Archive for the ‘expensive’ Tag

A review of personal insurance – Auto insurance (liability)   Leave a comment

Miss me

Hi everyone! Did you miss me?

Hey everyone!  It’s been too long since we’ve posted anything.  We’ll try to blend the purpose of this post between a good mix of information and ways to save.  Since our prior posts focused on business insurance, we’re going to start in a more widely useful direction – personal insurance.

Auto insurance is, at least in the state of PA, a legal requirement – but probably far less than you think.  In fact, state regulations only require that you carry liability coverage for the bodily injury and property damage of others, as well as your own personal medical expenses.  The limits required by the state are similarly low – only $15,000 per person & $30,000 per accident for bodily injury, $5,000 for property damage, and $5,000 for medical expenses.

Here are some of the coverages you can purchase, as well as ways to save on them:

  • Bodily Injury (BI)BI covers your liability for injuries people NOT in your vehicle sustain in the event of an accident for which you are at fault.  BI claims can get very tricky in PA.  If you are responsible for an accident that injures the passengers of another vehicle, typically the medical payments coverage on the policy on the OTHER (non-responsible) vehicle responds first.  It can quickly get convoluted, so in the interest of brevity, contact your agent for additional details of how coverage applies in the event of an injury.  Ways to save – see notes after Property Damage.
  • Property Damage (PD) PD covers your liability for the damage done to the property of others in an accident for which you are at fault.  For example, if you rear-ended a slower moving vehicle, back into a parked car in a parking lot, or take a turn too quickly and end up in someone’s front yardWays to save in general, liability coverages are the most difficult to reduce your costs on – the most convenient way to save is by lowering your limits.  However, especially if your driving record is clean, you won’t save as much by reducing limits as you might think.   Other ways to reduce your rates include changing driver/vehicle assignments on your policy (the youngest driver on the oldest car, for example), purchasing a safer car, or doing something to reduce your daily (commute) or annual mileage.
  • Uninsured/Underinsured Motorists (UM/UIM) – this coverage is similar to BI but in reverse.  If you or your passengers are injured in an accident where another party is at fault, and that party either does not have any BI coverage (uninsured) or they don’t have enough BI coverage (underinsured) to pay for your injuries, UM/UIM will pick up the difference (up to your policy limits).  Ways to save the best way to save without reducing your limits (if you have multiple vehicles on your policy) would be to reduce your limits and add stacking.  Stacking multiplies your UM/UIM limits by the number of vehicles on your policy.  So, if you have two cars on your policy, and carry $50,000/$100,000 unstacked limits, you can reduce your limits to $25,000/$50,000 and stack the coverage.  You will maintain the same total coverage (as long as you have at least two vehicles!) and pay less.
  • First Party Benefits (FPB) I will address these as a group, as they are typically lumped together in a batch on your policy.  Additionally, they can be combined into one large limit for the whole group of coverages, instead of having separate limits for each.  This is typically called blanketing coverage.  I digress – the four FPB coverages are medical expense, income loss, accidental death, and funeral benefits.  Each FPB coverage pays if you or your relatives (residing in your home) are injured or killed in an accident, regardless of who is at fault.  Medical Expenses operates similar to health insurance – covering your actual medical & rehab costs.  Income loss operates similar to disability coverage – covering your lost wages if you are injured in an accident and are unable to return to work.  Accidental Death and Funeral Benefits, similar to life insurance, provide coverage in the event you pass away as a result of an accident.  Ways to save in order to get higher limits for less money, consider purchasing the combination option, where you get one lump sum for all four coverages, which you can divvy up as necessary.  For example, instead of maintaining higher limits on each individual coverage, consider carrying combination coverage of $100,000 or $177,500.  Additionally, if you already have health, disability, or life insurance, consider reducing or removing the applicable coverages from your policy.

In the interest of your sanity and keeping this short, I will stop for today.  We’ll review the physical damage coverages you can purchase on your vehicle itself tomorrow.
In the meantime:

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Keep on riding!

