What is the Purpose of Insurance in Pennsylvania?
The primary purpose of insurance in the Commonwealth of Pennsylvania is the transfer of risks from insureds (individuals or businesses) through state-licensed insurance companies. An insurance policy is meant to provide financial compensation when an insured suffers damage or loss. Also known as spreading the risk, transfer of risks implies distributing the enormous losses of a few individuals or businesses through an insurance provider to a pool of other insureds who also pay premiums, however small. Insurance aims at managing sudden losses and reducing the associated financial uncertainties by exchanging small fees known as insurance premiums for potential risks.
The Pennsylvania Insurance Department (PID) regulates insurance business in the Commonwealth and promotes a vibrant insurance marketplace for residents needing personal and business insurance. To get insurance in Pennsylvania, using the services of a licensed insurance professional is advised. Licensed agents can help you find the insurance coverage you need for personal and business purposes at relatively affordable rates.
Why Do we Have Insurance in Pennsylvania?
One of the major reasons there is insurance in the Commonwealth of Pennsylvania is to facilitate a social protection mechanism by mitigating the impacts of events beyond human control. These events include natural disasters, accidents, death, and illnesses. Insurance helps individuals or businesses quickly recover from unexpected events and cushion the financial impacts such events might have on them. It relieves the government of providing all the social protection services required by its citizens.
In Pennsylvania, insurance is often a prerequisite for developing other productive economic activities because of its nature to manage, diversify, and absorb individuals' and businesses' risks. For instance, starting or expanding a business and buying a home with a mortgage requires that you have insurance. With insurance, it is easier for business owners to access credit from lenders and helps them channel their savings into long-term investments, further supporting economic growth. Insurance also guarantees Pennsylvania mortgagees of safety for their investments.
Generally, PA insurance will help any Pennsylvania resident, looking to protect themselves, family, businesses, and properties from financial losses through the method of risk transfer. For instance, insurance can do the following:
It can provide an income source for your family when you pass away (life insurance)
It can cover you and your family's medical expenses in case of hospitalizations, medical emergencies, regular treatments, and medical care (health insurance)
It can help you in building savings for the future via regular investments (for insurance plans with savings and investment options)
It can cover your home against damage and loss in the event of unforeseen circumstances (residential insurance)
It can protect your business from financial losses or at least limit the impact of an unexpected calamity on it (commercial insurance)
What is Insured?
What is insured by an insurance policy in the Commonwealth of Pennsylvania primarily depends on the insurance type a person or a business carries. For instance, if you have health insurance, what is insured by the policy is you and may also include your family. Also, if you carry an auto insurance policy, what is insured is your vehicle or a third party's car, depending on the type of auto insurance policy. In residential insurance, what is insured may include a property (house) and personal belongings such as clothes, bags, furniture, shoes, televisions, and fixtures, depending on the type of coverage. Similarly, in commercial insurance, what is insured by a business owner may include their business's property (building), equipment, employees, and other valuable assets.
What is an Insurer?
An insurer is a licensed business entity that provides the public (individuals and businesses) insurance coverage against unexpected events that could lead to financial losses. A financial loss may include a vehicle in an accident, a home gutted by fire, or any other event that puts an insured in a lesser financial state than before such an event. They are also known as insurance firms, companies, carriers, and providers. Insurance companies are solely responsible for designing insurance policies, creating insurance quotes, and setting the terms of contracts. Before selling an insurance policy, a Pennsylvania insurer will evaluate the risks involved to help them determine insurance pricing.
An insurer will provide financial compensation for whatever is damaged or lost when a covered event occurs based on the agreement. Most insurers in the Commonwealth of Pennsylvania provide coverage for homes, automobiles, businesses, life, health, and liabilities. Some also specialize in only one type of insurance. The Pennsylvania Insurance Department (PID) hosts the list of licensed insurers in the Commonwealth on its website.
What is an Insured?
An insured is a person or entity covered under an insurance policy and legally permitted to receive the benefits of such a policy after a claim. They are also responsible for keeping their insurance policies active by paying premiums as and when due. Insurance policies sold by Pennsylvania insurers have named insureds (could be one or more). Some insurance policies also extend coverage to other people (insured parties) who are not exactly named on them.
