Home Insurance Option: Equipment Breakdown Coverage

Posted by on Aug 15, 2017 in Blog | Comments Off on Home Insurance Option: Equipment Breakdown Coverage

Home Insurance Option: Equipment Breakdown Coverage

I am occasionally asked by a new or existing client whether their home insurance policy covers an air conditioning compressor or water heater that’s going bad. In most cases, the answer is no, unless it’s caused by an event justifying a claim such as a lightning strike, a tree limb that fell on it, etc. Two home insurance carriers offer a coverage option worth considering for their policy holders called Equipment Breakdown coverage and it may provide an attractive option worth adding to your policy.

Equipment breakdown coverage from both home insurance companies offers some very attractive coverage including:

  • Repair or replace a major home system such as the central heating and cooling system, swimming pool systems, ventilation, emergency generators, well pumps, air and water filtration, chair lifts and elevators, home entertainment systems and computer equipment.
  • One of the companies extends this coverage to include appliances.
  • One even includes coverage for additional living expenses if the home becomes uninhabitable due to the equipment breakdown.
  • Both offer to replace the failed equipment with greener replacement by paying to replace a non-Energy Star device with Energy Star rated equipment.
  • One won’t surcharge the renewal rate if such a claim is filed and paid.

Where these two home insurance companies differ is in the cause of the equipment failure that may trigger a claim.

  • One company excludes equipment breakdown coverage due to normal wear and tear. It requires a triggering event that is sudden, direct, and accidental such as a broken part or electrical arcing.
  • The other covers a sudden, direct, and accidental failure and goes on to cover failure due to human error such as an improper installation of the unit and improper operation and maintenance of the equipment by the homeowner.

The cost to add this option to either equipment is very affordable depending on the amount of coverage and deductible selected. It can range from $24 to $100 a year which is much less than most home warranties. The biggest difference is the home warranty is designed to cover normal wear and tear.

Equipment breakdown coverage is a fairly new option. Given the competitive nature of home insurance, I expect most companies will provide it within the next couple of years. If offered, would you choose to add it to your policy? Share your “decision” along with your thoughts, questions, and experiences with me on my Facebook, Google +, and LinkedIn pages. I’d love to hear from you!

Thanks!

Ed Wise

Wise Insurance Group

Car Insurance Topics for College Students

Posted by on Aug 9, 2017 in Blog | Comments Off on Car Insurance Topics for College Students

Car Insurance Topics for College Students

There are a couple of car insurance related topics every parent of a college student should discuss with their son or daughter before they head off to school. Both have a financial impact on the family’s car insurance rate. The biggest one is allowing a friend or roommate to drive their car or truck if they take one to school. The other one relates to grades. Let’s review this issue and ways to lower your car insurance rate.

Friends Driving Their Vehicle: Most students don’t think twice about letting a friend or roommate borrow their car. They’re not using it at that moment, so why not? The reason they shouldn’t is what happens if the friend is involved in an accident, regardless of who’s at fault. Any time your son or daughter allows one of their friends to drive their car, they put the family’s car insurance in jeopardy. It will be your car insurance which will pay for damages if their friend is involved in an accident, not theirs. If someone is hurt or injured, you may be found liable for medical expenses or worse.

I recommend all parents advise their student to not loan their car to a friend.

  • The moment a car is loaned to someone else, that driver becomes a permissive driver.
  • Insurance follows the car, not the driver. If the friend is involved in an accident, it will be your policy that’s liable not the friend’s.
  • A permissive driver can also put you at financial risk if someone is hurt or killed because of the accident.

Accidents and injury claims will impact your rate with most car insurance companies for 3 to 5 years.

Grades Still Matter: Why pay more for car insurance than you have too? Remind your son or daughter good grades keep the cost of car insurance lower! Students with an A/B average (they can still have one or two C’s on their transcript) earn a discount while attending college. A copy of the most recent transcript will need to be presented to underwriters to receive this discount.

Students With No Car: Many car insurance companies offer a discount if the student attends a school 100 or more miles away from home and doesn’t take a vehicle with them. The reason for the discount is the student doesn’t have a car with them which reduces their exposure for being involved in an accident.

Geographical Rating: Those students who attend a school in a smaller community than the one they live in may help reduce the premium by rating that vehicle with the new garaging address. For example, if the family residence is in Houston, Austin, or Dallas / Fort Worth and the student attends school in Lubbock, College Station, Abilene, Alpine, Waco, or another smaller community, changing the garaging address of their vehicle will lower the premium based on being in a smaller community with fewer cars, and hence, fewer opportunities to be in an accident. This does not work as well if they attend school out of state (Oklahoma, Arkansas, etc.). The reason is it may be less expensive to keep them on the family policy than rate them on their own policy in another state.

