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Teens, Car Insurance, and Two Questions

Teens, Car Insurance, and Two Questions

I’ve talked with two clients in the past week. Both are parents of teens who are about to start driving. One client has a teen son that’s about to get their learner’s permit while the other has a son who’s about to get their license. Both had two questions related to their car insurance. The two questions I’m most frequently asked when it comes to teens who are about to get their permit or license is when they should add their teen driver to their car insurance policy and does it make a difference to the insurance rate if their child takes a parent led driver’s training course or an instructor in a driving school? When to add a teen driver is dependent on the car insurance company and how they approach this. Companies usually falls into one of two approaches: Some want the teen driver listed on the policy when they receive their learner’s permit. Other companies wait to add the driver when they obtain their driver’s license. In the first case, listing a teen driver with a permit does not impact the insurance rate, it simply is an acknowledgement there is another “driver” within the household. In this case, the teen with a learner’s permit is listed but not rated.  The rate changes only when the teen driver receives their driver’s license whether it’s when they turn 16 or at a later age. For car insurance companies in the second group, since they do not require a permitted driver be listed, we only add them to the policy when they receive their driver’s license.  The rate is adjusted at that time to account for the new driver and the risk they represent. In both cases, there is no set time between when a driver receives their permit or is awarded their driver’s license.  Teen drivers are only rated when they become licensed, not when they turn 16 or some other age.  That is up to the parent and the teen, not the insurance company. Regarding my client’s second question, does the type of driver’s training class make a difference to their future rate?  The answer is, no. No insurance company I work with makes a distinction between a parent led or instructor led course.  In both cases, the student driver is awarded a certificate upon completion of the course and that’s worth a discount on the car insurance rate.  The only question is which class option is best for the emotional and relational health of both the parent and the teen! Do you have a question or experience you’d like to share?  Share them with me on my Facebook, Google +, and...

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Home Insurance and Federal Pacific Electric Panels

Home Insurance and Federal Pacific Electric Panels

I reviewed Sheri’s and my home insurance in March. It had gone up again and we’d been with the same company for several years, so it was time. I was very pleased with the rates I found with a couple of my other carriers and decided to call the underwriter to discuss our home since it was built in the mid 1950’s. She told me it would require an interior inspection, in addition to the exterior inspection. I was curious what they’d review and the criteria they’d use to determine whether to write my home insurance or cancel it. What I found out caused me to go to the next option on my list! The interior inspection would cover several items including whether the electrical, plumbing, and heating and air conditioning systems were up to code and if they’d been updated since the home was built. They would also see if the electrical panel had circuit breakers or fuses and if it is a Federal Pacific panel. We’d replaced the interior and exterior HVAC system in 2016, the water heater in 2009 or 2010 and both were up to code. The one strike against us is we have a Federal Pacific panel and that would cause us to be declined. I’d been asked by a realtor several years ago about whether a home insurance company would write a policy on a home with a Federal Pacific electrical panel before. Based on my research at the time, the company I was with would and I was not aware of any insurance company that wouldn’t. I’ve not run into any home insurance company since then who will decline a home insurance policy due to the presence of a Federal Pacific electrical panel until a few weeks ago. Federal Pacific electrical panels were widely installed in millions of homes nationwide from 1950 until 1990. Many people and safety experts believe they are the cause of to 2,000 to 3,000 home fires annually. These fires occur when a circuit becomes overloaded, overheats and fail to “trip” or switch into the off position. A properly working circuit breaker will trip into the off position in no more than two minutes when overloaded. The Federal Pacific circuit breakers weren’t tripping and were believed to cause home fires. The Consumer Product Safety Commission closed its investigation on Federal Pacific panels in 1983, as they didn’t find a serious risk of danger to consumers based on data at the time. The company, Federal Pacific Electrical Company sold the company’s assets to Challenger Electric which have been subsequently resold several times since then with no one having any ties to the original FPE...

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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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What Does Your Car Insurance Cover?

What Does Your Car Insurance Cover?

I am working with a prospective client on their car insurance. I realized he’d never had a good explanation on car insurance once we began to review the quote together. I suggested we start over so I could explain each coverage and answer his questions. Unfortunately, I’ve found most people have never received a good explanation on car insurance, what it covers, and options worth considering, so I thought I’d write about that in this post. Liability Coverage: This coverage, also referred to as Bodily Injury Property Damage (or BIPD), pays when you hit another car, person, or object and are at fault. The bodily injury portion is designed to cover an injured person’s medical bills and the property damage is there to repair the other person’s vehicle or whatever you hit. This is the only coverage required on a Texas car insurance policy. The limits may be expressed in one number or with three numbers. People with one number usually have combined single limit coverage ranging from $100,000 to $500,000. If your limits are expressed with three numbers, then you have split limits which can range from the Texas minimum of 30/60/25 all the way up to 500/500/100. Each number represents thousands with split limits. Uninsured Motorists: Uninsured / under insured motorist may be referred to as UM / UIM BIPD is optional coverage to protect you if someone with no car insurance or not enough car insurance hits you and it’s their fault. It can be used to cover medical expenses for you and anyone riding in the car with you, as well as to repair your car if it’s damaged. Coverage can be written as either combined single or split limits. Medical Coverage: There are two types of optional coverage available, medical and Personal Injury Protection or PIP. Both provide medical care ranging from $2,500 to $10,000 or more, and pay on a reimbursement basis. PIP, however, can also be used to cover lost wages or hiring someone to assist with activities you’re unable to do following a car insurance accident. It can also be used by a personal injury attorney in a lawsuit. Deductibles: Any deductible, is the amount of money the policyholder must first pay before the car insurance policy pays. The two most recognizable deductibles are comprehensive and collision. Collision pays to repair your car after an accident and comprehensive covers hail damage, falling objects such as tree limbs, fire, flood, if it’s stolen, or you hit a deer or other animal. For you to have either coverage you must have a deductible. If the deductible isn’t listed on your policy, then you do not have that coverage....

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