Generally, a named insured is often listed on an insurance policy's declaration page. On the other hand, an insured party is usually not listed but is legally eligible to receive insurance benefits after a covered loss. For instance, a home insurance policy often extends coverage to other people living with the named insured, even if it does not list their names on the declaration page. In this instance, a named insured's children who live away from home are also insured. In commercial insurance, insureds include business owners, executives, employees, and volunteers. However, these insureds only get coverage while on duty on behalf of the company (the named insured). While Pennsylvania insurance companies may have slightly varying descriptions of an insured, it is often advised that you find your insurer's definition in your policy wordings. A licensed insurance agent can always help with this.
What is an Insurance Policy?
An insurance policy in Pennsylvania is a legal agreement or contract between an insured and the insurance company. It stipulates the obligation of the insured person or business and their insurance company. Where an insured fails to meet its stipulated obligations in an insurance policy, it may impair the coverage on which they rely for protection.
Most insurance policies are written confusingly, and understanding them may be challenging. Hence, it is often advised that you take your time to read an insurance policy and understand what is covered and excluded before signing the contract. Engaging the services of an experienced and licensed Pennsylvania insurance agent is the best option to understand your policy. An agent will explain all the legal hard-to-understand terms in the policy and can advise you on the most optimal coverage to meet your insurance needs.
What Does an Insurance Policy Consist of in Pennsylvania?
A typical insurance policy in Pennsylvania consists of:
Definitions
Declarations
Insuring agreements
Exclusions
Conditions
Definitions - These are lists of common words with special meanings within the insurance context. Insureds are encouraged to carefully read this part and seek clarifications from their insurers or licensed agents where required
Declarations - The declaration page is usually the first in any policy and contains a summary of vital information such as:
Insured's name, date of birth, occupation, address, and ID number (for an individual)
A brief description of the business (if the insured is a business entity)
Policy dates, coverage provided, premiums, deductibles, and coverage limits
Insuring Agreements - These stipulate what an insurance company has agreed to provide or do for an insured in exchange for their premiums. Insuring agreements also specify in detail what the policy protects and classify the risks against which they are insured
Exclusions - Exclusions in an insurance policy clarify the coverages authorized by the policy and cross out coverage for specified risks
Conditions - These are laws binding an insured and its insurer. For instance, they stipulate the obligations of both parties in the event of a loss and specify how insurance claims are settled and valued
Some insurance policies also include endorsements. Endorsements are forms of policy that modify a primary form of insurance coverage. Before purchasing insurance coverage in Pennsylvania, it is best to review the policy thoroughly and understand it. If you find it hard to understand, ask a professional insurance agent knowledgeable in that insurance form to help with the review. Getting the help of an agent does not cost the insured extra.
What is Insurance Coverage?
Insurance coverage is the level of potential loss, liability, or risk covered for a person or business by an insurance company. Having insurance coverage in Pennsylvania is vital as it can help you mitigate losses and offer you a sense of safety. It aids quick recovery from financial losses when events covered by an insurance policy occur. In exchange for insurance coverage, insured persons or businesses pay their insurer agreed fees, known as premiums, to manage risks. Common insurance coverages in the Commonwealth of Pennsylvania include health, residential, commercial, auto, and life coverage.
What is Insurance Rate?
An insurance rate in Pennsylvania is the amount of money an insured must pay per unit of exposure to obtain a specified amount of insurance coverage. For instance, a Pennsylvania property insurance company may express an insurance rate as $2 per $100 of an exposed residential property. In this case, a homeowner with $2,000 of exposed property would pay $40 ($2x20 units) as their insurance premium.
Insurance rates in Pennsylvania are often different depending on the insurance category. For instance, the insurance rate in worker's compensation insurance is expressed as a percentage of an employer's payroll based on the occupation category. In life insurance, the rate is generally sufficient to cover all reasonably anticipated losses. Generally, an insurance rate, regardless of the insurance category, should:
Be revised often to reflect current costs
Be fair
Tend to promote loss prevention among insureds
Not generate unreasonable huge profits, but should be sufficient enough to meet total losses
What is an Insurance Quote?
An insurance quote is an estimate of how much an insurance policy would cost. It offers you an avenue to get a glimpse of the likely amount you would pay for an insurer for insurance coverage without having to pay or commit. Before a Pennsylvania insurance company gives you a premium cost, they will offer you an insurance quote. If you settle for such a quote, your final premium may be slightly different from the amount on the insurance quote; it may also be the same.
