Here are five of the most common blunders to steer around when choosing a policy to insure your wheels.
Recently Five for the Money took a look at some of the biggest mistakes consumers make when buying life insurance (see BusinessWeek.com, 2/1/07, "Life Insurance Blunders to Avoid"). This week we'll tackle car insurance. Auto insurance isn't as fraught a subject as life insurance; buying a sensible policy doesn't need to be a reminder of inevitable death. But that doesn't mean it's easy to negotiate. Having the wrong car insurance, or making the wrong claims, can put a serious ding in someone's financial health.
As with life insurance, some of the rules are straightforward: shop around to ensure a fair deal and review your policy annually to make sure that it still fits your life and financial condition. Here are a few other common mistakes policyholders should swerve away from:
1. Don't assume the insurance salesman is your friend.
The best insurance policies for consumers aren't necessarily the ones that bring in the best numbers and bonuses for salespeople, says Andrew Tignanelli, president of Luthersville (Md.)-based money management outfit Financial Consulate. Remember that the next time you go shopping for car insurance. Often it's in the salesman's best interest to sell the "least amount of insurance that they can possibly justify." Smaller policies leave insurers less exposed to risk and proportionately tend to be more expensive. As a result, they're more likely to be profitable for the insurer. Because of this conflict of interest and other factors, Tignanelli says he finds that even wealthy clients are often underinsured.
Make sure you have "liability" coverage, which is usually mandatory in most states and covers the costs of another person's car damage and injury. "Comprehensive" will protect you if your car gets stolen, catches fire, or is damaged without coming into contact with another car. And "collision" covers damages if your car collides with another vehicle or object, no matter who's at fault.
2. Don't have a tiny deductible.
When buying auto insurance, consumers frequently think of it as a way to protect themselves against every ding and scratch. That's a bad idea. "You should insure for what you cannot afford to lose," says financial planner Jeffrey Bogue of Bogue Asset Management. That means, don't have a miniscule deductible of $100 or even $250. "If you nickel-and-dime the insurance companies with these small claims, you may get socked with a premium hike or they may say 'we're not going to insure you,' " he says.
Policies with higher deductibles (Bogue says $1,000 is often sensible) that extend to higher coverage levels are not necessarily more expensive and protect drivers from costs associated with more serious car problems. Higher-deductible policies also cost less.
3. Don't assume all cars need the same insurance.
Just as you shouldn't waste insurance on minor incidents, Bogue says some cars just don't need the full insurance package. Drivers always need to maintain their liability insurance in case they cause an accident but some cars just aren't worth the hassle and expense. For example, Bogue's third vehicle is an old Toyota pickup that he uses sparingly. He wouldn't miss it if it "fell off a cliff tomorrow." Insuring it with a reasonable deductible would be useless, he says; it would irritate insurers without promising much upside in the event of a claim.
4. Don't ignore car ownership.
This won't necessarily come up when buying insurance, but vehicle ownership can make all the difference in potential payouts. "There's absolutely no good reason to own a car jointly," says Dr. Steven Podnos, principal at Wealth Care, a financial planning and investment advisory firm in Merritt Island, Fla. If a husband and wife share ownership, both are exposed to liability if one causes an accident. Both can be sued.
Parents should be aware of the age of majority (usually 18) in their state. When the kids reach it they should assume title for their cars so that parents can avoid liability for any mishaps caused by drivers who are of age, but still young.
5. Don't forget your umbrella.
Umbrella policies tend to be very cheap and can help drivers (and homeowners) weather the most severe storms. Say there's been a severe car accident that involves significant property damage extending beyond what a solid insurance policy covers. When this happens, policyholders need umbrellas to shelter them from liability extending beyond the limits of their standard policy.
Since these umbrella policies protect against only the worst accidents, they rarely pay out and so can be bought for very little, sometimes $200 for a policy stretching from where the liability stops to around $2 million in damages, according to John Discepoli of Discepoli Financial Planning near Cincinnati. This could be an amount of car insurance coverage that allows most drivers a smooth ride.
Tuesday, January 20, 2009
Shopping for an Auto Loan
Shopping for an auto loan is usually about price and loan terms -- which lender is offering the lowest interest rates and best rebates, for example.
When you buy an auto from a dealer, it is likely to direct you to a lender, often one that specializes in making auto loans to buyers of a particular make of auto.
You can find online lenders on the Internet that focus on auto loans. Other lenders are aggregators, which act as a kind of wholesaler or broker to pull together the best loan rates and terms from a variety of lending institutions. In exchange for identifying potential customers, lenders pay a fee to aggregators. As a result, you should be skeptical if a loan aggregator seeks payment from you.
Buying an auto is a major financial deal. However, it has gotten easier as technology has improved the loan underwriting process and the auto industry has grown more aggressive in its sales tactics.
Similar to other online transactions, applying for an auto loan online requires you to complete an online application and trust the lender or aggregator to use secured-sockets-layer (SSL) or similar encryption technology. If in doubt, read the lender's privacy policy.
If you have an existing auto loan, you may want to check with your current lender, either through a visit to its Web site or a visit to a retail branch.
Your lender may be willing to negotiate a reduction in the loan rate if your payment history has been good. Your current lender is also most familiar with your credit history. If your lender stonewalls you, you may be able to find better loan terms with other institutions.
When you buy an auto from a dealer, it is likely to direct you to a lender, often one that specializes in making auto loans to buyers of a particular make of auto.
You can find online lenders on the Internet that focus on auto loans. Other lenders are aggregators, which act as a kind of wholesaler or broker to pull together the best loan rates and terms from a variety of lending institutions. In exchange for identifying potential customers, lenders pay a fee to aggregators. As a result, you should be skeptical if a loan aggregator seeks payment from you.
Buying an auto is a major financial deal. However, it has gotten easier as technology has improved the loan underwriting process and the auto industry has grown more aggressive in its sales tactics.
Similar to other online transactions, applying for an auto loan online requires you to complete an online application and trust the lender or aggregator to use secured-sockets-layer (SSL) or similar encryption technology. If in doubt, read the lender's privacy policy.
If you have an existing auto loan, you may want to check with your current lender, either through a visit to its Web site or a visit to a retail branch.
Your lender may be willing to negotiate a reduction in the loan rate if your payment history has been good. Your current lender is also most familiar with your credit history. If your lender stonewalls you, you may be able to find better loan terms with other institutions.
Stuck in your car lease? Not necessarily
If you took out a car lease only to find that, with a change in your circumstances, your can no longer afford your lease , you may want to check out LeaseTrader.com. The ten-year-old firm is in the business of matching drivers in the market for a short-term lease with those looking to get out of an existing one. For its trouble, the company collects a fee, of course.
The process, which has been OK'd by almost all the car manufacturer's financing departments, works this way:
Person A, the lease holder, posts the vehicle and details of the lease on LeaseTrader
Person B, who wants to pick up a vehicle on a short-time lease, selects yours
Person B's credit-worthiness is confirmed
The vehicle lease is transferred from Person A to Person B. The buyer is not required to pay an down payment to the leasing company.
Person A pays LeaseTracker $79 for the service and $149 for the transfer
While the average time between posting and transfer is 3-7 weeks, according to a LeaseTrader exec quoted in Advertising Age, the site is hoping to drop that significantly with a new marketing campaign. LeaseTrader claims that it has seen demand grow threefold as nervous drivers look to shorter term leases in an unstable economy.
A couple of caveats, however: people who find themselves with burdensome leases are often people who also don't understand how to negotiate favorable deals, so the lease you assume might be on the high side. You may also have to include a wide swath of the U.S. to find enough candidate vehicles; near my home, there were almost none. Extending my search to 1,000 miles found a number of them, but retrieving a vehicle from that distance would cost me something in time, mileage or shipping.
If you're looking for to get out from under your lease, or looking for a nice ride for a short commitment, this seems like an interesting alternative to consider.
The process, which has been OK'd by almost all the car manufacturer's financing departments, works this way:
Person A, the lease holder, posts the vehicle and details of the lease on LeaseTrader
Person B, who wants to pick up a vehicle on a short-time lease, selects yours
Person B's credit-worthiness is confirmed
The vehicle lease is transferred from Person A to Person B. The buyer is not required to pay an down payment to the leasing company.
Person A pays LeaseTracker $79 for the service and $149 for the transfer
While the average time between posting and transfer is 3-7 weeks, according to a LeaseTrader exec quoted in Advertising Age, the site is hoping to drop that significantly with a new marketing campaign. LeaseTrader claims that it has seen demand grow threefold as nervous drivers look to shorter term leases in an unstable economy.
A couple of caveats, however: people who find themselves with burdensome leases are often people who also don't understand how to negotiate favorable deals, so the lease you assume might be on the high side. You may also have to include a wide swath of the U.S. to find enough candidate vehicles; near my home, there were almost none. Extending my search to 1,000 miles found a number of them, but retrieving a vehicle from that distance would cost me something in time, mileage or shipping.
If you're looking for to get out from under your lease, or looking for a nice ride for a short commitment, this seems like an interesting alternative to consider.
Ten reasons you shouldn't loan money to friends
Most of us will, as we grow up, at some point be hit up for a loan by a friend. Most of us agonize over the decision, but there's no reason you should. To prepare you against that day, consider this list of ten reasons you shouldn't loan money to your friend.
1. Your impression of your friend will forever after be colored by the memory of that loan, whether or not it was repaid promptly. When he walks into the room, some part of you will always hear a giant sucking sound.
2. There are no terms for such a loan that will not feel either miserly or foolishly generous. Every friend views himself as a sub-prime candidate.
3. You will lose confidence that your friendship is based on common regard, and begin to wonder if his bonhomie is that of a car salesman.
4. Your friend will forever be looking for a way to repay the favor or,
5. failing that, will come to resent you for the debt of that favor.
6. You will become an enabler of her profligate ways, sharing responsibility for any self-destructive choices she makes with your money. Yes, you helped pay for the Harley she wrapped around a telephone pole.
7. You will learn something about your friend you would be better off not knowing. He's a QVC junkie?
8. Every time you pass on buying something because you can't afford it, you'll think of the money you loaned to your friend.
9. People drift apart as their natures diverge, but the bond of the loan will keep you tied together like a bad marriage.
10. Other friends will also start to view you as a lender of last resort.
Of course, there are many offsetting reasons to go ahead and make the loan. But you don't need any help with that decision, right?
1. Your impression of your friend will forever after be colored by the memory of that loan, whether or not it was repaid promptly. When he walks into the room, some part of you will always hear a giant sucking sound.
2. There are no terms for such a loan that will not feel either miserly or foolishly generous. Every friend views himself as a sub-prime candidate.
3. You will lose confidence that your friendship is based on common regard, and begin to wonder if his bonhomie is that of a car salesman.
4. Your friend will forever be looking for a way to repay the favor or,
5. failing that, will come to resent you for the debt of that favor.
6. You will become an enabler of her profligate ways, sharing responsibility for any self-destructive choices she makes with your money. Yes, you helped pay for the Harley she wrapped around a telephone pole.
7. You will learn something about your friend you would be better off not knowing. He's a QVC junkie?
8. Every time you pass on buying something because you can't afford it, you'll think of the money you loaned to your friend.
9. People drift apart as their natures diverge, but the bond of the loan will keep you tied together like a bad marriage.
10. Other friends will also start to view you as a lender of last resort.
Of course, there are many offsetting reasons to go ahead and make the loan. But you don't need any help with that decision, right?
It's 'buyer beware' on subprime loans
Remember when you're shopping for a subprime loan, it doesn't mean lenders don't want your business. Just the opposite, actually, but it does mean you'll pay more for the money you borrow -- all the more reason to shop carefully.
"Often buyers aren't doing the shopping," says Allen Fishbein, director of housing and credit policy for the Consumer Federation of America. "A borrower needs to step back at this point and say, 'I've gotten this offer. Let me get some independent advice and maybe get a few more offers before I decide.'"
The need to shop and compare "is even more important for the subprime borrower," he says.
The gray area
First, are you certain you're subprime? The credit score used to separate prime from subprime varies with the lender and loan.
"Typically, usually below 600, it's safe to say is always subprime," says Barry Paperno, manager of customer service for Fair Isaac Corp., which designed the FICO score. "From 600 to 650 is kind of a gray area, depending on the lender."
A good rule of thumb is that the cutoff will be a FICO score around 620, says Fishbein.
"It's not standard," he says.
Two lenders looking at the same customer could rank him differently. "It's just not as uniform a standard as many borrowers think," says Fishbein. "This has created some confusion in the marketplace."
That means you don't take the first loan you're offered, especially if the rates are subprime. "Anybody in the mid-600 range, credit score-wise, should be very, very careful," says Robert Manning, finance professor at the Rochester Institute of Technology and author of "Credit Card Nation," "particularly if it's an unsolicited loan."
Instead, recognize that you're a commodity.
"Often people feel like they're not desirable as a customer and are happy if anybody wants to work with them," says Fritz Elmendorf, vice president of communications for the Consumer Bankers Association, a financial services trade group.
If you're on the edge, you can do a couple of things. First, be careful where you shop.
Try credit unions and banks that make both prime and subprime loans, says Ira Rheingold, executive director of the National Association of Consumer Advocates. If you're mortgage shopping, try some of the Internet sites that let you shop a variety of lenders simultaneously.
Some lenders are subprime, says Rheingold. "If you walk in and are eligible for prime, they may not be able to provide it to you."
Second, do all those things that will boost your scores a few points. Pay off balances (as much as you can). Keep making on-time payments. If you know you need a home or car loan, don't apply for other forms of credit, such as credit cards, even those preapproved offers or store cards. Inquiries can reduce your score as much as 10 percent, which is a lot if you're on the line between subprime and prime. When you do start shopping for your big loan, keep all your applications within a 14-day period so that the entire process is certain to be counted as one inquiry by the credit bureaus.
"Often buyers aren't doing the shopping," says Allen Fishbein, director of housing and credit policy for the Consumer Federation of America. "A borrower needs to step back at this point and say, 'I've gotten this offer. Let me get some independent advice and maybe get a few more offers before I decide.'"
The need to shop and compare "is even more important for the subprime borrower," he says.
The gray area
First, are you certain you're subprime? The credit score used to separate prime from subprime varies with the lender and loan.
"Typically, usually below 600, it's safe to say is always subprime," says Barry Paperno, manager of customer service for Fair Isaac Corp., which designed the FICO score. "From 600 to 650 is kind of a gray area, depending on the lender."
A good rule of thumb is that the cutoff will be a FICO score around 620, says Fishbein.
"It's not standard," he says.
Two lenders looking at the same customer could rank him differently. "It's just not as uniform a standard as many borrowers think," says Fishbein. "This has created some confusion in the marketplace."
That means you don't take the first loan you're offered, especially if the rates are subprime. "Anybody in the mid-600 range, credit score-wise, should be very, very careful," says Robert Manning, finance professor at the Rochester Institute of Technology and author of "Credit Card Nation," "particularly if it's an unsolicited loan."
Instead, recognize that you're a commodity.
"Often people feel like they're not desirable as a customer and are happy if anybody wants to work with them," says Fritz Elmendorf, vice president of communications for the Consumer Bankers Association, a financial services trade group.
If you're on the edge, you can do a couple of things. First, be careful where you shop.
Try credit unions and banks that make both prime and subprime loans, says Ira Rheingold, executive director of the National Association of Consumer Advocates. If you're mortgage shopping, try some of the Internet sites that let you shop a variety of lenders simultaneously.
Some lenders are subprime, says Rheingold. "If you walk in and are eligible for prime, they may not be able to provide it to you."
Second, do all those things that will boost your scores a few points. Pay off balances (as much as you can). Keep making on-time payments. If you know you need a home or car loan, don't apply for other forms of credit, such as credit cards, even those preapproved offers or store cards. Inquiries can reduce your score as much as 10 percent, which is a lot if you're on the line between subprime and prime. When you do start shopping for your big loan, keep all your applications within a 14-day period so that the entire process is certain to be counted as one inquiry by the credit bureaus.
Auto insurance industry takes the gas money savings from small car owners
Gary E. Sattler
Oct 27th 2008 at 8:00AM
Text SizeAAA
Filed under: Insurance, Transportation
Many drivers of smaller automobiles may be smiling about their fuel cost savings, but their smiles may soon fade when they start to realize that the auto insurance industry is taking a share of the money that they aren't paying for gasoline. Let it not be said that smaller automobiles don't come with a cost trade off.
An examination of automobile insurance premiums from The Wall Street Journal reveals that the nature of smaller autos makes them justifiably more expensive to insure. For some smaller cars, such as some of the new hybrid models, replacement parts can be difficult to obtain, and labor costs are sometimes higher than for conventional autos. Additionally, hybrid cars can often take longer to repair.