What do you think? Share your questions, suggestions, and experiences with me on my Facebook, Google +, or LinkedIn, pages. I’d love to hear from you!

Thanks!

Ed Wise

Wise Insurance Group

Insurance Considerations for College Students

Posted by on Aug 7, 2017 in Blog | Comments Off on Insurance Considerations for College Students

Insurance Considerations for College Students

Does your college student need property or liability insurance? I’m asked this question by clients who have a son or daughter headed off to college each August, and it is that time again. The answer is it depends more on where they’ll live; whether it’s in a dorm room on campus or off campus in an apartment, condo, or home. Let’s review both scenarios.

Dorm Room: If your son or daughter will live on-campus in a dormitory they don’t need renter’s insurance. Most home insurance policies provide coverage for personal property off premises, or items stored in a dorm room, storage unit, etc. The amount your home insurance policy covers depends on the carrier, but it’s usually 10% to 20% of your personal property or contents.

For example, a home insured for $200,000 will have contents coverage ranging from 60% to 75% of the home’s value or $120,000 to $150,000. The amount of off-premises contents coverage will range from $12,000 to $30,000, which should be more than enough coverage for the typical dorm room.

The only caveat is anything lost or stolen is subject to the home insurance policy deductible. Texas home insurance policies normally have a deductible ranging from $1,000 to 1% of the home’s dwelling value which means the home policy deductible will be $2,000 if there’s a 1% deductible for a home with an insured value of $200,000.

Items such as smart phones, laptops, tablets, and musical instruments can be scheduled on most home policies. Scheduling an item on a home policy simply means listing that item or items for their stated value under the scheduled items portion of the policy. This is optional coverage on the home policy and will have a nominal cost to add it. It also usually means there’s either no or a small deductible such as $100.

Apartments & Rent Homes: Many students move into an apartment or rent a home after the first or second year at school. I recommend a renter’s policy when that happens because the student usually has more personal property than their dorm room accommodates. You’ll need enough coverage to cover more electronics, decorative accessories, furniture and any appliances you own such as a washer and dryer.

Renter’s insurance policy rates are determined by the amount of the contents coverage, what type of home the student is living in, where the home is located and protective devices such as fire and burglar alarms. The cost of a renter’s policy will range from $150 to $300 a year. Common deductibles are stated in dollar amounts such as $250, $500, and $1,000 depending on the carrier.

If they have roommates living with them, each roommate will also need their own renter’s policy, as renter’s insurance only covers the items owned by each separate renter. A renter’s policy will also provide personal liability coverage for your student which is needed should someone get hurt when visiting the apartment or home.

Students attending an out of state school will need to get a renter’s policy specific to that state and from an agent licensed in that state. For those students attending school abroad, they’ll need coverage which is written in that country. Where will your student attend college? Share that with me along with your experiences, comments, advice, and questions on my Facebook, Google +, or LinkedIn pages. I’d love to hear from you!

Thanks!

Ed Wise

Wise Insurance Group

Converted School Buses and Car Insurance

Posted by on Aug 2, 2017 in Blog | Comments Off on Converted School Buses and Car Insurance

Converted School Buses and Car Insurance

I received a call a couple of weeks ago from someone who’d been referred to me. The caller needed car insurance for a Blue Bird bus he and his wife were buying. Their plan is to convert it into an RV and live in it as they drive to different parts of the country where they’ll live and work for varying timeframes. The question is what kind of car insurance would they need and who’d write it?

I initially thought this would be an easy policy to write, after all, I have several carriers who write RVs. None would. I then called the underwriters with the broker firms I work with thinking they could write a car insurance policy for it but they couldn’t either. I struck out with all my carriers but had several interesting discussions which helped me understand the difficulty in writing such a policy. Below are the three issues which resulted in the “no” answers I received.

Commercial vs Personal: Blue Bird buses are recognized as commercial vehicles. Anyone who drives a school bus must carry a commercial driver’s license. A RV, on the other hand, is designed as a personal vehicle to be driven be anyone with a standard driver’s license.

Converting a school bus to a traveling home means changing the vehicle classification from commercial to personal thereby requiring an initial commercial policy until it’s converted to a RV. Once the conversion is complete it needs a personal, or RV insurance policy. No carrier or broker was able or willing to write the vehicle one way and then shift it the other way when the project was completed.