In Pennsylvania, you can obtain insurance quotes via different means, such as visiting an insurer's office or online through their websites. However, the best option for obtaining an insurance quote is by engaging the services of state-licensed professional agents who are more experienced with insurance and shopping for affordable quotes. Getting several quotes for a particular coverage from multiple insurers is usually advised to enable you to compare side-by-side and help you make an informed decision.
Why Do you Need Insurance in Pennsylvania?
The primary goal of any insurance is to protect and relieve you from financial complications in times of unforeseen troubles. While insurance is generally not mandatory by law in Pennsylvania, it is required in some quarters. For instance, the Commonwealth requires residents to have health insurance in adherence to the Affordable Care Act. Pennsylvania law also requires all vehicle owners in the Commonwealth to maintain liability insurance on their registered vehicles. Similarly, the Commonwealth requires all employers to have worker's compensation insurance to enable them to provide insurance coverage for their employees.
Generally, you need insurance in Pennsylvania for the following reasons:
To secure your and your family's future from life uncertainties
It serves as a financial backup in times of emergency such as illnesses, bodily injuries, accidents, and death
It allows you to save money over a long-term period towards your retirement (for insurance policies with saving plans option)
It affords you the opportunity to leave a legacy behind
It gives you peace of mind and reduces stress for you during challenging times
Is Insurance Really Necessary?
Yes. Insurance in Pennsylvania is necessary because it is impossible to predict the future or prevent some unanticipated events. That is where insurance comes in; it can be pivotal in such instances and provide you with the needed financial support to pull through unforeseen circumstances. Although some insurance types could be expensive, you should consider the bigger picture of protecting yourself, your family, and your business. Not having insurance could be far more costly when insurable events occur and you do not have the right insurance policy to come to your rescue. When you consider getting insurance coverage in Pennsylvania, speak with a licensed agent who can recommend the right insurance based on your specific needs.
HEALTH INSURANCE
Health insurance is arguably the most crucial insurance form everywhere, including in Pennsylvania. It covers medical expenses for preventive care, illnesses and injuries, doctor's appointments, monthly tests, and surgery. The Commonwealth of Pennsylvania requires residents to carry health insurance in compliance with the Affordable Care Act. If you do not have health insurance, you may pay expensive medical bills out-of-pocket and possibly miss out on proper Medicare. According to a 2021 health assessment of Pennsylvania, 10% of adults whose situations required seeing a doctor in 2018 could not do so due to costs. The statewide health assessment also revealed that 7% of Pennsylvanians under 65 were uninsured in 2018, and in 2019, 16% of the adult demographic did not have a personal health care provider.
Pennsylvania has several types of health insurance and different health insurance markets. Your suitable health coverage will depend on your current circumstances and health needs. Usually, your best bet in choosing the right coverage is to speak with a Pennsylvania-licensed and professional health insurance agent for assistance. The health insurance market in Pennsylvania can be grouped into Medicaid, Medicare, Commercial fully insured/self-insured, and Children's Health Insurance Program (CHIP). Depending on the market and insurance type that suits you, in Pennsylvania, you can get health coverage in the following ways:
Medicare - Medicare is federal government-sponsored health insurance for persons 65 years or older. It provides coverage to enrollees directly or through private health insurers at four distinct levels, namely:
Hospital coverage (Medicare PArt A)
Medical coverage (Medicare Part B)
Medicare Advantage (Medicare Part C - combines parts A and B)
Prescription Drug coverage (Medicare Part D)
Pennie PA - In Pennsylvania, residents who are United States nationals, citizens, or have a qualified immigration status can enroll in health coverage via Pennie insurance. Pennie health insurance marketplace helps you shop for exceptional health care plans during open enrollment from November 1 through January 15. Special enrollment periods are also available for individuals who experience some changes in their life situations. In 2022, there were 13 health insurers offering affordable and frequently subsidized ACA health insurance on the Pennsylvania’s Health Insurance Exchange.