Karen Block, an independent insurance agent in Medford Wisconsin, indicates that the situation is quite basic and easy to understand. She stated: "Smaller cars have statistically higher repair costs." The Wall Street Journal article reports: "A recent study by the Highway Loss Data Institute, an affiliate of the IIHS, found that overall insurance costs for crash damage were higher for 11 of 12 hybrid cars and SUVs than for their gas-only counterparts."
While the owners of smaller cars may be paying higher costs to have their own cars repaired, it should be noted that their premiums for property damage liability may be lower. This is due to the fact that, when compared to larger vehicles in similar collisions, smaller cars tend to do less damage to the things they hit. There is concern however, that this condition may also mean that smaller cars offer their occupants a reduced level of crash protection, which is why I keep myself surrounded by a full sized Chevy pick-up truck, and keep my wife in her well built Jeep SUV.
Oct 27th 2008 at 8:00AM
Text SizeAAA
Filed under: Insurance, Transportation
Many drivers of smaller automobiles may be smiling about their fuel cost savings, but their smiles may soon fade when they start to realize that the auto insurance industry is taking a share of the money that they aren't paying for gasoline. Let it not be said that smaller automobiles don't come with a cost trade off.
An examination of automobile insurance premiums from The Wall Street Journal reveals that the nature of smaller autos makes them justifiably more expensive to insure. For some smaller cars, such as some of the new hybrid models, replacement parts can be difficult to obtain, and labor costs are sometimes higher than for conventional autos. Additionally, hybrid cars can often take longer to repair.
Karen Block, an independent insurance agent in Medford Wisconsin, indicates that the situation is quite basic and easy to understand. She stated: "Smaller cars have statistically higher repair costs." The Wall Street Journal article reports: "A recent study by the Highway Loss Data Institute, an affiliate of the IIHS, found that overall insurance costs for crash damage were higher for 11 of 12 hybrid cars and SUVs than for their gas-only counterparts."
While the owners of smaller cars may be paying higher costs to have their own cars repaired, it should be noted that their premiums for property damage liability may be lower. This is due to the fact that, when compared to larger vehicles in similar collisions, smaller cars tend to do less damage to the things they hit. There is concern however, that this condition may also mean that smaller cars offer their occupants a reduced level of crash protection, which is why I keep myself surrounded by a full sized Chevy pick-up truck, and keep my wife in her well built Jeep SUV.
Auto Insurance for Teenagers
Teens and Car Insurance
When teenagers first begin to drive, they quickly discover that auto insurance is and will continue to be a major factor in their driving lives.
First, they discover that it is required by state laws. In most states you cannot buy a car, get tags, or drive a car without at least a minimum level of auto insurance.
Second, they discover that insurance is expensive, especially for teenagers, and especially for male teenagers under 18 years old.
Third, teens often don't understand why insurance is important and why it is needed, and why it is smart to have it.
Why do I need insurance?
Teens often question the need for insurance, especially when it is so expensive — and they don't expect to ever be an accident anyway. Let's ask this question a slightly different way. Under what conditions would you not need auto insurance?
If you were financially wealthy and didn't care about the risk of losing a substantial portion of your wealth, you could self-insure. That is, you would use your own money to pay for damage repairs, a replacement vehicle if your current vehicle is stolen or destroyed, towing and storage charges, rental car charges, medical bills associated with an accident, lawsuits by other parties when you are at fault in an accident that causes damages, injuries, or death, as well as attorney fees, and property damages.
However, those who might be able to self-insure don't for two reasons. First, the cost of auto insurance is relatively small compared to the potential financial losses associated with self-insurance. Why risk losing thousands or millions of dollars in an at-fault lawsuit? Second, states have laws requiring liability insurance as a way of proving financial responsibility. Although a bank full of cash might seem to accomplish the same thing, most state laws don't see it that way. State laws vary, so car insurance in New Jersey is not the same as in California.
Another reason for having auto insurance for those who buy with a loan or lease is that bank and finance companies insist on it. In fact, most require "full coverage" insurance, which exceeds minimum state law requirements. They want to protect their investment during the time of the loan or lease. If the vehicle is destroyed or stolen while they still have money invested, they want to be sure they are paid first.
In summary, you need car insurance to protect you, protect your finances, protect your family, protect your finance company, and protect other parties and property for which you might be responsible. Insurance is all about protection.
Types of insurance
An auto insurance policy might include one or more of the following types of coverage:
Liability - Protection from risks associated with property damage and personal injury to others. Legal actions against at-fault drivers is becoming more common and more expensive. Multi-million dollar legal settlements are not unusual. Without insurance, a single accident could easily ruin an unfortunate family's life. For this reason, liability coverage is the most important part of such a policy. Liability insurance is required by law in most states.
Comprehensive - Protection from the cost of non-collision damages, vandalism, theft, weather-related damage, or natural disasters. Comprehensive coverage typically pays for the cost of repairs, or in the case that the vehicle is totally destroyed or stolen, the cost of a replacement vehicle - at "cash value" of the old vehicle. A deductible lessens the amount you are paid.
Collision - Protection from the cost of repairing damages to your own vehicle. A deductible lessens the amount you are paid, but also reduces premium cost.. If the cost of repairs exceeds about 75% of the value of the vehicle, the insurance company may decide to "total" the vehicle and pay fair-market replacement cost.
Medical - Pays medical costs to you or other parties for accidental injuries associated with your automobile. There are limits specified in your policy regarding maximum amounts paid for each incident.
Uninsured Motorist - Protection from costs associated with an accident caused by another driver with insufficient liability coverage - or no liability coverage.
Towing and Labor - Pays cost of towing and storing your damaged or disabled vehicle. Maximums usually apply.
Rental Reimbursement - Pays cost of renting a replacement vehicle after an accident.
Gap Coverage - Pays the difference between the amount owed on a loan or lease and the "cash value" paid by your insurance company in case of theft, fire, or accident. A gap waiver or gap insurance is usually provided with most leases, but not loans. Some auto insurance companies offer it and some do not. If you are going to be "upside down" on your loan, it's good coverage to have.
How much coverage do you need?
Many drivers view auto insurance as a necessary evil and buy as little coverage as they can get by with to minimize costs. State laws may dictate what and how much liability coverage is required, and whether no-fault coverage is required. If you buy with a loan or lease, the finance company may dictate minimum coverage requirements. They may even tell you the maximum deductible you can choose.
Beyond the requirements of your state laws or finance company, you have some ability to determine the kind of coverage you want, how much, what deductible, and what add-ons you want. Generally, the more coverage you have, the better you are protected.
For example, you can add more liability coverage, which can be a smart thing to do in these days of multi-million dollar legal settlements, especially when medical costs are involved. Many policies only cover $50,000 or less. If your auto insurance policy doesn't cover the full cost of a large settlement, you are personally responsible for the remainder.
You can also adjust your deductible amount, within limits. If you have sufficient cash available in case of an accident, you can set a high deductible to reduce your premium cost. However, many people who set high deductibles really can't afford to pay but bet on the chance they'll never have to. Not a good move.
Dropping collision and comprehensive coverage is another opportunity to save money. You should only do it, however, if you can afford to buy a replacement vehicle or pay for repairs from your own pocket. As mentioned previously, your loan or lease company may require this coverage even though you feel you don't want it.
Many insurance companies now look at your credit score and offer lower rates to people with high scores - 700 and above. You should know your FICO® credit score before you begin shopping for insurance.
Whose policy is it anyway?
Until a teen becomes 18 years old, they cannot buy insurance on their own. Therefore, most teens are simply added to their parents' policy, which is less expensive than a separate policy anyway. Some teens believe that they can simply not inform the parents' insurance company and avoid the high cost. Not very smart. It might work until the first time the teen is involved in an accident. At that juncture, the insurance company can and will declare no responsibility to cover the costs or lawsuits associated with that accident — and will likely cancel the parents' policy.
How much does auto insurance cost for a teenager?
There is no simple answer to that question. It depends on the type of car (see Cheapest Cars to Insure), where the car is driven, how many miles it is driven, for what purpose it is driven, and what discounts apply. Furthermore, insurance companies are regulated by state laws and rates can differ widely across state lines, even for the same insurance company. In some cases, a teenager may pay as little as $500 a year while in other cases can pay $3000 or more.
Get rate quotes
If you are buying a new policy or adding a teenager to an existing policy, the Internet makes it easy to shop for the best rates. Most people are already paying too much for their auto insurance. Companies frequently adjust rates such that no one company stays in the low cost leader slot very long. Unless you get new quotes every year, you never know that you might be able to get better rates from a different auto insurance company. It's easy to get free rate quotes online.
We recommend NetQuote to get a free insurance quote. It's fast and easy, and they work with multiple companies to get you the lowest rates and best coverage. NetQuote is the nation's oldest insurance broker company (see CBS News with comment). They can get the best rates by shopping your requirements to Allstate, Progressive, AIGdirect, Farmers, and other major insurers. Since these companies are competing with each other for your business, rates are as low as you'll find anywhere.
When teenagers first begin to drive, they quickly discover that auto insurance is and will continue to be a major factor in their driving lives.
First, they discover that it is required by state laws. In most states you cannot buy a car, get tags, or drive a car without at least a minimum level of auto insurance.
Second, they discover that insurance is expensive, especially for teenagers, and especially for male teenagers under 18 years old.
Third, teens often don't understand why insurance is important and why it is needed, and why it is smart to have it.
Why do I need insurance?
Teens often question the need for insurance, especially when it is so expensive — and they don't expect to ever be an accident anyway. Let's ask this question a slightly different way. Under what conditions would you not need auto insurance?
If you were financially wealthy and didn't care about the risk of losing a substantial portion of your wealth, you could self-insure. That is, you would use your own money to pay for damage repairs, a replacement vehicle if your current vehicle is stolen or destroyed, towing and storage charges, rental car charges, medical bills associated with an accident, lawsuits by other parties when you are at fault in an accident that causes damages, injuries, or death, as well as attorney fees, and property damages.
However, those who might be able to self-insure don't for two reasons. First, the cost of auto insurance is relatively small compared to the potential financial losses associated with self-insurance. Why risk losing thousands or millions of dollars in an at-fault lawsuit? Second, states have laws requiring liability insurance as a way of proving financial responsibility. Although a bank full of cash might seem to accomplish the same thing, most state laws don't see it that way. State laws vary, so car insurance in New Jersey is not the same as in California.
Another reason for having auto insurance for those who buy with a loan or lease is that bank and finance companies insist on it. In fact, most require "full coverage" insurance, which exceeds minimum state law requirements. They want to protect their investment during the time of the loan or lease. If the vehicle is destroyed or stolen while they still have money invested, they want to be sure they are paid first.
In summary, you need car insurance to protect you, protect your finances, protect your family, protect your finance company, and protect other parties and property for which you might be responsible. Insurance is all about protection.
Types of insurance
An auto insurance policy might include one or more of the following types of coverage:
Liability - Protection from risks associated with property damage and personal injury to others. Legal actions against at-fault drivers is becoming more common and more expensive. Multi-million dollar legal settlements are not unusual. Without insurance, a single accident could easily ruin an unfortunate family's life. For this reason, liability coverage is the most important part of such a policy. Liability insurance is required by law in most states.
Comprehensive - Protection from the cost of non-collision damages, vandalism, theft, weather-related damage, or natural disasters. Comprehensive coverage typically pays for the cost of repairs, or in the case that the vehicle is totally destroyed or stolen, the cost of a replacement vehicle - at "cash value" of the old vehicle. A deductible lessens the amount you are paid.
Collision - Protection from the cost of repairing damages to your own vehicle. A deductible lessens the amount you are paid, but also reduces premium cost.. If the cost of repairs exceeds about 75% of the value of the vehicle, the insurance company may decide to "total" the vehicle and pay fair-market replacement cost.
Medical - Pays medical costs to you or other parties for accidental injuries associated with your automobile. There are limits specified in your policy regarding maximum amounts paid for each incident.
Uninsured Motorist - Protection from costs associated with an accident caused by another driver with insufficient liability coverage - or no liability coverage.
Towing and Labor - Pays cost of towing and storing your damaged or disabled vehicle. Maximums usually apply.
Rental Reimbursement - Pays cost of renting a replacement vehicle after an accident.
Gap Coverage - Pays the difference between the amount owed on a loan or lease and the "cash value" paid by your insurance company in case of theft, fire, or accident. A gap waiver or gap insurance is usually provided with most leases, but not loans. Some auto insurance companies offer it and some do not. If you are going to be "upside down" on your loan, it's good coverage to have.
How much coverage do you need?
Many drivers view auto insurance as a necessary evil and buy as little coverage as they can get by with to minimize costs. State laws may dictate what and how much liability coverage is required, and whether no-fault coverage is required. If you buy with a loan or lease, the finance company may dictate minimum coverage requirements. They may even tell you the maximum deductible you can choose.
Beyond the requirements of your state laws or finance company, you have some ability to determine the kind of coverage you want, how much, what deductible, and what add-ons you want. Generally, the more coverage you have, the better you are protected.
For example, you can add more liability coverage, which can be a smart thing to do in these days of multi-million dollar legal settlements, especially when medical costs are involved. Many policies only cover $50,000 or less. If your auto insurance policy doesn't cover the full cost of a large settlement, you are personally responsible for the remainder.
You can also adjust your deductible amount, within limits. If you have sufficient cash available in case of an accident, you can set a high deductible to reduce your premium cost. However, many people who set high deductibles really can't afford to pay but bet on the chance they'll never have to. Not a good move.
Dropping collision and comprehensive coverage is another opportunity to save money. You should only do it, however, if you can afford to buy a replacement vehicle or pay for repairs from your own pocket. As mentioned previously, your loan or lease company may require this coverage even though you feel you don't want it.
Many insurance companies now look at your credit score and offer lower rates to people with high scores - 700 and above. You should know your FICO® credit score before you begin shopping for insurance.
Whose policy is it anyway?
Until a teen becomes 18 years old, they cannot buy insurance on their own. Therefore, most teens are simply added to their parents' policy, which is less expensive than a separate policy anyway. Some teens believe that they can simply not inform the parents' insurance company and avoid the high cost. Not very smart. It might work until the first time the teen is involved in an accident. At that juncture, the insurance company can and will declare no responsibility to cover the costs or lawsuits associated with that accident — and will likely cancel the parents' policy.
How much does auto insurance cost for a teenager?
There is no simple answer to that question. It depends on the type of car (see Cheapest Cars to Insure), where the car is driven, how many miles it is driven, for what purpose it is driven, and what discounts apply. Furthermore, insurance companies are regulated by state laws and rates can differ widely across state lines, even for the same insurance company. In some cases, a teenager may pay as little as $500 a year while in other cases can pay $3000 or more.
Get rate quotes
If you are buying a new policy or adding a teenager to an existing policy, the Internet makes it easy to shop for the best rates. Most people are already paying too much for their auto insurance. Companies frequently adjust rates such that no one company stays in the low cost leader slot very long. Unless you get new quotes every year, you never know that you might be able to get better rates from a different auto insurance company. It's easy to get free rate quotes online.
We recommend NetQuote to get a free insurance quote. It's fast and easy, and they work with multiple companies to get you the lowest rates and best coverage. NetQuote is the nation's oldest insurance broker company (see CBS News with comment). They can get the best rates by shopping your requirements to Allstate, Progressive, AIGdirect, Farmers, and other major insurers. Since these companies are competing with each other for your business, rates are as low as you'll find anywhere.
Lease-End Considerations
It's never too soon to be thinking about the end of your lease. Many people who know they should do some homework and prepare for the beginning of a lease overlook the need to also prepare for the end of the lease as the time nears.
Your lease-end options
At the normal end of a lease, you may have the following options: return your vehicle, extend your lease, re-lease, purchase, or trade.
Depending on the details of your particular lease situation, some of these options may be available to you while others will not be.
How it works
About a month before the end of your lease, you will be contacted by your leasing company. They will instruct you regarding having your vehicle inspected and returned to them. Normally, the return is made to a dealer, from which the lease company will pick up the vehicle.
They may also remind you of your option to purchase your vehicle and provide you a purchase buyout price, which may be a better price than stated in your lease contract. They may also offer to extend your lease for specified terms. They won't tell you, but you may also be able to use your vehicle as a trade-in on a new lease or purchase.
Be careful of your lease-end decision
Don't make a quick decision about which lease-end option you'll take. For example, if you simply return your vehicle to the lease company without doing your homework, you may be handing them built-in value that belongs to you. They'll love you for the gift.
But what if you have exceeded your mileage limits or have some damage to your vehicle? Is it best to return, or to purchase? Can the mileage and damage fees be negotiated if you decide to return?