A defense for the insurance industry…. based on my own experience   Leave a comment

I wrote this blog on the day that the incident occurred.  I decided to wait a few weeks and give myself time to cool down so I wouldn’t be posting in anger.  Nearly a month after the fact, I’m keeping it intact, as it’s mostly not about anger so much as it is informative about what’s going on out there.  On with the show:

Hello estranged readers!  (all 3 of you)

I’m going to describe an incident in my life today, to defend my industry.  I’m going to eliminate many of the identifying details; the situation is on-going.  However, I think the lesson it holds is an important one.

Very simply, one of my vehicles is in a repair situation that normally would be resolved via the insurance company.  It is, however, being paid out of pocket by the party responsible.  To make a long story short, I was told by the garage that I am being charged a higher rate for my repair.

When I asked why, I was told “Because the insurance companies will pay the higher rate.” 

“How is this a defense of the insurance industry?!  They are paying higher rates than necessary when they could negotiate reductions in cost!”  you might ask.

“While that may be accurate on the surface, there are some factors at play that make that not necessarily correct.”  Sammy would rebut.

To make it as straight forward as possible – the increased cost that’s being charged is lower than cost of negotiating the correct amount.  If an insurance company were to take the time and manpower necessary to haggle for better prices, they would pay more for the hourly pay/salary of their employee than the increased cost of repair – in my case, about $75 total.  It may not seem like much, and in my case, it’s not.  But when you multiply that by hundreds of cases a month (see “A form of insurance fraud” at bottom), every month of the year, well, you can see how it adds up.

One very important point needs made – not every repair shop operates in this fashion.  I was not aware this was going to be the case in my situation, or I would not have gone to the garage that I did.  Now, I’m stuck overpaying (albeit slightly), but I’m aware that it happens, and I’m aware that I need to be more wary of where I go to get repairs done.

Most importantly, I want you all to be aware that in a world of rising insurance costs, it’s not simply a case of the insurance company raking you over the coals.  Insurance companies are being nickel and dimed in this fashion quite often, and there is no simple solution to the problem.  To be blunt, some repair firms will take advantage of this situation, and that results in all of us paying higher rates for insurance.

And to the shop in question, Sammy only has one thing to say:

**Pbbbbbb**

**Pbbbbbb!**

Comparing prices…………   Leave a comment

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We may look the same, but our insurance rates won’t!

Good morning one and all!

This is a quick thought for those who compare pricing with your neighbors/friends/relatives etc to see whether or not your policy premium is competitive.  Can we please stop doing this?  It’s like comparing apples to galoshes.  Apples and oranges are probably much more similar than you and your neighbor’s insurance rating basis. 

“But we live in the same neighborhood, we drive similar cars!”  you may protest. 

“That’s all very true,” Sammy counters, “but insurance premium is based on several hundred different factors.  Even though you may seem very similar on the surface, looking deeper into the matter reveals quite a few important differences.”

Just one example that happened recently – we had a client call in, frustrated by the increase in their rates due to purchasing a new vehicle.  One thing that they kept coming back to was the fact that their granddaughter had also just purchased a new vehicle, and was paying substantially less.  As I pointed out, this is an impossible comparison to make, because you are talking about over 50 years difference in age, totally different types of vehicles owned, different credit ratings, different driving records and claims history, different lengths of time with the insurance company (remember our discussion on loss ratio?), and on and on and on.  Let’s not forget that different companies offer different discounts.  And we don’t even know if the granddaughter has the same insurance company! 

Crazy as it may seem, you could take twin siblings, driving the same vehicles, with similar driving histories, living next door to each other, and they will still be paying different amounts of money for their insurance.  If you want to know whether your rates are competitive, contact your agent and request quotes from multiple carriers.  Rather than comparing with friends/neighbors/relatives, who are dramatically different (from an insurance rating point of view), you are comparing YOUR information with multiple companies!

4 ways NOT to save on your insurance (and what you should’ve done) – Part 4 (Severity)   2 comments

Insurance Claim

Sammy attempts to demonstrate a major claim

This week Sammy and I are going to finish up our discussion on how your claims history affects the premium you pay for your insurance policies.  As you may recall, last week we discussed how the number of claims that you file can drive up your premium.  This week, we are going to discuss how the severity (ie – total dollar value) of individual claims affects your premium.

Just a quick search on Google   and you will find there is a lot of information out there about severe (major) insurance claims – the top causes of major homeowner’s claims, other blogs about major insurance claims, and even a website that lists the top 10 biggest insurance claims ever.  When reviewing a large claim, especially in light of your future premiums, companies will generally consider a couple factors.