Medical Assistance Program (Medicaid) - Medicaid provides free or low-cost health insurance for Pennsylvania residents depending on their income
Children's Health Insurance Program (CHIP) - CHIP provides free or low-cost health coverage for children of low-income parents or those without insurance at work
Medicare Supplement Insurance (Medigap)- This is private insurance that kicks in when Medicare cannot pay the entire cost of your medical bills. Medigap will pay the remaining costs like copays and deductibles to cover the gaps left by Medicare
LIFE INSURANCE
Life insurance in Pennsylvania is a type of insurance that can protect your family members financially after you die. It can replace your income after you pass away and provide the financial resources your dependents need to survive. Typically, in exchange for your premiums, your insurer will pay a lump sum, otherwise known as a death benefit, to your policy beneficiaries after you die. The beneficiaries of a life insurance policy are not restricted on what to do with the death benefit. In most cases, they use it to pay for the funeral and final expenses left after the passing. Additionally, depending on the amount of the death benefit, it can pay a mortgage, living expenses, pay the insured's dependents’ college tuition, and pay off other outstanding debts like credit cards and car loans. Some life insurance types also have cash value accounts and can help you build supplemental retirement savings. Cash value is a form of a living benefit and you can borrow against it while alive.
The two broad categories of life insurance are:
Term life insurance
Permanent life insurance
Term life insurance only protects you for a certain period, depending on your choice. It can be anywhere from one to 30 years. If you pass on within the policy term, your policy beneficiaries can file a claim with your insurer and receive the death benefit. Otherwise, term life insurance will not pay out a death benefit if it expires while you are alive. However, you can renew the coverage, but each renewal comes with a higher rate. Hence, it is best to always buy a term life policy for more extended periods to enjoy the same premium amount throughout the term. No term life insurance policy builds cash value.
Permanent life insurance provides an insured with lifetime coverage and normally builds cash value over many years, which serves as the policy’s savings component. Insureds with permanent life policies can withdraw from or borrow against their policies' cash value. The common types of permanent life insurance in Pennsylvania are:
Whole life insurance - This has a cash value portion that grows at a guaranteed return rate and offers a fixed death benefit
Final expense (FE) life insurance - FE life insurance offers a relatively small death benefit, and it is primarily designed to cover an insured's final expenses and funeral costs
Universal life insurance (ULI) - This is more flexible than a whole life policy as it allows insureds to alter their policy's death benefit and premium amounts subject to certain limits. The growth of the cash value component in ULI depends on the policy type. For instance, cash value growth for indexed life insurance (IUL) relies on the performance of a specific market index like the S&P 500
Make sure to prioritize having life insurance, especially if you have people who survive on your income. However, before purchasing life insurance in Pennsylvania, you must understand your needs and the available policy choices. Understanding your insurance needs will help you determine what type of coverage suits your needs and budget. If you need life insurance for a limited period, consider getting a term life policy. In contrast, get permanent life insurance coverage if you need a lifelong policy and if you intend to build cash value. Whatever choice you make, engage the services of a licensed life insurance agent to buy a life policy. A professional agent will analyze your needs and help you shop for insurance quotes to find an affordable yet suitable policy.
PRIVATE PROPERTY INSURANCE
You should consider getting private property insurance if you intend to protect your high-value personal property in Pennsylvania. Private property may be personal possessions fixed permanently to a particular place or movable items. Generally, private property insurance covers the cost of repairing or replacing your personal property if they are stolen, damaged, or destroyed due to a covered event. You may have to bear those costs out of your pocket without the right insurance, depending on the type of private property. The major types of private property insurance in the Commonwealth of Pennsylvania are residential and auto insurance.
RESIDENTIAL PROPERTY INSURANCE
According to the United States Census Bureau, as of 2021, there were over 5.7 million housing units in Pennsylvania. If something bad happens to these homes, residential property insurance can help pay for replacement costs, repair costs, and living expenses. Typically, residential property insurance provides three types of protection: structural, liability, and personal property coverage. Also known as dwelling coverage, residential property insurance covers several forms of insurance policies, including:
Condominium insurance
Landlord insurance
Mobile Home Insurance
About 69% of Pennsylvania's 5.7 million residential units are owner-occupied. Your home is probably your largest investment, and you need homeowners insurance to protect you against financial loss that may arise from accidents, theft, and other insurable incidents. It can cover damages and losses to your personal belongings and home structure while providing liability coverage if someone gets injured on your property. Condominium insurance in Pennsylvania provides financial protection for condo owners against damage or loss to their condo units. Also known as the HO-6 policy, condo insurance provides coverage for the interior wall of your condo unit and covers personal liability. It can pay to repair or replace your personal property, such as furniture, clothing, and appliances, in the event of a covered peril.