Is extending your current lease or re-leasing a smart thing to do? When is it advisable to use your leased car as a trade-in? Do you still have to pay for excess mileage and wear-and-tear?
If you decide to purchase, do you have to pay the lease company's purchase price? Is it negotiable? How do you determine what price to offer? Why do some lease companies refuse to negotiate? Does purchasing avoid paying mileage and damage fees?
What to do
Answering the above questions and deciding what to do requires a little homework and careful consideration of all your options. Remember, it's just as important to make the right decisions at the end of a lease as it is at the beginning. But each situation is different and must be examined on its own merits. There is no standard answer that fits every case.
Getting answers
If you need help in making your lease-end decision, our Lease Kit contains a special comprehensive section, "Lease-End Advisor," that provides answers to all the above questions, as well as a detailed explanation of each of your lease-end options — and how to go about determining which option will work best for you, given your particular situation.
If you decide to buy your vehicle, this section of the Lease Kit tells you what to pay and how to deal with the lease company. If you're in a position to trade, it'll tell you how.
If you are over your mileage limits or have excessive wear and tear, this section tells you how to handle this common situation. In some cases it's better to return; in others, it's better to buy or trade.
If you think you might want to re-lease your vehicle, this section of the Lease Kit explains how to determine if this is a smart choice and warns of some common problems.
If you decide to return your vehicle, this section of the kit tells you what to expect. It explains how to handle the inspection and return process to minimize the possibility of surprises from the lease company.
Your lease-end options
At the normal end of a lease, you may have the following options: return your vehicle, extend your lease, re-lease, purchase, or trade.
Depending on the details of your particular lease situation, some of these options may be available to you while others will not be.
How it works
About a month before the end of your lease, you will be contacted by your leasing company. They will instruct you regarding having your vehicle inspected and returned to them. Normally, the return is made to a dealer, from which the lease company will pick up the vehicle.
They may also remind you of your option to purchase your vehicle and provide you a purchase buyout price, which may be a better price than stated in your lease contract. They may also offer to extend your lease for specified terms. They won't tell you, but you may also be able to use your vehicle as a trade-in on a new lease or purchase.
Be careful of your lease-end decision
Don't make a quick decision about which lease-end option you'll take. For example, if you simply return your vehicle to the lease company without doing your homework, you may be handing them built-in value that belongs to you. They'll love you for the gift.
But what if you have exceeded your mileage limits or have some damage to your vehicle? Is it best to return, or to purchase? Can the mileage and damage fees be negotiated if you decide to return?
Is extending your current lease or re-leasing a smart thing to do? When is it advisable to use your leased car as a trade-in? Do you still have to pay for excess mileage and wear-and-tear?
If you decide to purchase, do you have to pay the lease company's purchase price? Is it negotiable? How do you determine what price to offer? Why do some lease companies refuse to negotiate? Does purchasing avoid paying mileage and damage fees?
What to do
Answering the above questions and deciding what to do requires a little homework and careful consideration of all your options. Remember, it's just as important to make the right decisions at the end of a lease as it is at the beginning. But each situation is different and must be examined on its own merits. There is no standard answer that fits every case.
Getting answers
If you need help in making your lease-end decision, our Lease Kit contains a special comprehensive section, "Lease-End Advisor," that provides answers to all the above questions, as well as a detailed explanation of each of your lease-end options — and how to go about determining which option will work best for you, given your particular situation.
If you decide to buy your vehicle, this section of the Lease Kit tells you what to pay and how to deal with the lease company. If you're in a position to trade, it'll tell you how.
If you are over your mileage limits or have excessive wear and tear, this section tells you how to handle this common situation. In some cases it's better to return; in others, it's better to buy or trade.
If you think you might want to re-lease your vehicle, this section of the Lease Kit explains how to determine if this is a smart choice and warns of some common problems.
If you decide to return your vehicle, this section of the kit tells you what to expect. It explains how to handle the inspection and return process to minimize the possibility of surprises from the lease company.
Car insurance companies are all different
It's important to re-examine your car insurance at least once a year and every time you acquire a new car. Insurance companies frequently change their rate structures. A company that offers the best rates today may be the highest cost company after they raise their rates.
Furthermore, a company that offers the best rates for minimum-coverage, high-deductible insurance may not offer the best rates for the higher level coverage you need for leasing. Actually, you may be able to find a car insurance company that offers high level coverage for about the same rate as another company's low level coverage.
Recommendations
Before the Internet came along, it was quite a chore to shop for auto insurance. Now, it's a breeze because most companies have web sites. Insurance brokers are also online, making it extremely easy to get multiple instant quotes from different companies from a single source. They save you the trouble of contacting individual insurance companies because they do it for you. The services of these online brokers are free to consumers. They make their money from the insurance companies.
You are under no obligation to accept any quote offered by these companies. There are no fees or costs involved to get quotes from them. It's a no-lose deal. If you don't get rates you like, you can shop elsewhere.
When asking for a quote, you'll get the most accurate quote if you provide all the information requested, including your social security number. If you choose to withhold some of this information, you can still get a "ballpark" quote.
Because some companies base rates partially on credit scores, providing your social security number allows the company to access your credit records for a more accurate quote. These credit inquiries are considered "soft" inquiries and do not count against your score.
Furthermore, a company that offers the best rates for minimum-coverage, high-deductible insurance may not offer the best rates for the higher level coverage you need for leasing. Actually, you may be able to find a car insurance company that offers high level coverage for about the same rate as another company's low level coverage.
Recommendations
Before the Internet came along, it was quite a chore to shop for auto insurance. Now, it's a breeze because most companies have web sites. Insurance brokers are also online, making it extremely easy to get multiple instant quotes from different companies from a single source. They save you the trouble of contacting individual insurance companies because they do it for you. The services of these online brokers are free to consumers. They make their money from the insurance companies.
You are under no obligation to accept any quote offered by these companies. There are no fees or costs involved to get quotes from them. It's a no-lose deal. If you don't get rates you like, you can shop elsewhere.
When asking for a quote, you'll get the most accurate quote if you provide all the information requested, including your social security number. If you choose to withhold some of this information, you can still get a "ballpark" quote.
Because some companies base rates partially on credit scores, providing your social security number allows the company to access your credit records for a more accurate quote. These credit inquiries are considered "soft" inquiries and do not count against your score.
How to minimize insurance costs
What most people don't know is that they are probably already paying too much for their car insurance. It's too easy just to stick with the same company you've been with for years, even though rates are lower elsewhere. Rates change frequently. One company can have the best rates one year, another the next year.
So, if you intend to lease and the insurance coverage requirements are higher than you currently have, you can nearly always get the higher level of insurance at about the same rate as you are currently paying by simply investing a little time shopping by comparing quotes from a few other insurance companies, asking for discounts that you already qualify for, and adjusting your coverage.
Insurance companies offer a variety of discounts based on driving records, other policies with the same company, having multiple cars, safety equipment, and such. Of course, vehicle make/model, repair costs, claim history, driving record, and driver age also affect insurance costs. Even your credit score can affect your insurance rates with many companies.
Free FICO® Credit Score Estimator
The vehicle you buy or lease can have a huge effect on your insurance rates, regardless of which company you choose. A Honda Accord will cost you less to insure than a Cadillac Escalade, not so much because the Honda is a less expensive vehicle, but because the Escalade is one of the top most-stolen vehicles in the country.
Is it possible to find dirt-cheap car insurance? No, but you can mimimize what you pay by shopping smart and asking for discounts. Rates between different insurance companies vary greatly.
Here are some of the possible discounts you should ask about. Be aware that all auto insurance companies may not offer all of these discounts.
[ ] $500 deductible
[ ] $1,000 deductible
[ ] More than one car
[ ] No accidents in 3 Years
[ ] No moving violations in 3 years
[ ] Driver training courses
[ ] Defensive driving courses
[ ] Anti-theft devices
[ ] Good credit score
[ ] Low annual mileage
[ ] Air bags
[ ] Anti-lock brakes
[ ] Traction and stability control systems
[ ] Daytime running lights
[ ] Student drivers with good grades
[ ] Auto and homeowners coverage with the same company
[ ] College students away from home
[ ] Long-time customer
[ ] Other discounts
The key to car insurance savings is not the number of discounts, but the final premium cost. A company that offers few discounts may still have lower overall prices.
So, if you intend to lease and the insurance coverage requirements are higher than you currently have, you can nearly always get the higher level of insurance at about the same rate as you are currently paying by simply investing a little time shopping by comparing quotes from a few other insurance companies, asking for discounts that you already qualify for, and adjusting your coverage.
Insurance companies offer a variety of discounts based on driving records, other policies with the same company, having multiple cars, safety equipment, and such. Of course, vehicle make/model, repair costs, claim history, driving record, and driver age also affect insurance costs. Even your credit score can affect your insurance rates with many companies.
Free FICO® Credit Score Estimator
The vehicle you buy or lease can have a huge effect on your insurance rates, regardless of which company you choose. A Honda Accord will cost you less to insure than a Cadillac Escalade, not so much because the Honda is a less expensive vehicle, but because the Escalade is one of the top most-stolen vehicles in the country.
Is it possible to find dirt-cheap car insurance? No, but you can mimimize what you pay by shopping smart and asking for discounts. Rates between different insurance companies vary greatly.
Here are some of the possible discounts you should ask about. Be aware that all auto insurance companies may not offer all of these discounts.
[ ] $500 deductible
[ ] $1,000 deductible
[ ] More than one car
[ ] No accidents in 3 Years
[ ] No moving violations in 3 years
[ ] Driver training courses
[ ] Defensive driving courses
[ ] Anti-theft devices
[ ] Good credit score
[ ] Low annual mileage
[ ] Air bags
[ ] Anti-lock brakes
[ ] Traction and stability control systems
[ ] Daytime running lights
[ ] Student drivers with good grades
[ ] Auto and homeowners coverage with the same company
[ ] College students away from home
[ ] Long-time customer
[ ] Other discounts
The key to car insurance savings is not the number of discounts, but the final premium cost. A company that offers few discounts may still have lower overall prices.
What's the deal with car insurance when leasing?
When you lease, your vehicle belongs to the lease company. They want to make sure that their investment is covered should you have an accident that damages or destroys the vehicle, or if the vehicle is stolen. They may also want you to have sufficient liability coverage in case you are at fault in causing an accident. This not only protects you from financial disaster, but it also protects the lease company if they should be held partly responsible.
Of course, having sufficient car insurance coverage is smart whether you are leasing or not. Many people attempt to get by with minimum coverage required by law but it's a big risk since there's so much to lose. Accidents do happen. Large lawsuits are common. If you have insufficient car insurance coverage, you can be personally sued for additional money after your insurance has been paid. Many smart consumers add additional coverage with "umbrella" policies.
Of course, having sufficient car insurance coverage is smart whether you are leasing or not. Many people attempt to get by with minimum coverage required by law but it's a big risk since there's so much to lose. Accidents do happen. Large lawsuits are common. If you have insufficient car insurance coverage, you can be personally sued for additional money after your insurance has been paid. Many smart consumers add additional coverage with "umbrella" policies.
Car Lease Insurance
Some things you need to know about insurance before you lease
Most auto lease companies require you to maintain insurance coverage as follows:
Liability coverage: $100,000 per person / $300,000 per occurrence
Property liability coverage: $50,000
Comprehensive and collision for actual value with no more than $500 deductible.
In Canada, $1,000,000 in liability coverage is required for car insurance when leasing.
This may be more coverage than you would normally buy, which could mean an additional leasing expense — unless you know how to get better rates. Most people are already paying too much for insurance, before they lease.
Most auto lease companies require you to maintain insurance coverage as follows:
Liability coverage: $100,000 per person / $300,000 per occurrence
Property liability coverage: $50,000
Comprehensive and collision for actual value with no more than $500 deductible.
In Canada, $1,000,000 in liability coverage is required for car insurance when leasing.
This may be more coverage than you would normally buy, which could mean an additional leasing expense — unless you know how to get better rates. Most people are already paying too much for insurance, before they lease.
Two Types of Leases
Two types of car leases - open and closed
Automobile leases come in two varieties: closed-end and open-end. There's a big difference between the two types and you should understand that difference before you sign your lease contract. Federal regulations require that the type of lease be clearly indicated on all lease contracts.
Dealer salespeople typcially don't have this level of understanding of leases. So, don't ask. You'll only get the
answer he/she thinks you want to hear. Read the contract form for yourself.
Closed-end leases, sometimes called "walk-away" leases, are most common for consumer leases today. This type of lease allows you to simply return your vehicle at the end of the lease and have no other responsibilities other than possible payment of excessive damage or mileage charges.
Closed-end leases are based on the concept that the number of miles you drive annually is fairly predictable (12,000 miles per year is typical), that the vehicle will not be driven in rough or abusive conditions, and that its value at the end of the lease (the residual) is therefore somewhat predictable.
At the time you lease, the leasing company estimates the vehicle's lease-end residual value based on the expected number of driven miles. If the vehicle is actually worth less than the residual when you turn it in, the leasing company takes the financial hit, not you.
On the other hand, if the vehicle is worth more than the residual, and you have the option to purchase, you may want to buy the vehicle, then keep driving it or sell it and make a profit. This happens frequently.
Open-end leases are used primarily for commercial business leasing. In this case the lessee, not the leasing company, takes all the financial risks, which is not so much a problem for a business, since the cost can be expensed. Annual mileage on a business lease is usually much greater and less predictable than the average 12,000 miles-per-year of a non-business lease.
In open-end leases, you are responsible for paying any difference between the estimated lease-end value (the residual) and the actual market value at the end of the lease. This could amount to a significant sum of money if the market value of your vehicle has dropped or you drive many more miles than expected. Often, the residual for an open-end lease is set much lower than for a non-business closed-end lease, which reduces the lease-end risk, but can significantly increase the monthly payment amount.
Business Leasing
This web site is primarily about consumer leasing, not commercial or business leasing. Although there are similarities, there are also many differences. Evaluation of a business lease is best handled by a tax accountant or business finance advisor who is familiar with details of the business and it's financial objectives.
If you are interested in a business lease, see the fleet manager at your local dealer to make arrangements and to determine which type of lease will be best for your business — after consulting with your tax advisor.
Consumer Leasing
As a consumer, make sure you only agree to a closed-end consumer lease. Even though most non-business leases you'll encounter will be of this type, read your contract closely just to be certain. Most consumer lease contract forms will clearly state, at the top of the form, that it is for a closed-end lease.
Automobile leases come in two varieties: closed-end and open-end. There's a big difference between the two types and you should understand that difference before you sign your lease contract. Federal regulations require that the type of lease be clearly indicated on all lease contracts.
Dealer salespeople typcially don't have this level of understanding of leases. So, don't ask. You'll only get the
answer he/she thinks you want to hear. Read the contract form for yourself.
Closed-end leases, sometimes called "walk-away" leases, are most common for consumer leases today. This type of lease allows you to simply return your vehicle at the end of the lease and have no other responsibilities other than possible payment of excessive damage or mileage charges.
Closed-end leases are based on the concept that the number of miles you drive annually is fairly predictable (12,000 miles per year is typical), that the vehicle will not be driven in rough or abusive conditions, and that its value at the end of the lease (the residual) is therefore somewhat predictable.
At the time you lease, the leasing company estimates the vehicle's lease-end residual value based on the expected number of driven miles. If the vehicle is actually worth less than the residual when you turn it in, the leasing company takes the financial hit, not you.
On the other hand, if the vehicle is worth more than the residual, and you have the option to purchase, you may want to buy the vehicle, then keep driving it or sell it and make a profit. This happens frequently.
Open-end leases are used primarily for commercial business leasing. In this case the lessee, not the leasing company, takes all the financial risks, which is not so much a problem for a business, since the cost can be expensed. Annual mileage on a business lease is usually much greater and less predictable than the average 12,000 miles-per-year of a non-business lease.
In open-end leases, you are responsible for paying any difference between the estimated lease-end value (the residual) and the actual market value at the end of the lease. This could amount to a significant sum of money if the market value of your vehicle has dropped or you drive many more miles than expected. Often, the residual for an open-end lease is set much lower than for a non-business closed-end lease, which reduces the lease-end risk, but can significantly increase the monthly payment amount.
Business Leasing
This web site is primarily about consumer leasing, not commercial or business leasing. Although there are similarities, there are also many differences. Evaluation of a business lease is best handled by a tax accountant or business finance advisor who is familiar with details of the business and it's financial objectives.
If you are interested in a business lease, see the fleet manager at your local dealer to make arrangements and to determine which type of lease will be best for your business — after consulting with your tax advisor.
Consumer Leasing
As a consumer, make sure you only agree to a closed-end consumer lease. Even though most non-business leases you'll encounter will be of this type, read your contract closely just to be certain. Most consumer lease contract forms will clearly state, at the top of the form, that it is for a closed-end lease.
