes federal standards for group and individual health insurance plans. The Act sets minimum standards for guaranteed renewability, preexisting condition waiting periods, and crediting for prior health insurance coverage. Alaska has enacted into law these federal standards which are discussed in the health insurance sections of this guide.

Health Savings Account

Under federal law, a bank, insurance company, or other federally approved entity may set up a Health Savings Account (HSA) in which money is set aside and used to pay for qualified medical expenses. Qualified medical expenses are those expenses paid for medical care, including any deductible and coinsurance payments. Qualified medical expenses paid out of the account are not included in gross income for federal income tax purposes, contributions are deductible and the HSA earnings are tax-exempt. Unused balances in the HSA may accumulate without limit. Health Savings Accounts are regulated by the federal government, not the Alaska Division of Insurance.

In order for a savings account to qualify as an HSA, individuals must be covered by a high deductible health insurance plan. The high deductible health insurance plan can be an individual or employer plan. An individual cannot be covered by any other health insurance or Medicare. In 2006, the high deductible health insurance plan must provide for at least a $1,050 annual deductible for individual coverage or $2,100 for family coverage with out-of-pocket costs not exceeding $5,250 for individuals and $10,500 for families. These limits are adjusted annually for inflation.

Health Savings Accounts are not regulated by the Division of Insurance in the same manner as other health insurance policies. If you are seeking information on setting up an HSA account, the best place to start is by contacting your financial advisor or producers selling health insurance in Alaska. Producers should have knowledge of the high deductible health insurance plans that are available in Alaska and any HSAs that may be offered in conjunction with those plans.

Health Discount Plans

Many Alaskans seeking an alternative to the increasing cost of individual health insurance have been victimized by unscrupulous marketers selling Health Discount Plans (HDPs). While there are legitimate discount health plans, many operate illegally. Such plans are most often sold on the Internet for marketing purposes, direct mail, fax blasts, and telephone solicitors.

HDPs often provide limited group insurance benefits. They are not a replacement for health insurance and do not cover major medical expenses. HDPs are not insurance, are not directly regulated by the Division, and may not provide promised cost savings. The Division has found that the provider list given to consumers is often inaccurate and consumers must pay at the time of service and get a smaller discount than promised. The price of membership may be greater than the ultimate discounts received.

In response to the problem, Director of Insurance, Linda Hall, submitted Health Discount Plan legislation (HB 147) that was enacted and signed into law by Governor Frank Murkowski in 2005. This law prevents a firm from marketing an HDP in a way that makes it seem like insurance. If the law is violated, the Division can consider the firm to be engaged in unlicensed activity, and can take appropriate action against the firm.

Here are some tips if you are shopping for health insurance or a health discount plan.

  • If you need individual major medical health insurance, talk to a licensed insurance producer. If you are not sure, please contact the Division.
  • Legitimate HDPs will not exaggerate the potential discounts (i.e. 50-80%). Be very skeptical of an HDP solicitor who promises unrealistic discounts.
  • Legitimate HDPs will state prominently on all their marketing material “This is not insurance” and will not use insurance-type terms. Alaska law forbids the use or terms such as all “pre-existing conditions accepted”, “no waiting period required”, “no one can be turned down”, or other insurance jargon.
  • Alaska Law requires HDPs and their marketing firms to provide, upon request, a current provider list before and/or after the purchase. Ask for the list before you buy and after you receive it, ask your doctor if he or she is a participating provider. If you are unable to get the list and/or your doctor is unaware of the plan, don’t buy and contact the Division.
  • Be careful if the HDP marketing firm uses illegal high-pressure marketing and an extreme sense of urgency, telling you that you “must act now”, or “this is one-time offer.” There is no legitimate reason to pressure you to purchase this product until you have had time to thoroughly research it. If the firm continues to pressure you, hang up the phone and call the Division.
  • HDPs do not qualify as “prior creditable coverage.” This is important when changing health insurance plans, enabling you to avoid the pre-existing condition clause under your new health insurance. Legitimate discount card issuers will never suggest you drop your health insurance.
  • Be very careful if you are asked for debit or credit card information or a large up-front fee. Once you have given checking or credit card information, you may find it difficult to stop additional debits to your account.