If you are renting an apartment in Pennsylvania, you need renters insurance to protect your personal possessions in the rented apartment and liabilities. Renters insurance can cover the financial loss associated with unexpected events in a rented apartment. Landlord insurance is primarily for people who rent or lease their property to tenants. Its purpose is to protect your rental property against certain events that may be entirely out of your tenants' control. Landlord insurance in Pennsylvania covers liability, property damage, and lost rental income.
You need mobile home insurance if you live in a manufactured home in Pennsylvania. Mobile home insurance covers any dwelling that falls under the description of a manufactured home. Like standard home insurance, mobile home insurance covers your mobile home, content (your personal belongings), and liability claims. It protects your investment in your mobile home and prevents you from paying for a replacement or repairs in the event of an insurable peril.
Personal property coverage in any condo, renters, homeowners, or landlord policy has limited protection on personal properties such as expensive watches, jewelry, and semi-precious stones. Available personal property coverage in any residential insurance policy on items like jewelry, silverware, precious metals, and watercraft (including equipment and trailers) is also limited. If you need coverage for these high-value personal belongings in Pennsylvania, you either get an optional scheduled personal property endorsement or a separate policy. Purchasing a scheduled property insurance policy in Pennsylvania is the best bet if you have high-value personal possessions such as these in your home. It provides additional protection where the personal property option in your residential insurance policy cannot and values covered items at replacement cost with no deductible.
AUTO INSURANCE
As reported by the Bureau of Motor Vehicles of the Pennsylvania Department of Transportation, the Commonwealth had over 12.1 million registered vehicles as of 2021. Over 8.1 million of these are passenger vehicles. The kind of insurance that provides coverage for these vehicles is known as auto insurance. Generally, auto insurance is your financial protection if you own a motor vehicle in Pennsylvania. It can cover damage to your car and provide monetary compensation up to your coverage limits if you are responsible for another person's damages or injuries in an accident.
Auto insurance is required in Pennsylvania, covering on- or off-the-road accidents. However, it does not cover vehicle wear and tear. The most common coverages in auto insurance policies in Pennsylvania are collision, liability, uninsured/underinsured motorist, medical payments, and comprehensive coverage. Below are the purposes of each coverage:
Collision Coverage - This covers your vehicle if you collide with another car or object
Liability Coverage - If you are at fault in a car accident, this coverage pays for damage to other vehicles/objects, injuries sustained by other drivers/passengers, and lawsuits in case someone sues you due to an accident
Uninsured/Underinsured Motorist Coverage - This coverage can pay for injuries sustained by you and your passengers if you are involved in an accident with a driver with no or enough insurance coverage
Medical Payments Coverage - This covers the cost of medical bills if you or your passengers sustain injuries in an accident regardless of who is at fault
Comprehensive Coverage - This covers your vehicle against incidents not within your control, including vandalism, falling objects, and theft
Some other types of private property insurance in Pennsylvania are:
Motorcycle Insurance - Motorcycle insurance provides bikers with financial protection for property damage and injuries. According to the Motorcycle Statistics published by the Pennsylvania DMV, as of 2021, the Commonwealth had over 375,000 registered motorcycles and more than 807,000 licensed motorcyclists. Pennsylvania requires motorcyclists to have motorcycle insurance, which must include at least, bodily injury and property damage liability coverage
Jet ski insurance - If you have a jet ski in Pennsylvania with jet ski insurance, the policy can protect you financially and compensate you if there is an accident. Jet skis and their accessories are very expensive; it is a big risk not to insure them if you have one. Jet ski insurance covers your jet ski against malicious damage, salvage charges, theft, and accidental damage. In the event of accidents, it can compensate you if a claim is made against you
Boat insurance - A boat can be a large investment and should be protected with boat insurance. Boat insurance in Pennsylvania can protect your boat against loss and damage caused by common risks like collision, storms, theft, fire, capsizing, and sinking. It can also cover the injuries your boat causes to others
COMMERCIAL INSURANCE
Commercial insurance in Pennsylvania is a form of insurance that caters to businesses. Also known as business insurance, commercial insurance protects businesses against losses arising from lawsuits, bodily injury, and property damage. According to the Statistics of U.S. Businesses (SUSB), there are 1.1 million small businesses in Pennsylvania, with 2.5 million employees. Also, over 6 million PA residents are employed. Owners of all businesses require commercial insurance to protect them from financial complications and prevent interruption in business operations.