Advantages of Car Leasing
Car leasing can offer advantages and be an attractive alternative to buying, although it's not for everyone, as we'll discuss later. You must decide about the importance and priority of these benefits to you.
So, what are the potential advantages of leasing?
Lower Monthly Payments
Because you only pay for the portion of the car or truck that you actually use, your monthly payments are 30%-60% lower than for a purchase loan for the same car and same term.
More Car, More Often
Since your monthly payments are lower, you get more car for the same money and drive a new vehicle every two to four years, depending on the term length of your leases.
Fewer Maintenance Headaches
Most people like to lease for a term that coincides with the length of the manufacturer's warranty coverage so that if something goes wrong with the car, the repairs are always covered.
Lower Upfront Cash Outlay
Most leases require little or no down payment, which makes getting into a new car more affordable and frees up your cash for other things. However, you can choose to make a down payment, or trade in your old vehicle, to lower your monthly payment amount.
Lower Tax Bite
In most states of the U.S. and in Canada, you don't pay sales tax on the entire value of a leased vehicle as you would if you purchased. You're only taxed on the portion of the value that you use during your lease. The tax is spread out and paid along with your monthly lease payment instead of being paid all at once.
No Used-Car Hassles
With leasing, the headaches of selling a used car are eliminated. When your lease ends, you simply turn it back to the leasing company and walk away, unless you decide to buy it or trade it.
Gap Coverage Included
Most leases automatically include free "gap" protection in case your vehicle is totaled in an accident or stolen, and you still owe more than the vehicle is worth. Loans do not generally come with gap protection.
So, what are the potential advantages of leasing?
Lower Monthly Payments
Because you only pay for the portion of the car or truck that you actually use, your monthly payments are 30%-60% lower than for a purchase loan for the same car and same term.
More Car, More Often
Since your monthly payments are lower, you get more car for the same money and drive a new vehicle every two to four years, depending on the term length of your leases.
Fewer Maintenance Headaches
Most people like to lease for a term that coincides with the length of the manufacturer's warranty coverage so that if something goes wrong with the car, the repairs are always covered.
Lower Upfront Cash Outlay
Most leases require little or no down payment, which makes getting into a new car more affordable and frees up your cash for other things. However, you can choose to make a down payment, or trade in your old vehicle, to lower your monthly payment amount.
Lower Tax Bite
In most states of the U.S. and in Canada, you don't pay sales tax on the entire value of a leased vehicle as you would if you purchased. You're only taxed on the portion of the value that you use during your lease. The tax is spread out and paid along with your monthly lease payment instead of being paid all at once.
No Used-Car Hassles
With leasing, the headaches of selling a used car are eliminated. When your lease ends, you simply turn it back to the leasing company and walk away, unless you decide to buy it or trade it.
Gap Coverage Included
Most leases automatically include free "gap" protection in case your vehicle is totaled in an accident or stolen, and you still owe more than the vehicle is worth. Loans do not generally come with gap protection.
Saturday, January 17, 2009
Luxury Car Lease
Why lease a luxury car? What's different about luxury car leasing?
Luxury car leasing is different
How is it different? It's not that luxury cars are more expensive, or that the leasing process is different, but because the consumer doing the leasing is typically different.
Luxury car consumer
High-end automotive consumers have different priorities, different values, bigger bank accounts, and prefer to transact business differently than people acquiring less expensive vehicles.
They have a tendency to lease rather than buy. "High-line" vehicles are leased at the rate of 50% - 70%, depending on brand, compared to only 20% - 30% for non-luxury models.
Luxury auto consumers tend to value time, efficiency, quality of service, and business relationship when dealing with financing. Spending a great deal of time shopping and haggling for bargain deals is less important that establishing a relationship with a company they can trust and depend on to genuinely look out for their interests.
High-end customrs tend to be more loyal to a brand and a dealership over a long period of time.
Luxury cars make good leases
Luxury automobiles make the best lease values, dollar for dollar, due to high lease-end residual values relative to MSRP. In fact, luxury vehicles, as a category, are leased significantly more often than vehicles in any other category.
The best lease deals are for those vehicles, such as Lexus, Mercedes, Porsche, Land Rover, and BMW, with the highest future resale values, or residual values, relative to their original cost. A high residual value creates a low monthly lease payment.
In fact, a better lease deal can often be obtained by leasing a high-residual luxury car than by leasing a car with a lower residual value, even though the price of the luxury car is the same or greater. This is the reason smart automotive consumers tend to lease a luxury vehicle.
Being smart about money is a typical characteristic of high-end car leasers. High-line leasing consumers are not trying to save a few bucks — they have the money to buy the car they want. They simply know that it's not smart to put money into depreciating assets (automobiles) when that money could be used for more productive purposes.
Independent lease companies and luxury cars
More than 20% of luxury automobile consumers finance their loans and leases outside of car dealerships, according to a recent report by JD Power and Associates.
Independent lease companies such as Primelease can, in most cases, beat luxury car dealers on prices and lease rates because high-end manufacturers don't subsidize deals and offer incentives nearly to the extent that low-mid-range vehicle manufacturers do. Furthermore, luxury car dealers don't like to be viewed as "discounters."
Finance companies who lease luxury cars typically require their clients to have "prime" credit ratings. This means a high FICO® credit score of 700 or greater. Lower credit scores can mean higher lease rates, large down payments, and security deposits — and possibly higher insurance rates.
For high-line vehicle leases an independent lease company can be more flexible and responsive to customers' needs than dealers, who are restrained by car manufacturers' rules. For example, when new models come out and are limited in dealers' inventories, independent lease companies can search the entire country for the exact car you want.
Benefits of leasing luxury cars
People who lease high-line cars like the convenience of a quick easy business transaction, like having a new style car every two or three years, like avoiding maintenace and repair headaches, and like avoiding disposing of used cars. They also like the option of minimizing cash outlay.
In summary, luxury car leasing is different, the people who lease luxury cars are different, and the companies who lease luxury cars are different.
Luxury car leasing is different
How is it different? It's not that luxury cars are more expensive, or that the leasing process is different, but because the consumer doing the leasing is typically different.
Luxury car consumer
High-end automotive consumers have different priorities, different values, bigger bank accounts, and prefer to transact business differently than people acquiring less expensive vehicles.
They have a tendency to lease rather than buy. "High-line" vehicles are leased at the rate of 50% - 70%, depending on brand, compared to only 20% - 30% for non-luxury models.
Luxury auto consumers tend to value time, efficiency, quality of service, and business relationship when dealing with financing. Spending a great deal of time shopping and haggling for bargain deals is less important that establishing a relationship with a company they can trust and depend on to genuinely look out for their interests.
High-end customrs tend to be more loyal to a brand and a dealership over a long period of time.
Luxury cars make good leases
Luxury automobiles make the best lease values, dollar for dollar, due to high lease-end residual values relative to MSRP. In fact, luxury vehicles, as a category, are leased significantly more often than vehicles in any other category.
The best lease deals are for those vehicles, such as Lexus, Mercedes, Porsche, Land Rover, and BMW, with the highest future resale values, or residual values, relative to their original cost. A high residual value creates a low monthly lease payment.
In fact, a better lease deal can often be obtained by leasing a high-residual luxury car than by leasing a car with a lower residual value, even though the price of the luxury car is the same or greater. This is the reason smart automotive consumers tend to lease a luxury vehicle.
Being smart about money is a typical characteristic of high-end car leasers. High-line leasing consumers are not trying to save a few bucks — they have the money to buy the car they want. They simply know that it's not smart to put money into depreciating assets (automobiles) when that money could be used for more productive purposes.
Independent lease companies and luxury cars
More than 20% of luxury automobile consumers finance their loans and leases outside of car dealerships, according to a recent report by JD Power and Associates.
Independent lease companies such as Primelease can, in most cases, beat luxury car dealers on prices and lease rates because high-end manufacturers don't subsidize deals and offer incentives nearly to the extent that low-mid-range vehicle manufacturers do. Furthermore, luxury car dealers don't like to be viewed as "discounters."
Finance companies who lease luxury cars typically require their clients to have "prime" credit ratings. This means a high FICO® credit score of 700 or greater. Lower credit scores can mean higher lease rates, large down payments, and security deposits — and possibly higher insurance rates.
For high-line vehicle leases an independent lease company can be more flexible and responsive to customers' needs than dealers, who are restrained by car manufacturers' rules. For example, when new models come out and are limited in dealers' inventories, independent lease companies can search the entire country for the exact car you want.
Benefits of leasing luxury cars
People who lease high-line cars like the convenience of a quick easy business transaction, like having a new style car every two or three years, like avoiding maintenace and repair headaches, and like avoiding disposing of used cars. They also like the option of minimizing cash outlay.
In summary, luxury car leasing is different, the people who lease luxury cars are different, and the companies who lease luxury cars are different.
Car Leasing and Car Renting - What's the Difference?
Many automotive consumers assume that car renting and car leasing are the same thing, or are very similar.
Not true.
This misconception may come about from the fact that apartment renting – which is very familiar to most people – and apartment leasing are essentially the same thing.
It is therefore natural for someone not familiar with car leasing to assume that it is much like apartment renting or leasing.
It is not.
What is car renting?
Car rental companies exist to fulfill the short-term automobile use needs of traveling business people, vacationers, or those who might need a particular type of vehicle for temporary use.
Rental cars are owned by a rental company and are made available to customers for relatively short-term use. The company maintains and services its vehicles and carries basic insurance. Customers agree to not damage the vehicle, to buy gas, to purchase additional insurance if personal auto insurance is not applicable, and to return the vehicle within a specified time. All maintenance is handled by the rental company.
Rent rates are determined by the car rental company, based on a daily or weekly fee, and includes either unlimited mileage or an additional mileage rate. The method by which rates are determined is not revealed to customers and can vary widely, even within the same rental company, based on various discount schemes.
Rental companies make money by renting the same car over and over again.
Car renting is not a form of financing, as is leasing.
Car renting is much the same as apartment renting or leasing.
What is leasing?
By contrast, leasing is actually a method of vehicle financing that is very similar to loan financing. A lease company — or manufacturer's finance company – only gets involved after a customer decides he wants lease financing. The lease company buys the car from the dealer at the customer-negotiated price and loans it back to the customer.
The "loan" in this case is not money, but a vehicle. Since the lease company has invested money in the vehicle, they expect to be paid interest on that money. Since all cars depreciate in value, they also want to be compensated for the reduced value of the vehicle as the customer adds miles to it and as the vehicle becomes older. It will not be worth as much when it's returned to them as when it was new.
At lease-end, vehicles are returned to the lease company as the final payment of the "loan." Lease payments are easy to calculate using a well-defined formula used throughout the leasing industry, unlike car renting for which there is no way for customers to calculate rental rates.
In short, lease payments are determined by the negotiated selling price of the vehicle, anticipated depreciated value at lease-end (residual value), term (length of lease), and the money factor (financing rate, similar to interest rate). See How Car Lease Payments are Calculated.
A leased vehicle is usually only leased once, when it's new, not over and over again like a rental car.
How are car renting and car leasing different
Leasing is a form of financing; renting is not. Lease terms begin at 24 months; renting can be for as little as a day or less.
You may be able to swap cars in the middle of a rental; not so with leasing. Since leasing is a form of financing, customer credit scores, income, and debt are important; not so with renting.
Leasing appears on your credit report just like a loan; renting does not. Defaulting on a lease damages your credit score; defaulting on a rental does not.
With renting, you choose your vehicle from rental companies' available makes and models. With leasing, you can lease any new vehicle make and model you want.
It's easy to end a rental early by simply returning the car, while ending a lease early can be very costly, because it's a long-term contract.
For the same length of time, renting is much more expensive than leasing.
Why car leasing is not like apartment leasing
Cars depreciate in value and require money to purchase. Leasing pays for the depreciation and interest on the money provided by a lease company to purchase the car.
Apartments are real estate and generally don't rapidly depreciate in value, as do automobiles. In fact, many increase in value unless they are not maintained well. Therefore apartment rental fees do not pay for specifically depreciation or anything else specific. There is no interest or finance charges. An apartment owner needs to make enough money to pay the mortgage, taxes, utilities, upkeep, and make a profit. He can rent his apartment over and over again, long after it's new.
There is no formula to calculate apartment rental rates, as there is with car leasing.
Nothing to show for your money
It's true with apartment renting that you have absolutely nothing to show for the money you've paid, and rental rates can easily be higher than mortgage payments for a home.
It's also true with car leasing that you have nothing to show for your money. However....you've paid 30%-60% less than loan payments for the same car, and you have specifically paid for your car's depreciation, and only the depreciation, not the entire vehicle cost.
The money you've lost to depreciation is exactly the same money that is lost by someone who has purchased the same car with a loan. His car depreciates exactly the same amount as your leased car, but he pays for the entire vehicle. He therefore has nothing to show for that part of the money that is lost to depreciation if he sells or trades. That money is gone, for both a buyer and a leaser.
Not true.
This misconception may come about from the fact that apartment renting – which is very familiar to most people – and apartment leasing are essentially the same thing.
It is therefore natural for someone not familiar with car leasing to assume that it is much like apartment renting or leasing.
It is not.
What is car renting?
Car rental companies exist to fulfill the short-term automobile use needs of traveling business people, vacationers, or those who might need a particular type of vehicle for temporary use.
Rental cars are owned by a rental company and are made available to customers for relatively short-term use. The company maintains and services its vehicles and carries basic insurance. Customers agree to not damage the vehicle, to buy gas, to purchase additional insurance if personal auto insurance is not applicable, and to return the vehicle within a specified time. All maintenance is handled by the rental company.
Rent rates are determined by the car rental company, based on a daily or weekly fee, and includes either unlimited mileage or an additional mileage rate. The method by which rates are determined is not revealed to customers and can vary widely, even within the same rental company, based on various discount schemes.
Rental companies make money by renting the same car over and over again.
Car renting is not a form of financing, as is leasing.
Car renting is much the same as apartment renting or leasing.
What is leasing?
By contrast, leasing is actually a method of vehicle financing that is very similar to loan financing. A lease company — or manufacturer's finance company – only gets involved after a customer decides he wants lease financing. The lease company buys the car from the dealer at the customer-negotiated price and loans it back to the customer.
The "loan" in this case is not money, but a vehicle. Since the lease company has invested money in the vehicle, they expect to be paid interest on that money. Since all cars depreciate in value, they also want to be compensated for the reduced value of the vehicle as the customer adds miles to it and as the vehicle becomes older. It will not be worth as much when it's returned to them as when it was new.
At lease-end, vehicles are returned to the lease company as the final payment of the "loan." Lease payments are easy to calculate using a well-defined formula used throughout the leasing industry, unlike car renting for which there is no way for customers to calculate rental rates.
In short, lease payments are determined by the negotiated selling price of the vehicle, anticipated depreciated value at lease-end (residual value), term (length of lease), and the money factor (financing rate, similar to interest rate). See How Car Lease Payments are Calculated.
A leased vehicle is usually only leased once, when it's new, not over and over again like a rental car.
How are car renting and car leasing different
Leasing is a form of financing; renting is not. Lease terms begin at 24 months; renting can be for as little as a day or less.
You may be able to swap cars in the middle of a rental; not so with leasing. Since leasing is a form of financing, customer credit scores, income, and debt are important; not so with renting.
Leasing appears on your credit report just like a loan; renting does not. Defaulting on a lease damages your credit score; defaulting on a rental does not.
With renting, you choose your vehicle from rental companies' available makes and models. With leasing, you can lease any new vehicle make and model you want.
It's easy to end a rental early by simply returning the car, while ending a lease early can be very costly, because it's a long-term contract.
For the same length of time, renting is much more expensive than leasing.
Why car leasing is not like apartment leasing
Cars depreciate in value and require money to purchase. Leasing pays for the depreciation and interest on the money provided by a lease company to purchase the car.
Apartments are real estate and generally don't rapidly depreciate in value, as do automobiles. In fact, many increase in value unless they are not maintained well. Therefore apartment rental fees do not pay for specifically depreciation or anything else specific. There is no interest or finance charges. An apartment owner needs to make enough money to pay the mortgage, taxes, utilities, upkeep, and make a profit. He can rent his apartment over and over again, long after it's new.
There is no formula to calculate apartment rental rates, as there is with car leasing.
Nothing to show for your money
It's true with apartment renting that you have absolutely nothing to show for the money you've paid, and rental rates can easily be higher than mortgage payments for a home.
It's also true with car leasing that you have nothing to show for your money. However....you've paid 30%-60% less than loan payments for the same car, and you have specifically paid for your car's depreciation, and only the depreciation, not the entire vehicle cost.