Remember, if it sounds too good, it probably is. When in doubt, check it out and contact the Alaska Division of Insurance. You can avoid being a victim of illegitimate health discount plans.

Disability Income Insurance

Disability income insurance provides a weekly or monthly income benefit if you are disabled due to a covered injury or sickness. This type of insurance can provide an income to partially replace the wages lost when a person is unable to work for an extended time. Policies are available to cover disability due to an accident only, or due to either accident or illness.

Disability income insurance is an extremely important kind of insurance coverage that is often overlooked. Statistically, people are three times more likely to become disabled for a period of time during their working years than they are to die during those same years, yet many people who buy life insurance fail to buy disability income insurance.

Disability income policies have waiting periods before benefits become payable. The waiting period starts after you have become disabled for a covered disability. The longer the waiting period, the lower the premium will be. The period of time for which benefits are payable can also vary considerably. Benefit periods may depend on whether the disability was caused by accident or illness. A long-term policy may provide for lifetime accident benefits and illness benefits to the age of 65. The longer the benefit period, the higher the premium will be.

What it Covers

The amount of monthly benefit provided by a disability income policy may be stated as a percentage of income or as a set dollar amount. The amount of benefit for which you can qualify is usually based on a percentage of your gross earnings, normally around 60%. A partial disability benefit may be provided, or may be available, on an optional basis.

Some policies may reduce your benefit by the amount you receive from social security or workers’ compensation so your disability benefit and social security or workers’ compensation benefits together will provide a specified income. Some companies will consider possible social security benefits when they decide the amount of benefits for which you qualify.

Occupational therapy and vocational rehabilitation benefits may also be provided by a disability income policy.

Things to be Aware of Regarding Disability Insurance

A disability income policy generally requires that you be totally disabled before benefits are paid. The definitions of total disability vary from policy to policy. There are two different definitions used in disability policies. One definition is that you are unable to perform your own occupation. The other definition is much more comprehensive requiring that you are unable to perform any occupation (for which you are suited by education or experience). This distinction can be important for jobs that require very specialized physical skills such as surgeons or loggers.

Relationship with Other Forms of Disability Insurance

If you are hurt on the job, or in a job-related activity, you probably qualify for workers’ compensation benefits. Employers, with certain exceptions, must have this insurance to pay your medical bills and pay a weekly benefit to replace some of your wages if you are injured at work. You can contact your employer or the Alaska Division of Workers’ Compensation about claims.

Social security benefits include disability benefits for long term or permanent total disability. Contact your local social security office for more information. You should consider what benefits would be available to you from social security when you are buying disability income insurance.

Medicare Part D - Medicare Prescription Drug Coverage

Under the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (MMA), Medicare beneficiaries are eligible for prescription drug coverage offered by private companies that are contracted with Medicare to provide such coverage. Beneficiaries that enroll in a prescription drug plan are required to pay a monthly premium and also pay a share of the cost of prescription drugs. Costs, prescription drugs covered (i.e., formulary), deductible, and what pharmacies can be used vary by prescription drug plan. However, all prescription drug plans must provide a level of coverage specified by Medicare under Federal law. It is important to study the costs and benefits of the various plans available in Alaska before purchasing a plan. Information about the prescription drug plans available in Alaska can be obtained from the Medicare website at www.medicare.gov or at 1-800-Medicare.

The Medicare Information Office in the Alaska Department of Health and Social Services provides information and assistance to seniors in the State of Alaska. Medicare Information Office can be contacted by telephone at (907) 269-3680 or 1-800-478-6065 (toll-free in Alaska only). In addition, trained Medicare Volunteer Counselors are available in many Alaska communities. Telephone contact numbers and e-mail addresses for trained Medicare Volunteer Counselors can be obtained from the Medicare Information Office website at http://www.hss.state.ak.us/dsds/Medicare.