The table below describes the common commercial insurance types in Pennsylvania:
| Commercial Insurance Type | Insurance Purpose | Who Needs It? |
| Commercial Property Insurance | Replaces or repairs lost or damaged business assets such as inventory or equipment | Any business operating out of rented or owned office space with valuable assets. Most landlords requires businesses intending to lease their buildings to show proof of commercial property insurance |
| General Liability Insurance | Pays for bodily injury or property damage sustained by a third-party due to a business activity. It covers liability claims caused by advertising errors and reputational harm | All kinds of businesses including contractors. Landlords also need it |
| Product Liability Insurance | Pays for injuries sustained by third parties caused by products sold or manufactured by a business | Business engaging in sale, manufacturing, or distribution of physical products |
| Worker’s Compensation Insurance | Pays the cost of medical bills incurred by an employee who sustains injury on the job. It also covers employees’ lost wages and rehabilitation | Any business with at least one employee |
| Business Interruption Insurance | Compensates a business for lost income if it cannot operate for some period after the occurrence of a covered event | Any business with recurring expenses |
| Commercial Auto Insurance | Pays for damage or loss due to an auto accident while in a vehicle used for business activities | Any business using vehicles for their daily operations |
| Professional Liability Insurance | Protects professionals when their clients accuse them of errors or advising them wrongly | Any business providing advisory services |
Other types of commercial insurance in Pennsylvania are cyber insurance, surety bonds, and commercial flood insurance. The type of business a person operates and the purpose for which insurance is needed determines the type of commercial insurance a business should purchase. Often, insurance companies package commercial property insurance, business interruption insurance, and general liability insurance as a Business Owner's Policy (BOP). This bundled or packaged policy offers some discounts and helps businesses to save costs on premiums.
If your business insurance needs in Pennsylvania appear complex, speak with a Commonwealth-licensed commercial insurance agent. A professional agent will explain the purpose each commercial insurance type serves and assist you in choosing the right policy for your business.
LIABILITY INSURANCE
Liability insurance is a type of insurance that provides coverage for individuals and businesses against claims arising from damage or injuries to other people or their property. Liability coverage is included in most insurance policies in Pennsylvania. Typically, liability insurance pays third parties and not insureds. However, it protects insureds from paying out of their pockets for claims made by third parties. The most common covered losses during liability claims include paying to repair or replace damage to property, bodily injury and the related medical payments, and the associated legal fees.
The common liability insurance coverages offered by insurance companies in Pennsylvania for personal and business purposes under different insurance policies are explained in the table below:
| Need Type | Liability Insurance Type | Purpose |
| Personal | Medical liability insurance | Pays a third party for medical bills incurred for bodily injury for which you are liable |
| Property liability insurance | Pays a third party to repair their damaged property for which you are legally responsible | |
| Umbrella insurance | This coverage extends an insured’s auto and homeowner’s liability insurance limits | |
| Commercial | Professional liability insurance | Covers legal costs if a customer sues an insured business for errors or omissions while providing professional services |
| General liability insurance | Pays for claims arising from property damage or bodily injury caused by an insured business | |
| Cyber liability insurance | Helps respond to data breach for personally identifiable information theft from an insured business | |
| Commercial auto liability insurance | Pays for bodily injuries or property damage to third parties caused by a business’s vehicle when involved in a car accident. Per Pennsylvania law, all vehicle owners must carry vehicle liability insurance as proof of financial responsibility. The minimum limit for bodily injury liability coverage for auto insurance is $15,000 per person and $30,000 per accident, while it is $5,000 for property damage liability coverage | |
| Commercial umbrella insurance | Pays for costs exceeding an insured business’s underlying liability coverage limits |
DISASTER INSURANCE
While home insurance may cover certain natural disasters like wildfires, lightning, and hail, it does not cover damage done by earthquakes or floods. You need a separate policy to protect yourself and your business from perils not covered by your home or commercial insurance policy in Pennsylvania.
Although not particularly an insurance type, disaster insurance describes the separate policies needed to get coverage against unexpected occurrences of disasters or catastrophes that regular insurance policies may not cover. For instance, carrying an earthquake policy is highly advisable if you live in an earthquake-prone region. The same applies to people who live or operate their businesses in flood zones - flood insurance (to cover flooding). People living in coastal areas whose homeowners policies do not cover wind must consider getting separate policies for wind, known as hurricane insurance.
