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Car Insurance, Rental Cars, and International Travel

Car Insurance, Rental Cars, and International Travel

A client called me last week to discuss a question about her car insurance. She’s taking a vacation with two friends in May and will head for Europe for a couple of weeks. They’ll travel through Italy, France, head up to Switzerland, and then back to Italy before returning home. They will rent a car for part of the trip and she wanted to know if her car insurance covers a rental car in Europe. The answers range from absolutely not to absolutely yes. Domestic Only: Most car insurance companies provide coverage anywhere in the United States and will extend coverage to rental cars. There are few who don’t so always confirm. US & Canada: Many companies will cover your car and a rental car if traveling anywhere in the US and even in Canada. US Territories: Some companies extend coverage to US territories such as Puerto Rico, Guam, the US Virgin Islands and American Somoa, however, confirm before you go. Mexico: Car insurance if you’re driving across our southern border is limited at best. Many exclude coverage in Mexico while others provide limited coverage which means the first two to five miles. If you’re traveling to Mexico, Central America, or even further south, I recommend buying the local insurance. Europe & Asia: A few carriers extend coverage when traveling to Europe or other western countries such as Japan, Australia, etc. Some may have restrictions by country or coverage while others don’t. MetLife extends coverage for both property damage and personal liability. Safeco requires a specific car insurance package to provide property damage coverage and an umbrella policy to cover personal liability. Regardless of where you’re traveling, confirm with your agent what coverage is provided by your policy and what limitations you may have. Here are a couple of considerations: Confirm you have enough property damage coverage in the liability and uninsured motorist limits to pay for a new car especially a high-end car. You’ll need to carry both collision and comprehensive deductibles to fully protect you in an accident claim when renting a car. If you don’t carry comprehensive or collision coverage, add it to your policy for the duration of the trip or buy it from the car rental company. If you don’t want an international claim to follow you home and impact your rates, buy the car insurance from the rental or travel company. If you’re traveling to multiple countries, such as in Europe, confirm if the insurance applies to each country you’re visiting. In the case of my client, I quoted the coverage she needs to be fully covered while driving a rental car in Europe. The cost is about...

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Home Insurance and Roof Depreciation Schedules

Home Insurance and Roof Depreciation Schedules

I sat in a meeting with one of our carriers last week and heard an interesting statistic. On average, insurance companies who wrote Texas home policies in 2016 paid $1.30 out in storm related claims last year for every $1.00 of premium they received. That doesn’t include non-storm related claims such as fire, theft, water damage, etc. The issue facing all home insurance companies is how to remain profitable without raising rates astronomically. One method carriers are examining is roof depreciation schedules. Most home insurance companies will write either a replacement cost policy or an actual cash value policy (see http://wiseinsurancegroup.com/home-insurance-replacement-cost-actual-cash-value/). If the roof needs to be replaced due to hail or wind damage, a replacement cost policy pays the amount it costs to replace the roof with a new one of the same quality less the wind / hail deductible. For example, a $200,000 home with a 1% wind / hail deductible ($2,000) and costs $10,000 to replace, will pay $8,000 to replace the roof with comparable grade shingles. Actual cash value policies, on the other hand, pay the depreciated value of the roof less the wind / hail deductible. For instance, a 10 year old roof covered in 20 year shingles will be depreciated by at least 50% if it’s in excellent shape. If the cost is still $10,000 to replace the roof as in the above example, the total amount paid for the claim will be $3,000 ($10,000 less 50% depreciation less 1% deductible). The issue with actual cash value policies, aside from the lower claim amount paid, is there’s too much wiggle room when determining the depreciated value. To reduce the amount of interpretation and provide a better client experience, a couple of companies have implemented or are considering implementing roof depreciation schedules. For instance, a brand-new composition shingle roof may depreciate at a published rate of 2% to 3% per year until it reaches a certain minimum amount, say 25%. Slate, tile, and metal roofs would have their own depreciation schedules. This enables the client to know if they don’t have a hail claim until 10 years from now, the claim amount paid will be some value between 70% and 90% depending on roof material. Insurance companies believe providing a written depreciation schedule prior to writing a policy enables clients to know the risk up front and make the right decision for themselves. In some cases, home insurance companies may provide a discount for accepting a roof depreciation schedule and charge more for a replacement cost coverage on the roof. Other companies may adopt this approach as their primary offering on all home policies and not offer a replacement...

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