Where to Go for More Information

Consumer Organizations

There are a number of organizations that provide information about insurance to consumers. These consumer organizations include:

Consumer Federation of America
1424-16th Street, NW, Suite 604
Washington, DC 20036
(202) 387-6121
http://www.consumerfed.org/

Division of Senior & Disabilities Services
Medicare Information Office
550 West Eighth Street
Anchorage, AK 99501
(907) 269-3680
(800) 478-6065 (in Alaska)
http://www.hss.state.ak.us/dsds/medicare

Insurance Information Institute
110 William Street
New York, NY 10038
(212) 346-5500
(800) 942-4242
http://www.iii.org/

Medicare Rights Center
520 Eighth Avenue
North Wing, 3rd Fl.
New York, NY 10018
(212) 869-3850
(800) 333-4114
http://www.medicarerights.org

National Association of Insurance Commissioners
2301 McGee, Suite 800
Kansas City, MO 64108-2604
(816) 842-3600
http://www.naic.org
https://eapps.naic.org/cis

U.S. Department of Labor, Employee Benefits Services Administration
Seattle District Office
1111 Third Avenue, Suite 860
Seattle, WA 98101-3212
(206) 553-4244
http://www.dol.gov/ebsa

Alaska Medicaid
Department of Health and Social Services
Division of Public Assistance
400 Gambell Street
Anchorage, AK 99501
(907) 269-6599
http://hss.state.ak.us/dpa/programs/medicaid

Denali KidCare
3601 C Street, Suite 120
P.O. Box 240047
Anchorage, AK 99524-0047
(907) 269-6529
(888) 318-8890
http://www.hss.state.ak.us/dhcs/DenaliKidCare/default.htm

Alaska Department of Health and Social Services
350 Main Street, Room 404
P.O. Box 110601
Juneau, AK 99811-0601
(907) 465-3030
http://www.hss.state.ak.us/

Indian Health Service
801 Thompson Avenue, Suite 400
Rockville, MD 20852
(301) 443-0750
http://www.ihs.gov

Division of Insurance Consumer Services Section

If You Have a Problem

The Division’s Consumer Services Section is located in our Anchorage office and staffed by consumer service specialists. They can help by providing information on Alaska insurance laws and regulations. If you believe someone has committed an unfair claims settlement practice, the consumer service specialists want to know. Although they cannot represent you in making a claim against an insurance company or adjuster, they do make appropriate investigations into the potential violations of insurance law or regulations based upon written complaints received from the public. Violators are subject to fines and/or suspension or revocation of their license and sometimes criminal prosecution.

If you have a problem with your insurance policy, the first thing you should do is contact your insurance producer or insurance company and explain your concern. For example, if you believe your insurance company has improperly denied you coverage, refused to continue your policy, or has refused to pay all or part of a valid claim, you can question the action taken. Even though your concern may be resolved after contacting your insurance producer or insurance company, it is important to write down whom you talked to, the date, time, and what was said. This information may be helpful if the issue comes up again.

If you do not receive a prompt, courteous, and satisfactory response from your insurance producer or insurance company, you may need the division’s assistance. Follow the instructions on the Insurance Inquiry/Complaint Form on page and send it to us with legible copies of your documents.

Even though we cannot provide the legal services that are sometimes required to settle complicated problems, the Division of Insurance is able to resolve most complaints before you hire an attorney. However, if you need legal advice, you may call the Lawyer Referral Service in Anchorage at (907) 272-0352 or outside Anchorage at 1-800-770-9999.

Filing an Inquiry or Complaint

If you need to request our assistance, complete our Insurance Inquiry/Complaint Form.