Flooding is the most common natural disaster in Pennsylvania, as confirmed by the Pennsylvania Emergency Management Agency (PEMA). Below are some notable floods that have destroyed many homes in the Commonwealth:
The great flood of May 31, 1889 - Destroyed 1,600 homes, killed 2,209 residents and led to $17 million in damages
The Saint Patrick's day floods of March 17 - 20, 1936 - Flooded almost 100,000 buildings, killed 67 people and produced an estimated $250 million in damages
Agness flooding of June 22 - 25, 1972 - Flooded 25,000 homes, led to 48 fatalities and 17 deaths, and caused almost $3 billion in damages
Snowmelt floods of January 1996 - Reports of flooding in 57 counties which left 19 people dead
Paying for losses such as the one caused by Agness flooding out of pocket can drain your life savings, but carrying the right insurance policy can help you mitigate them. If you live in Pennsylvania, having a separate flood insurance policy is highly recommended to protect your home and business from financial losses by unanticipated flooding. You can purchase a flood insurance policy through a Pennsylvania-licensed P&C agent. To obtain the name and contact information of any local professional agent with flood insurance experience, call the National Flood Insurance Program (NFIP) at 1-800-427-4661.
Deductible vs. Premium
Insurance premiums are regular payments made by insureds to keep their insurance policies active. Deductibles are payments insureds must make out-of-pockets before insurers kick in after the occurrence of a covered peril. Like in every other state, the size of the deductible you choose to pay for insurance in Pennsylvania affects the amount of the premium.
What is a Deductible in Insurance?
A deductible in insurance is the amount of money agreed upon with your insurer, which you must make out-of-pocket before your insurer begins to cover any cost or pays a claim. The amount you pay as a deductible for an insurance policy in Pennsylvania varies depending on the insurance company, coverage, and the amount you pay in premiums. Deductible payments are typical in health and property and casualty (P&C) insurance policies.
What Does Deductible Mean in Pennsylvania Insurance?
Deductible in Pennsylvania insurance means the specific amount of money you must pay before your insurance company pays out your claim after a covered event. Insurers use deductibles to ease the financial stress associated with an enormous loss suffered by an insured or an accumulation of several small losses sustained by multiple clients. Typically, it is a way of sharing the cost of any claim with an insured person or business. For instance, if the agreed-upon deductible in your insurance is $600 and your insurance company determines that your insured loss is $11,200, it (your insurer) will issue a check for $10,600. Generally, deductibles do not apply to the liability portion of P&C insurance policies; they only apply to property damage.
PROs of Deductibles
With the rising insurance cost, more businesses and individuals are choosing to pay higher deductibles. The PROs of high deductibles for insureds in Pennsylvania include:
Reducing insurance costs and improving cash flow
Allowing an insured to handle minor claims rather than file multiple claims that may increase their premium costs
Allowing flexibility for a business carrying multiple insurance policies, enabling them to use large deductibles only on the policies and risks they want
CONs of Deductibles
Some of the Cons of choosing high deductibles in Pennsylvania are:
Not having the financial ability to pay out of pocket for an enormous loss
Occasional delays in settling claims, which may force an insured to pay more than their deductible out of pocket (temporarily) for urgent repairs
Being forced to borrow or spend from your savings when you have a slim cash flow for a large loss
What is a Premium in Pennsylvania Insurance?
A premium in Pennsylvania insurance is the money paid periodically by insureds in the Commonwealth to keep their insurance policies active.
What is Insurance Premium?
An insurance premium is a cost paid to an insurance company in exchange for coverage. It is what maintains and keeps a policy in force in an insurance contract. In other words, it is the price an insurer charges you to absorb your risks. Typically, Pennsylvania insurers will cancel your policy if you fail to pay your insurance premiums, and that means a loss of coverage and loss of financial protection in the event of insurable perils.
How is Insurance Premium Determined?
Several factors determine the premium you pay for your insurance policy in Pennsylvania. These include:
Insurance type
The industry in which you play and business type (for commercial insurance)
Location
Policy limits
The required coverage and policy riders
These factors contribute to your risk profile which ultimately determines your insurance cost. After assessing these factors, an insurance company that considers you a high risk will charge you higher insurance premiums. In contrast, you will pay a lower insurance premium if your insurer considers you a low-risk individual. The same applies to a business in commercial insurance.