The money you've lost to depreciation is exactly the same money that is lost by someone who has purchased the same car with a loan. His car depreciates exactly the same amount as your leased car, but he pays for the entire vehicle. He therefore has nothing to show for that part of the money that is lost to depreciation if he sells or trades. That money is gone, for both a buyer and a leaser.
Truck Leasing - Lease Your Truck
Some things you need to know about truck leasing
Personal Use
To lease a truck for personal use is no different than leasing a car or SUV. A lease offers lower monthly payments than buying with a loan, and may not require a down payment. There are also savings on sales tax in most states. Therefore, leasing may cost you less to get into a new truck, and can save you on monthly cost as well.
However, before making a decision about whether to lease or buy, understand that leasing is best for people who drive no more than about 15,000 miles per year, like to have a new truck every 3-4 years, take good care of their vehicles, don't care about building ownership equity, and have a stable lifestyle such that they won't need to end the lease early.
Ending a lease early can be very expensive. It's more than simply paying termination fees. It means paying the balance of the lease, considering the wholesale auction value of the truck. In most cases, ending a lease early is very impractical. Therefore, if you think you might not be able to complete a lease, then don't lease.
If you plan on using your truck for heavy duty or rough utility purposes, such that the body and bed might be damaged or scratched, you might not want to lease. The reason is you may have to pay for those damages at lease-end when you return your truck to the lease company. Any damages beyond "normal" wear and tear can result in charges to you. Of course, you could get the repairs done yourself prior to returning your leased truck. Or, if you decide to purchase your vehicle at lease-end, the damages won't matter.
Also be aware that many trucks do not have high lease-end residual values as would a luxury car. This makes it more expensive to lease most trucks than a comparable car lease. There are exceptions of course. The Ford F-150 is an example of a truck that maintains good residual value and makes a good lease vehicle. Our Lease Kit contains a full list of all car and truck residual values and lease ratings.
You can expect lease payments on your truck to be approximately 30%-50% less than comparable loan payments for the same vehicle, same terms. If you watch for manufacturer-sponsored lease deals, you can get even better terms.
Since price is the most important factor in a lease deal, look for rebates and dealer discounts. We recommend getting dealer price quotes, which will include any available rebates and discounts, from InvoiceDealers, Edmunds, and Yahoo! Autos. It is best to get multiple quotes so that you have plenty of prices to compare and choose from.
Business and Commercial Use
Truck leasing for commercial or business use is different than personal vehicle leasing, although the purposes are about the same.
First, the type of lease used for commercial truck leasing is different. Most business vehicle leases are "open-end" leases, while personal leases are "closed-end."
Open-end leases have flexible lease-end residuals and are less structured to allow a company to use the vehicle as they need to, and pay for that use at lease-end. Monthly payments are higher than for personal leases and lease-end cost risk is higher. However, these costs are all tax deductible.
Commercial truck leasing offers a number of advantages over outright purchases or financed ownership:
No up-front investment and lower monthly expenses. Operating funds and capital are preserved for more useful purposes.
Predictable expenses when the lease plan includes fixed monthly payments, maintenance, and service
Most commercial truck leases are operating leases and considered off-balance-sheet financing. Leased trucks do not show up on the company balance sheet as an asset and will not affect financial ratios, making it easier to keep credit options open.
Truck lease payments are tax deductible and reduce AMT (Alternative Minimum Tax ) liability.
Truck leasing companies exist all over the U.S. and Canada. Companies such as Penske, Ryder, PacLease, NationaLease and many others are examples. Search online or look in your local telephone yellow pages for truck lease companies in your area.
Personal Use
To lease a truck for personal use is no different than leasing a car or SUV. A lease offers lower monthly payments than buying with a loan, and may not require a down payment. There are also savings on sales tax in most states. Therefore, leasing may cost you less to get into a new truck, and can save you on monthly cost as well.
However, before making a decision about whether to lease or buy, understand that leasing is best for people who drive no more than about 15,000 miles per year, like to have a new truck every 3-4 years, take good care of their vehicles, don't care about building ownership equity, and have a stable lifestyle such that they won't need to end the lease early.
Ending a lease early can be very expensive. It's more than simply paying termination fees. It means paying the balance of the lease, considering the wholesale auction value of the truck. In most cases, ending a lease early is very impractical. Therefore, if you think you might not be able to complete a lease, then don't lease.
If you plan on using your truck for heavy duty or rough utility purposes, such that the body and bed might be damaged or scratched, you might not want to lease. The reason is you may have to pay for those damages at lease-end when you return your truck to the lease company. Any damages beyond "normal" wear and tear can result in charges to you. Of course, you could get the repairs done yourself prior to returning your leased truck. Or, if you decide to purchase your vehicle at lease-end, the damages won't matter.
Also be aware that many trucks do not have high lease-end residual values as would a luxury car. This makes it more expensive to lease most trucks than a comparable car lease. There are exceptions of course. The Ford F-150 is an example of a truck that maintains good residual value and makes a good lease vehicle. Our Lease Kit contains a full list of all car and truck residual values and lease ratings.
You can expect lease payments on your truck to be approximately 30%-50% less than comparable loan payments for the same vehicle, same terms. If you watch for manufacturer-sponsored lease deals, you can get even better terms.
Since price is the most important factor in a lease deal, look for rebates and dealer discounts. We recommend getting dealer price quotes, which will include any available rebates and discounts, from InvoiceDealers, Edmunds, and Yahoo! Autos. It is best to get multiple quotes so that you have plenty of prices to compare and choose from.
Business and Commercial Use
Truck leasing for commercial or business use is different than personal vehicle leasing, although the purposes are about the same.
First, the type of lease used for commercial truck leasing is different. Most business vehicle leases are "open-end" leases, while personal leases are "closed-end."
Open-end leases have flexible lease-end residuals and are less structured to allow a company to use the vehicle as they need to, and pay for that use at lease-end. Monthly payments are higher than for personal leases and lease-end cost risk is higher. However, these costs are all tax deductible.
Commercial truck leasing offers a number of advantages over outright purchases or financed ownership:
No up-front investment and lower monthly expenses. Operating funds and capital are preserved for more useful purposes.
Predictable expenses when the lease plan includes fixed monthly payments, maintenance, and service
Most commercial truck leases are operating leases and considered off-balance-sheet financing. Leased trucks do not show up on the company balance sheet as an asset and will not affect financial ratios, making it easier to keep credit options open.
Truck lease payments are tax deductible and reduce AMT (Alternative Minimum Tax ) liability.
Truck leasing companies exist all over the U.S. and Canada. Companies such as Penske, Ryder, PacLease, NationaLease and many others are examples. Search online or look in your local telephone yellow pages for truck lease companies in your area.
How to choose the best car insurance company
There are a number of ways you can go about choosing a good insurer.
Research consumer opinions - Consumer Reports magazine frequently surveys readers on auto insurance companies. The last large survey results were reported in the March 2006 issue. The survey measures overall customer satisfaction and claim problems. Of the 27 companies reported, satisfaction score difference between the best company and the worst company was only 16 points out of 100. This is hardly enough of a difference to make for a solid decision choice. Find the report on Consumer Reports' web site (a subscription fee is required) or look for the magazine at your local library.
Browse online forums - Consumer forums and automotive discussion boards often have sections in which car insurance is discussed. These sources change frequently and the quality of the information can vary widely, so don't use this as your only research source. Remember that people who have experienced problems are more likely to post comments than those who don't have problems.
Ask repair shop managers - Nobody knows about car insurance companies any better than the body shops that have to deal with them. Ask the owners or administrative managers of accident repair shops about which insurers are the best to deal with – which are the least trouble when settling claims and paying for proper repairs. We've seen body shops in which auto insurance company ratings were actually posted on the wall in the waiting room. Don't forget your car dealer's body shop, if he has one.
Check state government data - Most states have departments that regulate insurance companies and and handle complaints against them. This may be the Attorney General's office of consumer affairs or it may be the office of the Insurance Commissioner. You can often find which auto insurance companies have the best and worse complaint rates on your state's website. Actually, it may be helpful to look at other state's web sites as well. Just be aware that most state web sites are not well designed or out of date, and it may be somewhat difficult to find the information you need.
Use broker web sites - Insurance broker web sites (see recommended sites below) are one of the best and easiest ways to compare auto insurance companies online. Brokers work with multiple insurance companies so that they can offer customers a variety of choices to meet their needs. It's easier than shopping individual companies on your own. Their services are free. Some of these broker sites contain comparative information and ratings.
Get quotes from as many companies as you can (quotes are free) so that you have plenty of data to compare. The more information you provide when asking for a quote, the more accurate your quote price will be. Many people overpay for their insurance simply because they do not shop around enough.
Research consumer opinions - Consumer Reports magazine frequently surveys readers on auto insurance companies. The last large survey results were reported in the March 2006 issue. The survey measures overall customer satisfaction and claim problems. Of the 27 companies reported, satisfaction score difference between the best company and the worst company was only 16 points out of 100. This is hardly enough of a difference to make for a solid decision choice. Find the report on Consumer Reports' web site (a subscription fee is required) or look for the magazine at your local library.
Browse online forums - Consumer forums and automotive discussion boards often have sections in which car insurance is discussed. These sources change frequently and the quality of the information can vary widely, so don't use this as your only research source. Remember that people who have experienced problems are more likely to post comments than those who don't have problems.
Ask repair shop managers - Nobody knows about car insurance companies any better than the body shops that have to deal with them. Ask the owners or administrative managers of accident repair shops about which insurers are the best to deal with – which are the least trouble when settling claims and paying for proper repairs. We've seen body shops in which auto insurance company ratings were actually posted on the wall in the waiting room. Don't forget your car dealer's body shop, if he has one.
Check state government data - Most states have departments that regulate insurance companies and and handle complaints against them. This may be the Attorney General's office of consumer affairs or it may be the office of the Insurance Commissioner. You can often find which auto insurance companies have the best and worse complaint rates on your state's website. Actually, it may be helpful to look at other state's web sites as well. Just be aware that most state web sites are not well designed or out of date, and it may be somewhat difficult to find the information you need.
Use broker web sites - Insurance broker web sites (see recommended sites below) are one of the best and easiest ways to compare auto insurance companies online. Brokers work with multiple insurance companies so that they can offer customers a variety of choices to meet their needs. It's easier than shopping individual companies on your own. Their services are free. Some of these broker sites contain comparative information and ratings.
Get quotes from as many companies as you can (quotes are free) so that you have plenty of data to compare. The more information you provide when asking for a quote, the more accurate your quote price will be. Many people overpay for their insurance simply because they do not shop around enough.
Auto Insurance Companies - Which is Best?
Selecting the best auto insurance company – best rates and best customer service
People use different criteria for choosing an auto insurer. Some base their decision on the opinions of friends, some on marketing and advertising promotions, and others simply on the cost of premiums.
Typically, new auto insurance buyers tend to choose the lowest cost provider, assuming that most providers are essentially the same. As they become more experienced, and after having made a claim or two, they become more wise to other factors that determine a good car insurance company. Let's be clear, all insurance companies are not alike.
Eventually, most automotive insurance buyers place the most importance on how companies treat them after filing a claim. Low premiums become much less important if a company won't pay when they should, or immediately raise rates after an accident.
What's the problem?
Many thousands of auto insurance customers are happy with their insurers. A significant number of people have been with the same insurance company for 15 years or more. However, other customers don't find their companies very satisfactory. The most frequent complaints that customers have with car insurance providers are:
Refused claims
Slow adjustment process
Unsatisfactory payout on claims
Feel forced to use insurer's repair shop
Poor repair quality
High premiums
Company raised rates after accident
Lack of personal attention or compassion
Billing, policy, and other non-claim issues
Unfortunately, most of these problems don't surface until after a claim has been filed, when it's too late to find another company. That is why it is important to do your homework before selecting an insurance provider.
If you have been involved in an accident and are being sued or are not satisfied with your insurance company, you may need to get help from an accident attorney. See our article: How to Find an Auto Accident Lawyer.
People use different criteria for choosing an auto insurer. Some base their decision on the opinions of friends, some on marketing and advertising promotions, and others simply on the cost of premiums.
Typically, new auto insurance buyers tend to choose the lowest cost provider, assuming that most providers are essentially the same. As they become more experienced, and after having made a claim or two, they become more wise to other factors that determine a good car insurance company. Let's be clear, all insurance companies are not alike.
Eventually, most automotive insurance buyers place the most importance on how companies treat them after filing a claim. Low premiums become much less important if a company won't pay when they should, or immediately raise rates after an accident.
What's the problem?
Many thousands of auto insurance customers are happy with their insurers. A significant number of people have been with the same insurance company for 15 years or more. However, other customers don't find their companies very satisfactory. The most frequent complaints that customers have with car insurance providers are:
Refused claims
Slow adjustment process
Unsatisfactory payout on claims
Feel forced to use insurer's repair shop
Poor repair quality
High premiums
Company raised rates after accident
Lack of personal attention or compassion
Billing, policy, and other non-claim issues
Unfortunately, most of these problems don't surface until after a claim has been filed, when it's too late to find another company. That is why it is important to do your homework before selecting an insurance provider.
If you have been involved in an accident and are being sued or are not satisfied with your insurance company, you may need to get help from an accident attorney. See our article: How to Find an Auto Accident Lawyer.
Directly from insurance provider
Buying directly from an insurance company wasn't very practical until the Internet came along. Before, you always had to go through an exclusive agent of the company, or an independent agent. Now, direct-sales companies such as GEICO provide convenient web sites that allow customers to do research, get quotes, buy coverage, and even submit claims right from the web site. This is one of the most significant advances in the insurance industry in a long time. Since the company has no sales offices, it pays no sales commissions, which means low rates for consumers.
After you choose a company
Many of the differences between car insurance companies are hidden in the details of their policies. Before you sign, make sure you read and understand these details. If you have questions or concerns, get it resolved before you sign. Later may be too late.
Also understand that, regardless of where or how you buy your insurance, claims are always handled directly by the insurance company, not the agent or broker from whom you may have purchased.
After you choose a company
Many of the differences between car insurance companies are hidden in the details of their policies. Before you sign, make sure you read and understand these details. If you have questions or concerns, get it resolved before you sign. Later may be too late.
Also understand that, regardless of where or how you buy your insurance, claims are always handled directly by the insurance company, not the agent or broker from whom you may have purchased.
From an independent agent
This type of agent is an independent business person or company, often called a broker or agency, that represents a number of different insurance companies. This is most common way that auto insurance, and other types of insurance, are sold in the United States. Many insurance providers only sell through independent agencies or insurance brokers, and don't have exclusive agents working for them. The benefit of using an independent agency or broker is that they can do your shopping for you and find you the best insurance that meets your needs. There are thousands of local insurance brokers around the country. Check your telephone yellow pages for listings.
From an insurance company agent
Some national or regional auto insurance companies employ agents who are commissioned sales and support people, and who work directly for the insurance company from small offices located around the country. Allstate, State Farm, and Farmers are examples of companies who work this way. Some people feel that there are benefits to being able to talk to a familiar voice regarding policy questions, billing concerns, renewals, and claim advice. Good agents will even call customers about new discounts or program options that offer cost savings. Just be aware that agents don't administer claims.
Buying Auto Insurance - Agent or Direct?
Who sells auto insurance?
You can buy car insurance in different ways, from a variety of sources, depending on the insurance company. Does it make a difference how or where you buy? It might. Let's take a look.
There are essentially four ways to purchase auto insurance. They are:
From an agent (employed representative) of an insurance company
From an independent agent
From an online broker
Directly from an insurance company
Some insurance companies use only one of these methods of selling to customers, others may use a combination of methods. Let's look at the advantages and disadvantages of each.
You can buy car insurance in different ways, from a variety of sources, depending on the insurance company. Does it make a difference how or where you buy? It might. Let's take a look.
There are essentially four ways to purchase auto insurance. They are:
From an agent (employed representative) of an insurance company
From an independent agent
From an online broker
Directly from an insurance company
Some insurance companies use only one of these methods of selling to customers, others may use a combination of methods. Let's look at the advantages and disadvantages of each.
Saturday, January 10, 2009
Tips on Finding Facts of Auto Insurance Companies
Are you thinking of buying a car? You need to spend some time to gather on some important fact about the insurance companies. Whether you intend to buy the car insurance for yourself, your spouse or your teenage kid there are some things you need to know for this process. Insurance cost is increasing on a daily basis and people are just on the lookout for insurance they can afford. There are some auto insurance facts that play a key role you in the amount you need to shell out of your pockets.