  • What we can do for you:
  • We can answer your questions directly, or get answers to your questions from the insurance producers involved.
  • We can determine if your company or producer has complied with Alaska insurance laws.
  • We can assist in obtaining any refund due.
  • We can explain basic policy language.

What we cannot do:

  • We cannot act as your attorney, give you legal counsel, or refer you to a specific attorney.
  • We cannot recommend or rank insurance companies.
  • We cannot decide a dispute between you and an insurance company when the only evidence is your word against the company.
  • We cannot resolve disputes involving issues of negligence in an accident.
  • We cannot resolve disputes of medical necessity.
  • We cannot enter negotiations for settlement amounts.
Completing the Inquiry/Complaint Form

Your completed inquiry/complaint form gives us authorization to review your concern and provides the information necessary to pursue our investigation. Briefly explain your inquiry or complaint by providing written details as to what happened, who was involved, and why you feel the company’s position in the matter is wrong. Tell us what you have done to work with the company (written letters, called the company, whom you spoke with, on what date, etc.). If someone else’s insurance company is involved, provide us with the company’s name, insured’s name, policy number, and claim number. Tell us what you want from the insurance company or the producer involved (payment of a claim, a refund, etc.).

If you need additional space, please attach a separate piece of paper and sign each page. Along with your completed form, provide us copies (never originals) of any correspondence, policies, or material relating to your insurance concern. Once we have received your inquiry/complaint, we will assign a specialist to assist you.

We will request that your producer and/or company explain their position with respect to your concern. Once we receive their response, we will review and determine whether Alaska laws have been complied with and decide whether further action by our office will be required. As soon as the producer or company involved agrees to resolve your concern, we will send you a short verification letter indicating what action will be taken and within what time frame.

If your inquiry or complaint exceeds our regulatory authority, we will let you know. We will also indicate in our written response who may be able to help you. If Alaska law is not violated, we will let you know in writing and explain why. Keep in mind we are restricted from making determinations regarding disputed facts or contested questions of law.

Definitions of Insurance Terms

Actual Cash Value
In automobile insurance, actual cash value is equivalent to a vehicle’s pre-loss market value. In home owner's insurance, actual cash value represents the actual cost to replace a damaged item less depreciation.

Agent
A person or firm authorized to sell insurance as a representative of the insurance company (also see producer).

Adjuster
A person or firm who is employed by the insurance company (or contracted by the company) and is responsible for investigating and determining the value of your loss.

Alaska Automobile Insurance Plan
An entity established to provide automobile insurance to people who are unable to find a licensed insurance company willing to sell them a policy.

Annuitant
A person who receives income payments from an annuity.

Application
The form on which you provide the information required by the insurer for their use determining whether to sell you an insurance policy. The information provided on this form is also used to determine the premium rate you will be charged for the insurance policy.

Arbitration
A process of resolving disputes in a nonjudicial setting to determine the rights or obligations under a contract.

Beneficiary
A person named by the owner of a life or annuity to receive benefits under an insurance policy.

Binder
A temporary proof of insurance that is only valid for the number of days indicated on the binder or until the actual insurance policy is issued, which time period is shorter. A binder is not issued in life and health insurance.

Broker
A producer who represents you, not the insurance company, and who helps you find an insurance policy. Brokers cannot bind your coverage.

Cancellation
The termination of your insurance coverage at any time other than at a policy anniversary date.

Cash Value
The amount of money you are entitled to receive from the insurance company when you terminate a life insurance or annuity policy. The amount of cash value will be determined as stated in the policy.

Claim
A request for benefits for a loss made against you or your insurance company.

Commission
The amount paid by the insurance company to the producer as compensation for selling and servicing an insurance policy.

Covered Loss
Any claim that is covered under the provisions of your insurance policy.

Declaration Page
The part of your insurance policy that shows the policy period, who and what is insured, the basic amounts, and general types of coverage being provided. The declaration page also lists all the documents or policy forms, endorsements, and riders which make up the insurance policy.