The table below shows some of the factors insurance companies in Pennsylvania consider in determining insurance premiums for selected insurance types:
| Insurance Type | Factors Determining Insurance Premium |
| Auto Insurance | Insured’s age, age of car, credit score, type of car, type of coverage chosen, driving frequency, location, driving record, and selected coverage limits |
| Homeowners Insurance | Home’s condition and age, credit rating, deductible amount, selected optional coverage, claims history, home construction type, local fire protection, installed security equipment, and selected coverage limits |
| Life Insurance | Selected length of policy, coverage amount, type of life insurance coverage, age, health condition, and life expectancy |
How Do Deductibles Affect Premiums?
Generally, deductibles have an inverse relationship with insurance premiums. In other words, the deductible you choose while purchasing insurance in Pennsylvania significantly impacts your insurance premium costs. The lower your deductible, the higher the premium you will have to pay, and vice versa. For instance, if you elect to pay a $1,000 deductible on your auto insurance policy, chances are that you will pay less in premiums than someone with a $250 deductible for the same policy.
Most insurers set policies at the minimum deductibles by default, which implies high premiums. However, if you think the chances of filing claims are slim, choosing a higher deductible may be a good idea, and you will only have to pay low insurance premiums. For instance, if you are in an industry with minimal risks and operate in a low-risk environment with no or low likelihood of filing claims, going for a high deductible may be worth it.
Discuss how a change in the deductible may affect your coverage premium with your trusted PA insurance agent. Only a licensed agent may assess insurance needs and make professional suggestions and recommendations.
How Do you Pay Insurance Premiums in Pennsylvania?
Premium payments are essential to keep your insurance policy in force. In Pennsylvania, you can pay your insurance premiums via various means, including premium financing. Depending on the insurance type and the agreement between you and your insurer, you may pay your premiums annually, bi-annually, quarterly, or monthly. In some cases, your insurer may decide that you pay your premium upfront. If you miss your premium payment and fail to pay up within the grace period, your policy will lapse and your insurer may cancel your coverage.
Health Insurance
You can pay for your health insurance policy in Pennsylvania using any of the following payment options:
Sending a check to your insurer's address by mail
Online via your insurer's website. This may require you to create an account and choose a password for the first payment
Handing your check to a designated company representative in person
Paying via a mobile app designed by your insurer
Paying over the telephone. Make sure to have your checking account or card (debit or credit) information handy when you call your insurance company's office
Paying via a mobile app designed by your insurer
Getting financial assistance to pay monthly premiums monthly if you purchased your policy through the commonwealth's health insurance marketplace
Auto Insurance
You can pay your auto insurance premiums in Pennsylvania in person at your insurer's office, via mail, online, over the telephone, or through a dedicated mobile app designed by your auto insurer. Premium financing can also be used to pay for auto insurance premiums in Pennsylvania. You can pay in six-month or yearly increments. However, most insurers offer one-month or three-month premium payment options.
Residential Insurance
Homeowners and renters in Pennsylvania can pay their residential insurance premiums using any of the following means:
In-person
By mail
Setting up autopay
Over the telephone
Through a mobile app
Online
Premium financing
Commercial Insurance
Pennsylvania business owners can choose from two broad payment plans: pay in installments or make a one-time full payment. They can save some money (service fees) by making one payment for the total premium. As a business owner, you can also pay in installments, such as six or nine installments. Some insurers may accept monthly payments, especially from newly established businesses.
Regardless of the premium payment structures you choose, you can pay your commercial insurance premiums in the Commonwealth of Pennsylvania via:
Online
Telephone
Auto payments
Mail
Premium financing
Life Insurance
Life insurance companies in Pennsylvania accept insurance premium payments via electronic bank transfer, mailed checks, checks submitted in person and online. They also accept payments made through mobile apps.
Premium financing is an excellent means of paying life insurance for high-net-worth individuals who do not wish to liquidate their assets just yet. It involves taking a loan from a premium financing company to pay for a premium. The insurer charges interest while the insured pays in regular installments. This option is used chiefly for expensive life insurance premiums.
Disaster Insurance
You can pay your disaster insurance premium in Pennsylvania online, cheks (mailed or submitted in person), over the telephone, or via money order. If you have a mortgage, you can pay disaster insurance premiums, for instance, a flood insurance policy, through an escrow account set by your mortgage lender.
If you have insurance questions or are not sure about your insurer's preferred insurance premium payments method in Pennsylvania, ask any Commonwealth-licensed insurance agent or speak directly with your insurer. Usually, your insurance policy document will outline the payment options accepted by your insurer.