Intended Use: This line of reasoning from a couple of underwriters, is similar to whether this is a commercial or personal vehicle. It’s based on what the Blue Bird bus was originally intended to do, carry people. Converting from a commercial vehicle to a personal vehicle changes its original intended use and caused a couple of underwriters to say no. I run into this with a few underwriters when someone converts a commercial building, barn, etc., into a home. These companies won’t write a home which wasn’t originally built to be a home.

DIY vs Skilled Work: The other problem resulting in underwriters declining to write a RV or car insurance policy is who is doing the conversion work. The couple buying the bus are intending to do most of the work themselves. They will have a skilled electrician and plumber assist them with wiring and adding the kitchen and bathroom, but intend to do the finish out themselves.

DIY projects of this kind, as well as on kit cars, make underwriters decline to write an insurance policy unless the person doing the work has the training to craft such as conversion. The reasoning is an untrained owner who’s watched several YouTube videos does not fully understand all the issues such as weight distribution and its impact on steering, braking, etc. which may result in an unsafe vehicle.

The caller was disappointed I couldn’t find a policy for them, but I haven’t given up hope. We’ve added several new car insurance carriers and I’m hopeful one of them can write it. What do you think? Share your thoughts, questions, and experiences with me on my Facebook, Google +, and LinkedIn pages. I’d love to hear from you!

Thanks!

Ed Wise

Wise Insurance Group

 

 

 

 

Why Home Insurance Rates Change Every Year

Posted by on Jul 31, 2017 in Blog | Comments Off on Why Home Insurance Rates Change Every Year

Why Home Insurance Rates Change Every Year

Many people are surprised to learn their home insurance rate will change from year to year. Many times, there will be an increase as we’ve seen in the past few years, and sometimes there will be a decrease. Rates fluctuate, so let’s examine why!

Inflation: Most home insurance policies include an “inflation protection” component within the policy. This is designed to increase the home’s insured value, what it cost to replace the home in the event of a total loss, each year based on the rate of inflation. The average rate of long term inflation in the United States since World War 2 is 3.76%. If the rate of premium increase for a home insurance policy at renewal is between 3% and 5%, that signals to me the rates are stable and not increasing beyond the rate of inflation. If rates are rising at a rate faster than inflation, as they have been for the past five years, then it becomes increasingly important to review our client’s options each year.

Insurance companies didn’t always include an inflation protection component within their home policies. They depended on the agent and their team to review each client’s insurance policies every year to two and adjust them accordingly. The only problem is it didn’t always happen and resulted in many people having a home which was underinsured for a total loss. Inflation protection protects the client from having too little home insurance coverage to replace their home.

Weather: Texas, especially the Dallas / Fort Worth area, has experienced three continuous years of severe hail storms. Insurance companies have paid billions in claims over this timeframe which has resulted in significant rate increases in the zip codes which have been most impacted by hail. As severe weather frequency increases, rates go up, even if you didn’t file a weather-related claim. When the severe weather abates, rates will drop.

Claims: Home insurance is designed to protect the homeowner from financial disaster by moving the risk for a major claim from the homeowner to the insurance company. When claims for water damage, a fire, theft, vandalism, and other non-weather-related events are filed, rates will increase for the homeowner. Being claim free, helps keep rates lower and enhances your ability to move to a carrier with lower rates.

Competitive Pressure: Rates don’t always increase. Sometimes, they do go down. Texas is the second largest home insurance market in the country which means it’s a very competitive marketplace. Some home insurance companies lower rates to increase their market-share and grow their business. When this happens, consumers benefit, if they are willing to evaluate options!

Complacency: Most people I know really don’t enjoy shopping for insurance! They’re inclined to ignore it until they’re surprised it’s changed, and not for the better. Home insurance companies know this so rates tend to rise every year the longer a person remains with that company. That’s why it’s important to review your home and car insurance every two to three years!

One of the advantages of being an independent insurance advisor is I’m able to find the best rate from all my carriers for a client each year! What do you think? Share your comments, questions, and experiences with me on my Facebook, Google +, and LinkedIn pages. I’d love to hear from you!

Thanks!

Ed Wise

Wise Insurance Group

Business Insurance Considerations for Solopreneurs

Posted by on Jul 26, 2017 in Blog | Comments Off on Business Insurance Considerations for Solopreneurs

Business Insurance Considerations for Solopreneurs

I had a fun phone conversation last week with a social media solopreneur about business insurance. Ruby’s business has grown, the clients are getting larger, and she wanted to get a handle on the business insurance she should be considering for her growing enterprise. I believe our discussion provides a great framework for solopreneurs and small business owners contemplating their business insurance needs.

General Liability (or GL) insurance protects your company in the event someone sues for negligence for reasons such as slipping and falling in your office or shop, a contract breach, or potentially issues with a product or service you provided. One of the things I determine is the location of the solopreneur’s office and whether they are meeting with clients or potential clients in their office.