The kind of car you will be driving is the primary factor in calculating the cost of insurance. If you are driving a sports car then you should be prepared to shell out some money. If you have a good driving history then you need not worry on the contrary if you are a bad driver and have been involved in accidents you will end up paying a decent amount of money as premiums to the insurance companies
Some ways by which you could reduce your insurance premium is by installing anti theft devices or security devices in your vehicles since this will reduce the risk of your car being stolen.
Another way is to buy insurance from companies which are purely internet based. For this just go online and just compare the quotes from these online companies. You will also save time. Just a word of caution cheaper is not always better.
You should know that all companies are different and these companies will offer you some schemes to jump aboard them. So take a look at the features these companies offer, their reputation and reliability.
So first decide whether you need a full coverage or just third party insurance. Next most insurance companies include options for damage liability, medical cover, insurance. Some of the insurance companies will include all of these as part of the package while other will charge you for it. Therefore a word of advice is to shop around and gather all the important facts before you buy insurance for yourself or your family. Only once you have done it should you go and buy a car.
The kind of car you will be driving is the primary factor in calculating the cost of insurance. If you are driving a sports car then you should be prepared to shell out some money. If you have a good driving history then you need not worry on the contrary if you are a bad driver and have been involved in accidents you will end up paying a decent amount of money as premiums to the insurance companies
Some ways by which you could reduce your insurance premium is by installing anti theft devices or security devices in your vehicles since this will reduce the risk of your car being stolen.
Another way is to buy insurance from companies which are purely internet based. For this just go online and just compare the quotes from these online companies. You will also save time. Just a word of caution cheaper is not always better.
You should know that all companies are different and these companies will offer you some schemes to jump aboard them. So take a look at the features these companies offer, their reputation and reliability.
So first decide whether you need a full coverage or just third party insurance. Next most insurance companies include options for damage liability, medical cover, insurance. Some of the insurance companies will include all of these as part of the package while other will charge you for it. Therefore a word of advice is to shop around and gather all the important facts before you buy insurance for yourself or your family. Only once you have done it should you go and buy a car.
How to Cut Your Car Insurance Premiums in Half
Fancy reducing your car insurance premiums by more than 50 percent? It can be done. A price comparison website has undertaken research into simple steps a family can take over the course of a year to reduce the premiums on a range of insurance products. Though the survey took into account payment protection, life, travel and home insurance products, by the far biggest savings could be achieved with car insurance.
The most crucial step is to shop around with an online car insurance comparison tool. According to the study, a 45-year-old male driver with a Ford Focus and five years' no-claims could pay as much as £1,458.63 through provider Marker Study Group. However, the same driver using a comparison website could pick up a policy for just £202.73 through Swiftcover. That's not just 50 percent off - it's more than a 70 percent reduction.
Admittedly the savings for you may not be this extensive. Car insurance by its very nature is variable and influenced by a number of factors including your personal circumstances and the car you drive. However, it's clear that if one driver can slash more than £1,000 off an annual premium just by switching providers it's well worth taking a look to see how much you could save by following a similar approach.
Indeed there are several other ways to save on car insurance too. For example, if you are a younger motorist you could add an older family member to your policy as a named driver, potentially saving more than £280 a year. Changing your policy excess from around £100 to £500 could cut your premiums by more than £50 and adding a partner to a policy could also reduce your payments by more than £20.
The most crucial step is to shop around with an online car insurance comparison tool. According to the study, a 45-year-old male driver with a Ford Focus and five years' no-claims could pay as much as £1,458.63 through provider Marker Study Group. However, the same driver using a comparison website could pick up a policy for just £202.73 through Swiftcover. That's not just 50 percent off - it's more than a 70 percent reduction.
Admittedly the savings for you may not be this extensive. Car insurance by its very nature is variable and influenced by a number of factors including your personal circumstances and the car you drive. However, it's clear that if one driver can slash more than £1,000 off an annual premium just by switching providers it's well worth taking a look to see how much you could save by following a similar approach.
Indeed there are several other ways to save on car insurance too. For example, if you are a younger motorist you could add an older family member to your policy as a named driver, potentially saving more than £280 a year. Changing your policy excess from around £100 to £500 could cut your premiums by more than £50 and adding a partner to a policy could also reduce your payments by more than £20.
Women, Get What You Deserve - Cheap Car Insurance
The statistics speak for themselves - women are safer on the road than men. So girls, make sure you're picking up a cheaper car insurance premium to reflect this.
Figures from the Home Office show that women are the safest on the road and more law abiding than their male counterparts. Indeed men are responsible for 94 per cent of convictions of death by dangerous driving and statistics from the Transport Department show that in 2005 there were 6,529 male casualties on the UK's roads compared to just 2,968 female.
With men also involved in 97 per cent of dangerous driving convictions it's clear that females have a superior record on the road. However, they must take a savvy approach to their car insurance shopping to ensure this is reflected through premium savings.
The first step is to compare car insurance quotes online. There are a host of female branded car insurance providers to choose from including Diva Insurance, Ladybird, Diamond and Sheila's Wheels. These specialists claim they can offer cheaper premiums to females because they brand the deals to them and also offer special incentives such as handbag cover and child seat cover.
However, while these incentives can be worth consideration, it is still possible to find cheaper deals from a more conventional provider - as such you should take a complete overview of the market with a comparison website.
While women have a superior driving record to men, they often fall victim to car crime so enhancing the security of a vehicle is a vital step towards making savings. Install a good car alarm, immobiliser and tracking device to earn discounts each month - the Thatcham range of alarms are particularly popular.
Figures from the Home Office show that women are the safest on the road and more law abiding than their male counterparts. Indeed men are responsible for 94 per cent of convictions of death by dangerous driving and statistics from the Transport Department show that in 2005 there were 6,529 male casualties on the UK's roads compared to just 2,968 female.
With men also involved in 97 per cent of dangerous driving convictions it's clear that females have a superior record on the road. However, they must take a savvy approach to their car insurance shopping to ensure this is reflected through premium savings.
The first step is to compare car insurance quotes online. There are a host of female branded car insurance providers to choose from including Diva Insurance, Ladybird, Diamond and Sheila's Wheels. These specialists claim they can offer cheaper premiums to females because they brand the deals to them and also offer special incentives such as handbag cover and child seat cover.
However, while these incentives can be worth consideration, it is still possible to find cheaper deals from a more conventional provider - as such you should take a complete overview of the market with a comparison website.
While women have a superior driving record to men, they often fall victim to car crime so enhancing the security of a vehicle is a vital step towards making savings. Install a good car alarm, immobiliser and tracking device to earn discounts each month - the Thatcham range of alarms are particularly popular.
Auto Insurance - Companies Or Broker, Which is Better?
A number of people engaged in obtaining auto insurance are really not aware whether they are dealing with an insurance company or an insurance broker. This has happened because a number of insurance brokers advertise themselves as the company in spite of restrictions imposed by the government. Consumers are led astray many times and even end up getting cheated.
You could easily identify the insurance brokerage firms by identifying the suffix in their names such as services, brokerage or agency. If your state does not allow such differentiation you can get in touch with the local authorities to get more information. You should never ever avoid this step while obtaining insurance.
Internet has brought in tremendous benefits to a number of companies including insurance companies. Take complete advantage of the internet and find as such details as possible about the company you are dealing with on the net. You can also avail of a number of benefits the companies offer for internet customers which your insurance broker may not offer.
The days have gone where you used to make repeated calls to your insurance broker and kept chasing him/her to obtain that insurance you badly needed for your car. Today with the internet you can just obtain a quote online in the comfort of your home after filling in the required information. You won't be surprised at the number of mails reaching your mailbox. They will come with a number of benefits and you will need to spend time thinking on which company to choose. Finally you must choose a company which is reputed and offers you a rate which you can comfortably pay. As a warning don't just go for the cheapest company.
You will realize that although the insurance brokers are a better alternative and you could obtain insurance after a couple of calls you will not get the benefits offered by the insurance companies. This does not in any way mean that there are no good insurance brokers out there. You will find a number of brokers who take care of the customer's interest and they provide cheap quotes which will delight their customers. The advice that they provide can be invaluable.
In the end it is finally up to you to make that choice whether to go for a broker or approach the company directly.
You could easily identify the insurance brokerage firms by identifying the suffix in their names such as services, brokerage or agency. If your state does not allow such differentiation you can get in touch with the local authorities to get more information. You should never ever avoid this step while obtaining insurance.
Internet has brought in tremendous benefits to a number of companies including insurance companies. Take complete advantage of the internet and find as such details as possible about the company you are dealing with on the net. You can also avail of a number of benefits the companies offer for internet customers which your insurance broker may not offer.
The days have gone where you used to make repeated calls to your insurance broker and kept chasing him/her to obtain that insurance you badly needed for your car. Today with the internet you can just obtain a quote online in the comfort of your home after filling in the required information. You won't be surprised at the number of mails reaching your mailbox. They will come with a number of benefits and you will need to spend time thinking on which company to choose. Finally you must choose a company which is reputed and offers you a rate which you can comfortably pay. As a warning don't just go for the cheapest company.
You will realize that although the insurance brokers are a better alternative and you could obtain insurance after a couple of calls you will not get the benefits offered by the insurance companies. This does not in any way mean that there are no good insurance brokers out there. You will find a number of brokers who take care of the customer's interest and they provide cheap quotes which will delight their customers. The advice that they provide can be invaluable.
In the end it is finally up to you to make that choice whether to go for a broker or approach the company directly.
Is leasing for you?
Leasing can offer advantages but it may not fit everybody's needs and lifestyle. Furthermore, leases can be somewhat more complicated than new-car purchase loans and require greater care and preparation in order to get a good fair deal — and avoid problems. Some people will discover that leasing offers them no benefits and that they should not lease. Others will realize that leasing is right for them and that they can benefit greatly.
This Lease Guide will be your roadmap to successful car leasing. We'll help you understand how leasing works, how to determine if it's right for you, how to calculate monthly payments, how to find good deals (and avoid bad deals), and how to handle things if you are already in a lease. Start now with the first topic: What is Leasing?
This Lease Guide will be your roadmap to successful car leasing. We'll help you understand how leasing works, how to determine if it's right for you, how to calculate monthly payments, how to find good deals (and avoid bad deals), and how to handle things if you are already in a lease. Start now with the first topic: What is Leasing?
Why is car leasing popular?
Two factors helped cause the shift to leasing. First, the cost of new cars has rapidly spiraled upwards over the last few decades, often putting prices out of reach of average buyers. Second, federal tax law changes in the late 1980's eliminated finance interest deductions on automobile loans, which further increased ownership cost. The net effect is that people have become increasingly eager to find ways to make personal vehicles more affordable.
Auto manufacturers and finance companies have come to the rescue in a big way with consumer car leasing programs. These programs are simply a modified version of business leasing that have been around for years. This helps explain much of the strange language and confusing concepts associated with consumer leasing today.
In a nutshell, leasing has become popular because it offers people a way to drive the vehicles they want — often better vehicles than they could buy — for less money and less hassle. Low monthly payments are the big attraction, although we'll soon find out why it's important to look at other factors before deciding to lease.
Auto manufacturers and finance companies have come to the rescue in a big way with consumer car leasing programs. These programs are simply a modified version of business leasing that have been around for years. This helps explain much of the strange language and confusing concepts associated with consumer leasing today.
In a nutshell, leasing has become popular because it offers people a way to drive the vehicles they want — often better vehicles than they could buy — for less money and less hassle. Low monthly payments are the big attraction, although we'll soon find out why it's important to look at other factors before deciding to lease.
Why leasing?
As recently as ten years ago, most automobile consumers had never heard of leasing, much less done it. Now, approximately 20%-25% of all new cars, trucks, SUVs, and vans are leased. Approximately 75% of luxury cars are leased.
After a temporary slowdown during the last few years because of aggressive zero-percent loan programs, leasing is once again growing in popularity. Just look at the volume of lease ads in your local newspaper and on TV to get a notion of how popular automobile leasing has become, especially during times of economic troubles when consumers are looking for more affordable ways to meet their transportation needs.
Leasing provides an alternative method of financing an automobile that offers several benefits that are attractive and beneficial to many automotive consumers. In particular, leasing offers significantly lower monthly payments than a loan.
After a temporary slowdown during the last few years because of aggressive zero-percent loan programs, leasing is once again growing in popularity. Just look at the volume of lease ads in your local newspaper and on TV to get a notion of how popular automobile leasing has become, especially during times of economic troubles when consumers are looking for more affordable ways to meet their transportation needs.
Leasing provides an alternative method of financing an automobile that offers several benefits that are attractive and beneficial to many automotive consumers. In particular, leasing offers significantly lower monthly payments than a loan.
Understand how car leasing works
As with any business transaction, the key to successful and intelligent auto leasing is understanding how the process works, taking the time to properly prepare yourself before making decisions, and learning to use leasing to your benefit rather than to your disadvantage.
Without at least a basic understanding of leasing concepts, knowing how to get a good deal, and knowing how payments are figured; you expose yourself to the very real possibility of making mistakes, significantly overpaying, or worse, being cheated.
Leasing is a method of financing, similar to a loan. It would be a mistake to think that consumer car leasing is like apartment leasing, apartment renting, or car renting. It is not. The differences are so significant that any attempt to try to understand one by drawing on your knowledge of the other will only result in a serious misunderstanding.
Let's make an important statement here: You shouldn't consider leasing an automobile unless you have an understanding of car leasing fundamentals and how it works. Don't lease if you don't understand it. Understand how car leasing works and it can work for you.
That is what this Lease Guide is all about.
Without at least a basic understanding of leasing concepts, knowing how to get a good deal, and knowing how payments are figured; you expose yourself to the very real possibility of making mistakes, significantly overpaying, or worse, being cheated.
Leasing is a method of financing, similar to a loan. It would be a mistake to think that consumer car leasing is like apartment leasing, apartment renting, or car renting. It is not. The differences are so significant that any attempt to try to understand one by drawing on your knowledge of the other will only result in a serious misunderstanding.
Let's make an important statement here: You shouldn't consider leasing an automobile unless you have an understanding of car leasing fundamentals and how it works. Don't lease if you don't understand it. Understand how car leasing works and it can work for you.
That is what this Lease Guide is all about.
Understand what automobile leasing is — and what it's not
The concept of leasing is fairly simple, yet many automotive consumers don't completely understand it and are often skeptical, even afraid of it. It is frequently misunderstood as a kind of "rent-to-own" scheme hatched up by clever dealers to separate good people from their money.
There are even well-meaning but misinformed "experts" who are quick to advise against leasing because "it's all a scam" or "it's the same as renting and you throw your money away" or "it's only good for businesses."
In fact, leasing is a well-respected and common financial concept that has been used in the commercial world for decades as a method of financing buildings, equipment, and vehicles — although it is still relatively new to most automotive consumers.
Car leasing is not renting, as many people mistakenly believe. Because many consumers still are not sufficiently informed, there have certainly been cases in which mistakes have been made and in which customers' lack of knowledge has been taken advantage of, sometimes fraudulently.
There are even well-meaning but misinformed "experts" who are quick to advise against leasing because "it's all a scam" or "it's the same as renting and you throw your money away" or "it's only good for businesses."
In fact, leasing is a well-respected and common financial concept that has been used in the commercial world for decades as a method of financing buildings, equipment, and vehicles — although it is still relatively new to most automotive consumers.
Car leasing is not renting, as many people mistakenly believe. Because many consumers still are not sufficiently informed, there have certainly been cases in which mistakes have been made and in which customers' lack of knowledge has been taken advantage of, sometimes fraudulently.
Friday, January 2, 2009
Auto Insurance Tips
1. As you are researching insurance companies to purchase auto insurance from, make sure that your first educate yourself on your driving record. To get an initial estimate, insurance companies will ask you to remember the number of tickets and accidents you have had in the last x-number of years. The number of years that an insurance company looks back changes from company to company. Therefore, if you have a poor driving record five years ago, but in the last three years you have improved, look for a company that adjusts rates according to a three-year record. Also, companies use a CLUE (Comprehensive Loss Underwriting Exchange) report from Equifax to determine your rates. You can purchase one, and you might consider it as you are shopping around for insurance companies.
2. Purchasing a car brings up many questions about how your insurance will be affected. If you are using a loan, most lending institutions require that you purchase both comprehensive and collision. Insurance companies take a vehicle’s safety features and the cost of repair into consideration when they are setting insurance premiums. Generally, the vehicle that has the most safety features and that would be the least expensive to fix would be the car with the lowest premium. Using this criteria, exotic cars would be the most expensive to insure because of the cost of repairs if the car was damaged. However, sedans would be the least expensive because they are reasonable to fix and have many safety features.