  • Cause – I’ll make this as simple as possible.  In the event of a large claim, the cause of the claim can be a factor that is considered with regard to premium change – although, this primarily applies to business insurance.  Basically, if you have a large claim, but it’s not something that would be considered “your fault” (ie – a weather claim, an uninsured driver hits you),your agent can make an argument with the underwriter that this large claim was something outside of your control and not easily prevented.  It’s not always successful, but it’s still worth having a discussion.
  • Prior Claims – This ties into cause, in a way.  If you have a large claim, but no prior claims, your agent can again make an argument that this was a one-time event that could happen to anyone, especially if you were not at fault.  It’s definitely not always going to be successful, but it helps.  However, if you have a couple prior claims, regardless of size, it makes it much more likely that you will see a premium increase (or potentially a non-renewal notice) upon expiration of your current term.
  • Loss Ratio – Loss ratio is the calculation a company makes to determine your “net” expense to them.  The most simple calculation takes the total dollar amount paid on every claim you’ve ever had while insured with that company (for THAT particular line of coverage – auto, home, etc), and divides it by the total amount of premium you’ve paid while insured with them (again, for THAT line of coverage).  For example, let’s say you had a $1,000 claim and a $45,000 claim.  You’ve been insured with the company for 25 years, and paid $23,000 of premium.  Your loss ratio calculation would be $45,000 + $1,000 = $46,000, divided by $23,000. $46,000/$23,000 = 2, or 200%.  Another example – the company paid out $8,000 in claims, and you’ve paid in $16,000 in premium.  $8,000/$16,000 = .5, or 50%.   Obviously, the higher your loss ratio is, the more likely it is your premium goes up.  This is one argument for having longevity with a company – the longer you stay, the lower your loss ratio will be – and thus, the greater chance that a loss, even a large one, will not have a dramatic effect on your premium.

One last thought – claim history is something which “travels” with you.  Similar to your driving record with the DMV or your credit score, ALL insurance companies provide claims information with a central database.  When you change insurance companies, the new insurance company will contact the central database and have access to basic information about all of the prior claims that were filed.

In summary – two different factors are the biggest influence on how your claims history can affect your annual premium – frequency and severity.  Obviously, the more that you do to reduce those two factors, the more favorable your insurance premiums will be!  I’ll stress filing numerous small claims – the more small claims that you file, the less flexibility there will be in the pricing of your coverage.

A little dry these last two weeks, but I hope it helps you to understand how insurance works!

insurance blog

Man, I’m worn out! That’s a lot of info

4 ways NOT to save on your insurance (and what you should’ve done!) – part 2   Leave a comment

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The busy blogger!

Good morning one and all!  Sorry about the delay in getting a post up – Sammy’s been one busy blogger!  Too many bones in the fire, I guess.  For part two of 4 ways NOT to save on your insurance, we’ve decided that we are going to discuss removing coverages from your policy or cancelling the policy.

We can both understand the idea behind removing coverages.  Times are tough right now for a lot of people.  You’ve been paying money into a policy that, in most cases, you’ve never used.  You need to cut back on costs – and “why should I keep paying for something I don’t use?”

Here is the main problem with removing coverages from your policy – there could come a time when you DO have a claim, and need the coverage you’ve deleted.  If you’ve removed it completely (or cancelled your policy), then you will pay for your claim entirely out of pocket. 

“Well, I haven’t had a claim in years!”  you say “Why would it be more likely that I’ll have a claim after I remove the coverage?”

“You’re right” Sammy says “removing a coverage won’t increase the likelihood that you’ll have a claim.  BUT, no one schedules when they have a claim – it often happens at the worst time possible!”

Rather than removing a coverage entirely, you should consider other options – increasing your deductible, reducing (but not removing) the amount of coverage, etcThis way, instead of receiving nothing from the insurance company, you will receive a reduced settlement.  Talk to your agent about ways to save on a coverage, rather than just deleting it.  Options available will vary greatly depending on the coverage(s) you are considering.

I hope this helps – and we are always looking for feedback – please ask questions or provide suggestions in the comment section.

We’re here to help you rest easy!!

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