Deductible
The amount you pay when you have a claim before your insurance company begins payment.

Endorsement
Written agreement attached to a policy to add or subtract insurance coverages. An endorsement modifies the original provisions in a policy.

Evidence of Insurability
Statement or proof of a person’s medical history, occupation, age, lifestyle, and physical condition upon which acceptance for coverage will be made.

Incontestability Clause
Section in a life insurance policy stating that after the policy is in force for a period of time (usually two years), the company cannot terminate the policy because of misrepresentation or concealment by the insured in obtaining the policy.

Inflation Guard Endorsement
An endorsement to a home owner's policy that adjusts the policy limits based on the insurer’s estimates of increases in building costs.

Insurance Policy
The entire written legal contract of insurance that describes you and your insurance company’s rights and responsibilities.

Insured
The person covered by an insurance policy. The insured is often the policyholder.

Insurer
The insurance company.

Lapse
For property/casualty insurance, termination of your policy for failure to pay your premium. For life insurance, termination of your policy for failure to pay premium and lack of enough cash value to pay the premium.

Lienholder
The person or entity that holds a security interest in a property until debt on the property is paid off.

Limits of Liability
The maximum amount a policy will pay, either overall or under a particular coverage.

Misrepresentation
When a policyholder or applicant makes an oral or written false statement of any fact.

Nonrenewal
The insurance company’s failure to continue coverage at a policy anniversary.

Personal Property
Property that belongs to the insured and family members living in the insured’s home other than real estate.

Policyholder
The person who purchases or owns an insurance policy.

Premium
The amount of money that you are charged to purchase or maintain your insurance coverage.

Producer
The person who sells you an insurance policy.

Proof of Loss
A formal statement made by the insured to the insurance company providing sufficient information concerning the loss that the company uses to determine its liability under the policy.

Provider
Physicians and other individuals or entities that provide medical care.

Rating Agency
An independent organization that reviews the financial condition of insurance companies and provides a grade based on their review.

Rebate
When an insurer or producer agrees to accept a lower commission or provides something of value not stated in the insurance policy to an applicant or the insurance company in exchange for the applicant’s agreement to purchase an insurance policy.

Renewal
The continuation of your insurance coverage at the end of the original policy period with the same insurance company.

Replacement Cost
The cost to repair or replace an insured item without adjustment for depreciation.

Stop-Loss Insurance
Insurance coverage purchased by employers, associations, labor unions, and other entities that choose to self-insure. Stop-loss insurance pays for claims that exceed a preset limit often called the retention amount.

Subrogation
In property/casualty insurance, the transfer to an insurance company of an insureds rights to recover from a third party.

Twisting
Misrepresentation by an insurer or producer that is intended to cause you to terminate an existing insurance policy and purchase a new policy.

Underwrite
The process of examining, accepting or rejecting an individual or group for insurance coverage, and classifying those accepted into categories based on their risk in order to charge an appropriate premium.

Unearned Premium
That portion of a premium payment that has not yet been used for coverage. For example, if you pay an annual premium at the end of the first month of the premium period, 11/12 of the premium would still be unearned.

Waiting Period
The period of time indicated in a policy that must pass before you are covered.

Reporting Fraud

If you have information of suspected fraudulent insurance information, the division website provides the information necessary to commence an investigation. You may call (907) 269-7900 or 1-800-867-8725 to speak with an investigator.

What is requested:

  • A detailed letter explaining the situation and why you believe that the person(s) may have presented to an insurer a written or oral statement in support of a claim for payment or other benefit under an insurance policy, knowing that the statement contains false, incomplete, or misleading information concerning a matter material to the claim filed a false, misleading, or incomplete statement in support of a claim, knowing that the information.
  • The name, address, and telephone number of any suspects or witnesses.
  • Color copy of any photos or video concerning the matter.
  • Name of insurance company, if known.