3. When you get married, think about combining all of your cars and your spouse’s cars onto one policy. Holding one policy may be less expensive than holding two separate ones because of the discounts that could be available. Check with your carrier to see whether they offer discounts if you insure multiple cars with them. Some insurance companies also lower insurance premiums for males under the age of twenty-five who are married (males generally are not as aggressive when they are married, and less aggressiveness results in fewer accidents and speeding tickets).
4. The theft of a car is a traumatic experience. In case of theft, you should keep copies of your license, registration, and insurance in your home. Also, if you have updated your car (adding stereo equipment, new tires, etc.), you should keep receipts of those purchases. You should also have some sort of security system on your cars (most new cars come with these systems installed; such systems also lower insurance premiums). If your car is ever stolen, you should contact the police first and then your insurance company. Your insurance company should work quickly to get you into a rental car while the police are investigating.
5. Personal injury protection is coverage that pays for the medical or funeral expenses of you or your family if you are injured in an auto accident. Personal injury protection is a smart addition if you have poor health and life insurance. However, if you have health and life insurance policies that would offer sufficient coverage in the event of a fatality, personal injury protection is an additional coverage that is not needed. If you are looking at reducing your rates and you already have medical coverage from another source, you could reduce the amount of personal injury coverage on your auto insurance policy.
6. Uninsured and underinsured motorists protection is essential to your insurance policy. Uninsured motorists insurance is required in several states, and it covers bodily injury when an accident occurs with an uninsured driver or a driver of a stolen car. It also covers hit-and-run accidents. Underinsured motorists coverage pays the balance of medical costs up to the policy limit when the at-fault motorist’s insurance is insufficient to pay for all of the costs. Because of the prevalence of uninsured and underinsured motorists, you should purchase a high limit of uninsured and underinsured protection as it will, in the end, cost much less if an accident occurs.
7. Adding teenage drivers to your insurance is an expensive proposition. As you are considering purchasing insurance, consider a few factors: first, females generally cost less than males to insure; second, shop around for insurance companies that offer discounts for driver’s education classes, good grades, and driving logs; third, as you are insuring teenage drivers, your premiums will be lower if the drivers are occasional drivers; fourth, teenagers have a high accident rate, so consider purchasing high liability coverage and lower comprehensive coverage; and fourth, the type of car teenagers drive—whether it is new, sporty, or exotic—will also determine the premiums.
8. When you are purchasing auto insurance, consider paying the complete premium when you sign up. Insurance companies generally offer discounts for those that pay the premium up front opposed to over a period of months. Paying in full at the beginning of the insurance period reduces an insurance company’s administrative costs in processing and checking your payments on a monthly basis. Paying up front is the most economical option.
9. Motorcycle insurance can either be purchased through a company that specializes in motorcycle insurance by creating another insurance policy, or it can be purchased through your auto insurance company. Many auto insurance companies offer motorcycle insurance. A miscellaneous category on the policy can insure motorcycles, mopeds, and motor homes. Adding motorcycles onto an existing policy can be more economical than creating a new policy. Also, if you do not ride your motorcycle in the winter, reduce your coverage for the motorcycle during that season. If you are not going to be riding it, why purchase expensive coverage?
10.If you have a child visiting for a period of time and that child would like to use your car, you should check with your insurance company about whether you should add your child back onto your insurance policy. Personal insurance policies cover you, your family, your friends, and any of your associates that drive your car and do so believing that you would have permitted them to drive it. In the case of a child using a car on a consistent basis over an extended period of time, you should check with your insurance company to see how many consecutive days a child would need to drive a car before adding that child onto your insurance.
2. Purchasing a car brings up many questions about how your insurance will be affected. If you are using a loan, most lending institutions require that you purchase both comprehensive and collision. Insurance companies take a vehicle’s safety features and the cost of repair into consideration when they are setting insurance premiums. Generally, the vehicle that has the most safety features and that would be the least expensive to fix would be the car with the lowest premium. Using this criteria, exotic cars would be the most expensive to insure because of the cost of repairs if the car was damaged. However, sedans would be the least expensive because they are reasonable to fix and have many safety features.
3. When you get married, think about combining all of your cars and your spouse’s cars onto one policy. Holding one policy may be less expensive than holding two separate ones because of the discounts that could be available. Check with your carrier to see whether they offer discounts if you insure multiple cars with them. Some insurance companies also lower insurance premiums for males under the age of twenty-five who are married (males generally are not as aggressive when they are married, and less aggressiveness results in fewer accidents and speeding tickets).
4. The theft of a car is a traumatic experience. In case of theft, you should keep copies of your license, registration, and insurance in your home. Also, if you have updated your car (adding stereo equipment, new tires, etc.), you should keep receipts of those purchases. You should also have some sort of security system on your cars (most new cars come with these systems installed; such systems also lower insurance premiums). If your car is ever stolen, you should contact the police first and then your insurance company. Your insurance company should work quickly to get you into a rental car while the police are investigating.
5. Personal injury protection is coverage that pays for the medical or funeral expenses of you or your family if you are injured in an auto accident. Personal injury protection is a smart addition if you have poor health and life insurance. However, if you have health and life insurance policies that would offer sufficient coverage in the event of a fatality, personal injury protection is an additional coverage that is not needed. If you are looking at reducing your rates and you already have medical coverage from another source, you could reduce the amount of personal injury coverage on your auto insurance policy.
6. Uninsured and underinsured motorists protection is essential to your insurance policy. Uninsured motorists insurance is required in several states, and it covers bodily injury when an accident occurs with an uninsured driver or a driver of a stolen car. It also covers hit-and-run accidents. Underinsured motorists coverage pays the balance of medical costs up to the policy limit when the at-fault motorist’s insurance is insufficient to pay for all of the costs. Because of the prevalence of uninsured and underinsured motorists, you should purchase a high limit of uninsured and underinsured protection as it will, in the end, cost much less if an accident occurs.
7. Adding teenage drivers to your insurance is an expensive proposition. As you are considering purchasing insurance, consider a few factors: first, females generally cost less than males to insure; second, shop around for insurance companies that offer discounts for driver’s education classes, good grades, and driving logs; third, as you are insuring teenage drivers, your premiums will be lower if the drivers are occasional drivers; fourth, teenagers have a high accident rate, so consider purchasing high liability coverage and lower comprehensive coverage; and fourth, the type of car teenagers drive—whether it is new, sporty, or exotic—will also determine the premiums.
8. When you are purchasing auto insurance, consider paying the complete premium when you sign up. Insurance companies generally offer discounts for those that pay the premium up front opposed to over a period of months. Paying in full at the beginning of the insurance period reduces an insurance company’s administrative costs in processing and checking your payments on a monthly basis. Paying up front is the most economical option.
9. Motorcycle insurance can either be purchased through a company that specializes in motorcycle insurance by creating another insurance policy, or it can be purchased through your auto insurance company. Many auto insurance companies offer motorcycle insurance. A miscellaneous category on the policy can insure motorcycles, mopeds, and motor homes. Adding motorcycles onto an existing policy can be more economical than creating a new policy. Also, if you do not ride your motorcycle in the winter, reduce your coverage for the motorcycle during that season. If you are not going to be riding it, why purchase expensive coverage?
10.If you have a child visiting for a period of time and that child would like to use your car, you should check with your insurance company about whether you should add your child back onto your insurance policy. Personal insurance policies cover you, your family, your friends, and any of your associates that drive your car and do so believing that you would have permitted them to drive it. In the case of a child using a car on a consistent basis over an extended period of time, you should check with your insurance company to see how many consecutive days a child would need to drive a car before adding that child onto your insurance.
Insuring Your Business Vehicle Properly
Many people make the mistake of insuring a vehicle they use primarily for their business along with their personal vehicles. This can be a huge risk if you have an accident. In some cases, your insurance company can use the fact that the car was being used for business to deny a claim made on the policy. Without insurance coverage to rely on, you could be out a serious amount of money. Don’t expect your business insurance package to include a commercial auto policy. Businessowners policies (BOPs) do not cover auto insurance. You have to purchase that separately.
Any vehicle used primarily for a business should be insured with a commercial auto policy. Whether it’s a delivery truck, a passenger van, a pick-up truck, or even a privately owned car, you need a commercial auto policy. If your vehicle is only used occasionally for business, it might be okay to leave it on your personal auto policy, however. If your business has employees that use your business vehicle, it’s even more important to have a commercial auto policy.
Insuring your business vehicle requires the same level of coverage as your personal vehicle. This includes liability coverage, collision coverage, and comprehensive coverage. Most states have a liability minimum requirement dictated by law, but this is usually not enough coverage for a business. Collision and comprehensive cover the physical damage to the business vehicle caused by accident and non-accident related events such as vandalism and theft. These policies are not required by law, but they are a must have. Having at least $500,000 of auto insurance coverage is standard for small businesses, but $1 million is recommended. Most commercial auto policies use a combined single limit to define the amount of coverage, which means businesses have a greater amount of coverage for bodily injury and property damage.
There are three ways you can structure your commercial auto insurance policy. You can insure just the vehicles your business owns, the vehicles the business owns and hires, or all the vehicles used by the business. The last option is usually preferred because it provides coverage for all situations including when employees use their own vehicles to serve the business. This is also usually the most expensive option.
It’s best to shop around for commercial auto insurance policies. You’ll find quotes range in price greatly from one insurer to another. If you already have business insurance, which you should, start with your current insurer. You can often get a discounted commercial auto insurance quote from an insurer if you have other policies with that insurer. Don’t just accept that quote, though. You can get others to compare it to by searching it online or working with other insurance brokers.
To get the best price on commercial auto insurance, there are a couple things you can do. For one, hire employees to drive your business vehicles that have good driving records. You can check into potential employee driving records at the DMV. Also, consider buying or leasing vehicles that cost less to insure. Some vehicles are less expensive to insure due to low repair costs and other factors. Check with your insurer before buying a new business vehicle to learn how much it will cost to insure it.
Any vehicle used primarily for a business should be insured with a commercial auto policy. Whether it’s a delivery truck, a passenger van, a pick-up truck, or even a privately owned car, you need a commercial auto policy. If your vehicle is only used occasionally for business, it might be okay to leave it on your personal auto policy, however. If your business has employees that use your business vehicle, it’s even more important to have a commercial auto policy.
Insuring your business vehicle requires the same level of coverage as your personal vehicle. This includes liability coverage, collision coverage, and comprehensive coverage. Most states have a liability minimum requirement dictated by law, but this is usually not enough coverage for a business. Collision and comprehensive cover the physical damage to the business vehicle caused by accident and non-accident related events such as vandalism and theft. These policies are not required by law, but they are a must have. Having at least $500,000 of auto insurance coverage is standard for small businesses, but $1 million is recommended. Most commercial auto policies use a combined single limit to define the amount of coverage, which means businesses have a greater amount of coverage for bodily injury and property damage.
There are three ways you can structure your commercial auto insurance policy. You can insure just the vehicles your business owns, the vehicles the business owns and hires, or all the vehicles used by the business. The last option is usually preferred because it provides coverage for all situations including when employees use their own vehicles to serve the business. This is also usually the most expensive option.
It’s best to shop around for commercial auto insurance policies. You’ll find quotes range in price greatly from one insurer to another. If you already have business insurance, which you should, start with your current insurer. You can often get a discounted commercial auto insurance quote from an insurer if you have other policies with that insurer. Don’t just accept that quote, though. You can get others to compare it to by searching it online or working with other insurance brokers.
To get the best price on commercial auto insurance, there are a couple things you can do. For one, hire employees to drive your business vehicles that have good driving records. You can check into potential employee driving records at the DMV. Also, consider buying or leasing vehicles that cost less to insure. Some vehicles are less expensive to insure due to low repair costs and other factors. Check with your insurer before buying a new business vehicle to learn how much it will cost to insure it.
Can I Protect My Business from an Unforeseen Tragedy?
Can you protect your business from an unforeseen tragedy? The short answer is: “Yes!” These days there are more ways than ever to make sure your business is fully protected in the event of a natural disaster, a product recall, a serious lawsuit, or any other potential danger. Getting business insurance, however, requires you to do a little research and analysis because the type of business insurance you purchase makes all the difference. The right business insurance can mean the difference between a long and prosperous business life and professional and personal financial ruin.
You can and should get business insurance tailored to the specific needs of your business. Part of protecting your business is determining where you are vulnerable. Every business should have insurance to protect the business property. This includes the building where the business resides if the business owns it and all of the contents of that building whether leased or owned. Should there be a natural disaster like an earthquake or a flood, you need to make sure your property is covered. Remember, however, that many types of natural disasters require additional insurance coverage.
Natural disasters are not the only tragedies that can harm a business. Power outages, structural failures, gas leaks, etc. can all force you to close your doors at least temporarily. While you’re closed, you are loosing money, and that’s why you have to carry insurance to cover income loss. This is usually included in a business property insurance policy, but not always. Income loss protection is crucial because a forced closure can be a tragedy for a business that could lead to bankruptcy.
Another unforeseen tragedy you have to protect your business from is a lawsuit. Whether a suit has merit or not has no basis on how much it could cost you. All businesses are vulnerable to lawsuits in one form or another, so it pays to have liability insurance. Liability insurance covers settlement costs, legal fees, and other expenses that come with defending your business against a lawsuit. There are several types of liability insurance, however, so you need to make sure that your business is property covered for its needs.
Commercial General Liability (CGL) is the type of insurance that protects you from suits brought about because of personal or advertising injury. This insurance pays for medical expenses and other payments your business is held responsible for. Most businesses will need this type of protection. Professional liability insurance covers your business against suits that arise from service related errors, negligence, or malpractice. Employment practices liability insurance covers your business against suits that arise from disputes over things such as discrimination, sexual harassment, and wrongful termination. It can be hard to determine how much liability coverage you need because settlements in these cases run the gamut, but you can use other settlements in your industry as a guide and discuss norms with your insurance broker.
There are other types of business insurance that can protect your business from a tragic end. Worker’s compensation insurance is an absolute must for any business that has employees. Commercial auto insurance is required if your business has or used vehicles regularly. Life insurance is recommended if your business has multiple partners. Which combination of coverage your business needs will depend on your industry and the specifics of your company.
You can and should get business insurance tailored to the specific needs of your business. Part of protecting your business is determining where you are vulnerable. Every business should have insurance to protect the business property. This includes the building where the business resides if the business owns it and all of the contents of that building whether leased or owned. Should there be a natural disaster like an earthquake or a flood, you need to make sure your property is covered. Remember, however, that many types of natural disasters require additional insurance coverage.
Natural disasters are not the only tragedies that can harm a business. Power outages, structural failures, gas leaks, etc. can all force you to close your doors at least temporarily. While you’re closed, you are loosing money, and that’s why you have to carry insurance to cover income loss. This is usually included in a business property insurance policy, but not always. Income loss protection is crucial because a forced closure can be a tragedy for a business that could lead to bankruptcy.
Another unforeseen tragedy you have to protect your business from is a lawsuit. Whether a suit has merit or not has no basis on how much it could cost you. All businesses are vulnerable to lawsuits in one form or another, so it pays to have liability insurance. Liability insurance covers settlement costs, legal fees, and other expenses that come with defending your business against a lawsuit. There are several types of liability insurance, however, so you need to make sure that your business is property covered for its needs.
Commercial General Liability (CGL) is the type of insurance that protects you from suits brought about because of personal or advertising injury. This insurance pays for medical expenses and other payments your business is held responsible for. Most businesses will need this type of protection. Professional liability insurance covers your business against suits that arise from service related errors, negligence, or malpractice. Employment practices liability insurance covers your business against suits that arise from disputes over things such as discrimination, sexual harassment, and wrongful termination. It can be hard to determine how much liability coverage you need because settlements in these cases run the gamut, but you can use other settlements in your industry as a guide and discuss norms with your insurance broker.
There are other types of business insurance that can protect your business from a tragic end. Worker’s compensation insurance is an absolute must for any business that has employees. Commercial auto insurance is required if your business has or used vehicles regularly. Life insurance is recommended if your business has multiple partners. Which combination of coverage your business needs will depend on your industry and the specifics of your company.
Will I Have Health Insurance When I Retire?
Getting insurance after you retire can be challenging if you retire before the age of 65. At 65, you become eligible for Medicare health coverage. However, before 65, your options may be limited. Because health insurance is so important, particularly as you advance in age, you should be sure to have a plan for coverage before you retire early. Make sure you will have access to coverage at least until you reach Medicare eligibility.
The best option for extending health care benefits past retirement is to join your spouse’s employer sponsored health plan. This is almost always the most affordable option. Before you rely on your spouse’s health insurance to carry you until you’re 65, however, consider if you spouse will be in that job until then and whether the business is stable and reliable. If your spouse suddenly loses that job, both of you will be without health insurance.