  • Home office where no clients or prospective clients visit may not need general liability depending on the work or service provided. General contractors and trades should carry GL regardless of where they office.
  • Office or retail space whether traditional, co-located, or an executive suite usually necessitates carrying GL. Most property managers will require it. This even applies if you’re hosting a seminar or training in a rented space such as a hotel ballroom.

Common GL limits may be expressed as a single number ranging from $100,000 to $1,000,000 or more or as two numbers. The first number is the per occurrence limit and the second number is the aggregate limit. For most solopreneurs, a $1 million per occurrence and $2 million aggregate limit are sufficient.

Business Owner’s Policy or BOP, is usually a packaged policy which includes GL and other coverage such as:

  • Business Personal Property (BPP) includes office furniture, phones, computers, office supplies, etc.
  • Personal and Advertising Injury protects you if state something inaccurate in an advertisement, use a photograph not licensed to you, make an unsubstantiated claim, etc.
  • Damage to Premises Rented to You covers you to repair any damage to rented space you or a client caused. If you rent an office or retail space, you need this included.
  • Products and Completed Operations applies if you are selling products as a part of your business including reselling third party products such as appliances you install, computer and networking equipment, etc.
  • Medical Coverage to help pay for initial care for a non-employee injured on your premises.
  • Hired and Non-Owned Auto is an option which should be added if you rent a car while on a trip and take a client or prospective client out for lunch, dinner, etc. It even protects you if you send a limo or chauffeured driver to pick someone up.

Not all BOP policies contain all the above coverage so determine what you need and then confirm whether it’s included.

Professional Liability or Errors and Omissions (E&O) insurance protects solopreneurs who provide a service for a fee.  E&O insurance provides coverage for judgments, settlements, and defense costs if the business owner is sued for delivering or failing to deliver a service that meets the expectations of a client.  I recommend E&O coverage for consultants, wedding planners, freight forwarders, software developers, web designers, web hosting companies, photographers, advertising agencies, public relations professionals, commercial printers, social media firms, and many more.

Many solopreneurs don’t carry business insurance thinking they don’t need it, it cost too much, or they’ll avoid mistakes. Depending on what you do, if you’ve had prior losses, have employees, your annual revenue, and the amount of property your business owns, rates can range from a few hundred dollars to a few thousand. That’s not a lot to pay if something goes wrong!

What do you think?  Share your comments, questions, and experiences with me on my Facebook, Google +, and LinkedIn pages.  I’d love to hear from you! And if you need help with your social media, check out www.socialsuccessmarketing.com or connect with Ruby on Twitter, @SocialSMktg!

Thanks!

Ed Wise

Wise Insurance Group

 

 

 

#GetWiseInsurance

Hail’s Continued Impact on Texas Home Insurance

Posted by on Jul 24, 2017 in Blog | Comments Off on Hail’s Continued Impact on Texas Home Insurance

Hail’s Continued Impact on Texas Home Insurance

Summer’s here and while our hail storms are probably behind us, its impact continues to unfold for homeowners in the Dallas / Fort Worth metroplex and San Antonio. Home insurance companies paid an unprecedented amount in claims and tallied up losses from the storms. The impact goes beyond insurance companies balance sheets, it’s being felt by homeowners and buyers in both north and central Texas as insurance companies consider their options. The responses include moratoriums, increased deductibles, increased rates, and coverage shifts.

Moratoriums: A moratorium, as I addressed in a recent post is when an insurance company ceases writing new policies for a specific reason and period of time (see http://wiseinsurancegroup.com/tropical-storm-cindy-causes-insurance-moratoriums-along-gulf-coast/ for more info). One of our smaller carriers has issued a moratorium stating they will not issue new home insurance policies in Dallas, Tarrant, Denton, and Collin counties until further notice. This is a drastic measure that will not impact homeowners but may impact a small number of buyers. I don’t see, nor expect, any other companies to follow their lead.

Deductibles: A couple of smaller home insurance companies moved their wind / hail deductible from 1% to 2%. This happened last year so I was not surprised to see it repeated this year. Last year, this was a short-term move, though I believe more companies will consider implementing this over time. This is currently being done by some companies when they write the home insurance policy without the accompanying car policy. Others increase the wind / hail deductible from 1% to 1.5% or 2% when the roof is older than 9, 10, 15 years, etc.

Rates: Home insurance rates across north and central Texas have increased. I’ve seen some rates jump 20% to 30% in zip codes from Justin to Murphy, Texas due to the hail claims this and last year. I expect rates to continue to climb in zip codes which are more hail prone than others. This impacts all homeowners in these areas, whether they filed a claim or not. I believe the long-term trend is rates will continue to rise until we experience two or three years of little to no hail.