Some employers extend health benefits to their retired employees. This is often a good option for continuing your health care. Be aware, however, that these plans are not usually the same plan you have become accustomed to as a working employee. Usually these plans offer reduced coverage and require increased premiums. Sometimes you will have to pay the entire premium without any employer subsidizing. It’s important to find out exactly what is covered under your employer’s retirement health benefits and what is not. If you are on expensive medication, for example, make sure prescriptions are covered. Find out if there is a lifetime cap on coverage as well. A major illness or heart attack can quickly drain your coverage leaving you without insurance. Finally, find out if the coverage has a time limit. Some of these plans are only available for a year or two after retirement. You want to make sure you’re covered until the age of 65.
If you worked in a business with 20 or more employees before you retired, you may be eligible to purchase COBRA (Consolidated Omnibus Budget Reconciliation Act) insurance. You are only eligible if your employer offered group insurance to employees, however. These plans are more expensive than regular group insurance, but they are less than individual plans. The only catch is, they are only available for 18 months after retirement.
If you don’t have access to group health insurance, you may have to purchase an individual plan. These plans are going to cost a fortune in premiums, however, because of your advanced age. Most insurers will consider you a high risk particularly if you have a history of health problems. In order to get coverage, you may have to waive treatment of pre-existing conditions and pay for treatment of those conditions out-of-pocket. This is probably the most expensive option and should be your last resort for health insurance.
Finally, if none of these options work for you because of lack of funds or ineligibility, you can look to your state assistance programs for help. Medicaid is available for low-income seniors that meet eligibility requirements. Coverage and cost varies from state to state, so you have to research what is available where you live. No matter what, you cannot go without health insurance. A catastrophic illness or accident could ruin you physically and financially, and unfortunately the older you get, the more likely you are to get sick.
The best option for extending health care benefits past retirement is to join your spouse’s employer sponsored health plan. This is almost always the most affordable option. Before you rely on your spouse’s health insurance to carry you until you’re 65, however, consider if you spouse will be in that job until then and whether the business is stable and reliable. If your spouse suddenly loses that job, both of you will be without health insurance.
Some employers extend health benefits to their retired employees. This is often a good option for continuing your health care. Be aware, however, that these plans are not usually the same plan you have become accustomed to as a working employee. Usually these plans offer reduced coverage and require increased premiums. Sometimes you will have to pay the entire premium without any employer subsidizing. It’s important to find out exactly what is covered under your employer’s retirement health benefits and what is not. If you are on expensive medication, for example, make sure prescriptions are covered. Find out if there is a lifetime cap on coverage as well. A major illness or heart attack can quickly drain your coverage leaving you without insurance. Finally, find out if the coverage has a time limit. Some of these plans are only available for a year or two after retirement. You want to make sure you’re covered until the age of 65.
If you worked in a business with 20 or more employees before you retired, you may be eligible to purchase COBRA (Consolidated Omnibus Budget Reconciliation Act) insurance. You are only eligible if your employer offered group insurance to employees, however. These plans are more expensive than regular group insurance, but they are less than individual plans. The only catch is, they are only available for 18 months after retirement.
If you don’t have access to group health insurance, you may have to purchase an individual plan. These plans are going to cost a fortune in premiums, however, because of your advanced age. Most insurers will consider you a high risk particularly if you have a history of health problems. In order to get coverage, you may have to waive treatment of pre-existing conditions and pay for treatment of those conditions out-of-pocket. This is probably the most expensive option and should be your last resort for health insurance.
Finally, if none of these options work for you because of lack of funds or ineligibility, you can look to your state assistance programs for help. Medicaid is available for low-income seniors that meet eligibility requirements. Coverage and cost varies from state to state, so you have to research what is available where you live. No matter what, you cannot go without health insurance. A catastrophic illness or accident could ruin you physically and financially, and unfortunately the older you get, the more likely you are to get sick.
Homeowners Insurance Tips
1. Homeowner’s insurance and title insurance are two terms that are often confused. Homeowner’s insurance covers damages to your property and your possessions and any liability of a guest on your property. On the other hand, title insurance protects your ownership of the home and investigates the title to determine if the title is valid and without encumbrances or defects. Title insurance is generally required by lending institutions if you use a loan to purchase a home. Whether a lending institution requires you to purchase title and homeowner’s insurance or not, you should consider purchasing both types of insurance to sufficiently protect yourself and your property.
2. Homeowner’s insurance policies cover your possessions in your home. Generally insurance companies create categories of items and assign a certain dollar limit to each category. However, if you have possessions in one category that exceed the limit on the category, you can purchase a rider to the policy to increase the limit on that specific category. Riders come at an additional cost, but they ensure that your possessions are sufficiently insured in your home.
3. If you own additional properties besides the one that you reside on, you can purchase riders on your homeowner’s policy to cover those properties. These riders are called income property riders. As a general rule, you should purchase insurance for properties that you rent out to protect the property itself from renters that damage it and to protect you from liability suits from your renters or your renters’ guests. You can also purchase secondary residence premises endorsement insurance to cover vacation homes or a home that you reside in during a part of a year. Adding second homes to your existing homeowner’s policy opposed to creating a new policy is generally more economical.
4. Homeowner’s insurance policies can also cover vehicles that are stored at your home. These vehicles include watercraft and other recreational vehicles. These vehicles are generally not included under auto insurance policies. You can purchase a rider to your homeowner’s policy to protect against the loss of any of these vehicles. However, if you use these vehicles often, you might consider purchasing insurance for them on a separate plan. Such a plan would already cover loss and theft, generally the only coverage option available for these types of vehicles under homeowner’s insurance.
5. If an item on a neighbor’s property does damage to your property (such as a tree falling and damaging a fence or a deck), your neighbor’s homeowner’s policy should cover the expenses. When an individual purchases a homeowner’s policy, it not only covers the individual’s property and possessions, it also covers damage done to third parties. Therefore, when the neighbor’s tree fell and damaged your fence, your fence should be covered by their policy. If something on your property is damaged by your neighbor, you should contact your insurance company and inform them of the damages. In some cases, your insurance company may initially fix the damage done to your property and then have your neighbor’s company reimburse them.
6. Your possessions are covered to a certain dollar amount under your homeowner’s insurance policy. The question is, when you go on vacation, are those items covered? Policies vary from company to company, but the general answer is yes, homeowner’s policies that cover your possessions in your home also cover those same possessions if you take them with you while you travel. If you have possessions that are extremely valuable, like jewelry or rare items, you can add a rider onto your homeowner’s policy that can extend your coverage to cover the cost of such items. However, in some cases where some possessions are extremely valuable, it might be wiser to just buy separate insurance.
7. Insurance companies generally insure a home for 80 percent of its value. When you are purchasing insurance, you should determine whether 80 percent would be sufficient: you do want to be underinsured if your home is damaged heavily or destroyed. You may consider purchasing a policy that covers 100 percent of your home’s value and then offset the premium price by raising your deductible. If your home was damaged heavily, you would spend less if you had a higher percentage of your home covered by had a higher deductible than if you had a lower percentage of your home covered, had a lower deductible, and then had to pay out-of-pocket for the percentage of your home that was uninsured.
8. Before you purchase homeowner’s insurance, you should determine how much you should insure yourself for in case of a third-party accident on your property, in other words, liability. Determine the amount of your assets, and if a large judgment was issued against you in a liability case, how much insurance you would need to protect your assets. You should think about protecting your business and investments and then purchase insurance accordingly.
9. Many factors go into pricing premiums for homeowner’s insurance. There are a few factors that you have little control over that determine the premium: the material used to build the home (brick, wood, stucco), your home’s closeness to a fire station (the better the fire protection, the lower the premium), the age of the home (old buildings may be against building codes), and the location of the home. Factors that you can change to determine the premium include the deductible amount (the higher the deductible, the lower the premium), the amount of riders you have attached to your policy, and the amount and type of coverage.
10. There are several different types of homeowner’s insurance packages. Basic packages include protection from fire, lightning, windstorms, explosions, riots, aircraft, vehicles, smoke, vandalism, theft, and volcanoes. More broad packages include protection from all the previous incidents and then further protection from damages caused by falling objects, snow, water events (there are specific restrictions on this one), freezing, and electrical currents. There are several other packages available for homes that are older or that qualify as rental homes. Special riders can then be attached to policies to protect homeowners from specific damages.
2. Homeowner’s insurance policies cover your possessions in your home. Generally insurance companies create categories of items and assign a certain dollar limit to each category. However, if you have possessions in one category that exceed the limit on the category, you can purchase a rider to the policy to increase the limit on that specific category. Riders come at an additional cost, but they ensure that your possessions are sufficiently insured in your home.
3. If you own additional properties besides the one that you reside on, you can purchase riders on your homeowner’s policy to cover those properties. These riders are called income property riders. As a general rule, you should purchase insurance for properties that you rent out to protect the property itself from renters that damage it and to protect you from liability suits from your renters or your renters’ guests. You can also purchase secondary residence premises endorsement insurance to cover vacation homes or a home that you reside in during a part of a year. Adding second homes to your existing homeowner’s policy opposed to creating a new policy is generally more economical.
4. Homeowner’s insurance policies can also cover vehicles that are stored at your home. These vehicles include watercraft and other recreational vehicles. These vehicles are generally not included under auto insurance policies. You can purchase a rider to your homeowner’s policy to protect against the loss of any of these vehicles. However, if you use these vehicles often, you might consider purchasing insurance for them on a separate plan. Such a plan would already cover loss and theft, generally the only coverage option available for these types of vehicles under homeowner’s insurance.
5. If an item on a neighbor’s property does damage to your property (such as a tree falling and damaging a fence or a deck), your neighbor’s homeowner’s policy should cover the expenses. When an individual purchases a homeowner’s policy, it not only covers the individual’s property and possessions, it also covers damage done to third parties. Therefore, when the neighbor’s tree fell and damaged your fence, your fence should be covered by their policy. If something on your property is damaged by your neighbor, you should contact your insurance company and inform them of the damages. In some cases, your insurance company may initially fix the damage done to your property and then have your neighbor’s company reimburse them.
6. Your possessions are covered to a certain dollar amount under your homeowner’s insurance policy. The question is, when you go on vacation, are those items covered? Policies vary from company to company, but the general answer is yes, homeowner’s policies that cover your possessions in your home also cover those same possessions if you take them with you while you travel. If you have possessions that are extremely valuable, like jewelry or rare items, you can add a rider onto your homeowner’s policy that can extend your coverage to cover the cost of such items. However, in some cases where some possessions are extremely valuable, it might be wiser to just buy separate insurance.
7. Insurance companies generally insure a home for 80 percent of its value. When you are purchasing insurance, you should determine whether 80 percent would be sufficient: you do want to be underinsured if your home is damaged heavily or destroyed. You may consider purchasing a policy that covers 100 percent of your home’s value and then offset the premium price by raising your deductible. If your home was damaged heavily, you would spend less if you had a higher percentage of your home covered by had a higher deductible than if you had a lower percentage of your home covered, had a lower deductible, and then had to pay out-of-pocket for the percentage of your home that was uninsured.
8. Before you purchase homeowner’s insurance, you should determine how much you should insure yourself for in case of a third-party accident on your property, in other words, liability. Determine the amount of your assets, and if a large judgment was issued against you in a liability case, how much insurance you would need to protect your assets. You should think about protecting your business and investments and then purchase insurance accordingly.
9. Many factors go into pricing premiums for homeowner’s insurance. There are a few factors that you have little control over that determine the premium: the material used to build the home (brick, wood, stucco), your home’s closeness to a fire station (the better the fire protection, the lower the premium), the age of the home (old buildings may be against building codes), and the location of the home. Factors that you can change to determine the premium include the deductible amount (the higher the deductible, the lower the premium), the amount of riders you have attached to your policy, and the amount and type of coverage.
10. There are several different types of homeowner’s insurance packages. Basic packages include protection from fire, lightning, windstorms, explosions, riots, aircraft, vehicles, smoke, vandalism, theft, and volcanoes. More broad packages include protection from all the previous incidents and then further protection from damages caused by falling objects, snow, water events (there are specific restrictions on this one), freezing, and electrical currents. There are several other packages available for homes that are older or that qualify as rental homes. Special riders can then be attached to policies to protect homeowners from specific damages.
Business Insurance Quotes FAQs
Q: What is risk analysis?
A: At least once a year, you should run a risk analysis on your business to determine the type and amount of insurance you should purchase. Setting aside mandatory insurance such as worker’s compensation and unemployment, you should consider the risk of property damage, employee theft, inventory loss, various liabilities, and the death of an owner. After assessing your risks, you should determine which risks you can eliminate by either installing security equipment, selling property, or updating older properties. Then you should determine which risks are important enough to be covered by insurance and find adequate coverage.
Q: I just started a small business. What type of insurance should I buy?
A: The best type of insurance for a small- or medium-sized business is the business owner’s policy (BOP). A BOP combines liability and property insurance, generally with various supplemental coverage including employee dishonesty or machinery breakdowns. Insurance companies may question you about your business and may place some restrictions on the policy itself. However, a BOP is a form of insurance that covers your basic needs as a business owner. It does not offer benefits to your employees, so you would have to actively seek out an insurance company that would provide you with group health insurance plans.
Q: How is worker’s compensation calculated?
A: Worker’s compensation is calculated by dividing your employees into categories and assigning a rating factor to each category. Then that rating factor is multiplied by the payroll amount for that category. The sum equals the net premium for worker’s compensation, upon which additional taxes and fees are added. Therefore, the more dangerous or risky a job category is, the more worker’s compensation you will pay for that category. And the more employees you have that fall under that category, the more you will pay towards worker’s compensation.
Q: What type of insurance do I need to run a home business?
A: Getting insured so that you can run a home business is relatively simple. First you need to check your homeowner’s policy; often times many of your materials will be covered in that policy. Talk with an agent and ask to add additional coverage to your existing plan. The additional coverage should include the equipment that you are using, such as the computer or a fax machine. The policy should cover liability insurance; malpractice insurance that protects you from losses due to a professional mistake, which is not always applicable; and disability insurance, which is not required by law but that offers more security. An agent will be able to provide you with practical advice and options for each situation.
Q: Do I need business interruption insurance?
A: Business interruption insurance should be thought of in a similar light to fire or theft insurance. Business interruption insurance allows a business compensation for lost time due to a disaster-related occurrence. If a business is not allowed to open for several days due to a storm or a fire, the damages to the building are far less severe then the cost of lost work. This insurance provides monetary compensation for the time that was lost. The amount of compensation id determined when the business chooses an insurance policy.
A: At least once a year, you should run a risk analysis on your business to determine the type and amount of insurance you should purchase. Setting aside mandatory insurance such as worker’s compensation and unemployment, you should consider the risk of property damage, employee theft, inventory loss, various liabilities, and the death of an owner. After assessing your risks, you should determine which risks you can eliminate by either installing security equipment, selling property, or updating older properties. Then you should determine which risks are important enough to be covered by insurance and find adequate coverage.
Q: I just started a small business. What type of insurance should I buy?
A: The best type of insurance for a small- or medium-sized business is the business owner’s policy (BOP). A BOP combines liability and property insurance, generally with various supplemental coverage including employee dishonesty or machinery breakdowns. Insurance companies may question you about your business and may place some restrictions on the policy itself. However, a BOP is a form of insurance that covers your basic needs as a business owner. It does not offer benefits to your employees, so you would have to actively seek out an insurance company that would provide you with group health insurance plans.
Q: How is worker’s compensation calculated?
A: Worker’s compensation is calculated by dividing your employees into categories and assigning a rating factor to each category. Then that rating factor is multiplied by the payroll amount for that category. The sum equals the net premium for worker’s compensation, upon which additional taxes and fees are added. Therefore, the more dangerous or risky a job category is, the more worker’s compensation you will pay for that category. And the more employees you have that fall under that category, the more you will pay towards worker’s compensation.
Q: What type of insurance do I need to run a home business?
A: Getting insured so that you can run a home business is relatively simple. First you need to check your homeowner’s policy; often times many of your materials will be covered in that policy. Talk with an agent and ask to add additional coverage to your existing plan. The additional coverage should include the equipment that you are using, such as the computer or a fax machine. The policy should cover liability insurance; malpractice insurance that protects you from losses due to a professional mistake, which is not always applicable; and disability insurance, which is not required by law but that offers more security. An agent will be able to provide you with practical advice and options for each situation.
Q: Do I need business interruption insurance?
A: Business interruption insurance should be thought of in a similar light to fire or theft insurance. Business interruption insurance allows a business compensation for lost time due to a disaster-related occurrence. If a business is not allowed to open for several days due to a storm or a fire, the damages to the building are far less severe then the cost of lost work. This insurance provides monetary compensation for the time that was lost. The amount of compensation id determined when the business chooses an insurance policy.
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