Coverage: Most carriers have implemented subtle shifts in home insurance coverage over the past few years. Some carriers will write a home with a metal roof but exclude cosmetic damage caused by hail. Others will limit their exposure by either not writing a home with a roof over 15 years old or only doing so on an actual cash value or depreciated basis instead of replacement cost.

A couple of companies have introduced depreciation schedules based on the age of the roof. Each year a roof ages, the company pays a lower percentage of the replacement cost until the roof is not covered at all. I’m not crazy about this coverage, but at least they are publishing their depreciation schedules so policyholders will know the financial impact before they file a home insurance claim for hail damage.

The future should be interesting as home insurance companies grapple with how to deal with hail in Texas. I expect we’ll see more companies raise rates or deductibles, and tweak coverage in the coming year. It’s important for homeowners to compare their home insurance every two or three years instead of getting locked in to one company. As an independent insurance agent, I can at least advise a client of a better option to consider when we review their policy. What do you think? Share your thoughts, questions, and experiences with me on my Facebook, Google +, or LinkedIn page. I’d love to hear from you!

Thanks!

Ed Wise

Wise Insurance Group

Can You Really Get Car Insurance for $25 a Month?

Posted by on Jul 19, 2017 in Blog | Comments Off on Can You Really Get Car Insurance for $25 a Month?

Can You Really Get Car Insurance for $25 a Month?

My office is in east Dallas one of the melting pot areas of the metroplex. Across the street on both corners are two insurance agencies which advertise car insurance for as little as $25 to $30 a month. You may wonder if it’s a sweetheart deal that no one really gets, so I thought I’d answer the question in this post which wraps up a look at liability oriented car insurance. The answer is yes, no, and what are truly getting or giving up!

Yes, you really can purchase car insurance for as little as $25 to $30 a month. In the post I wrote two weeks ago, I contrasted full coverage versus liability insurance. Pure liability car insurance only carries bodily injury property damage coverage. There is no uninsured motorist, medical or personal injury protection, no roadside assistance, or rental car reimbursement (see http://wiseinsurancegroup.com/full-coverage-vs-liability-car-insurance/). Neither is there any comprehensive or collision coverage which is represented by a deductible.

This type of coverage is typically reserved for a cash car when if wrecked, you’re able to walk away from without any regret as you would over the loss of a disposable pen. It also means you are carrying the lowest possible limits in Texas which are 30/60/25. These numbers mean if you hit someone and are found to be at fault, the policy will pay up to $30,000 for medical care per person with a maximum of $60,000 total and $25,000 for damage to the other car. I only write these limits for clients who are struggling financially because even a new Honda Civic can cost more than $25,000

No, not everything is covered, as I mentioned above. If you do want uninsured motorist coverage, protection for a stolen car, or roadside assistance, you’ll need to add that. Add that coverage and your monthly rate will be more than $25 or $30. You obviously can’t get full coverage for that amount either which the finance or lease company will require if you are still making payments for a loan or lease.

Aside from giving up additional coverage you may want, the question is how well will such a company handle a claim. Some will handle them better than other companies. If you’re curious about who handles them well and who doesn’t, check out the Texas Department of Insurance’s web page, http://www.helpinsure.com//auto/index.html and click on company information chart. You’ll see who writes car insurance in Texas, their A.M. Best rating, and even their complaint index (anything over a 2 may be problematic).

Keep in mind, if you truly want and can live with pure liability insurance, you can buy it affordably from even the major companies and that may be just the peace of mind you want! What do you think? Share your thoughts, questions, and experiences with me on my Facebook, Google +, and LinkedIn pages. I’d love to hear from you!

Thanks!

Ed Wise

Wise Insurance Group

How Does Credit Impact the Cost of Your Insurance?

Posted by on Jul 17, 2017 in Blog | Comments Off on How Does Credit Impact the Cost of Your Insurance?

How Does Credit Impact the Cost of Your Insurance?

How would you like to pay less for your home and car insurance? I don’t know of anyone who wants to pay more than they need to! Most people I talk with realize paying less for their insurance is attainable simply by improving your credit, or insurance, score. People with good credit pay less for their insurance than someone with not so good credit.

Texas is one of several states which permits insurance companies to use credit as a factor in determining the rate you pay for home and car insurance. Some permit credit based scoring to be used on property insurance only such as home and auto, while other states allow it to be used on other policy types such as umbrella, life, and more.

This practice began about 15 years ago resulting from a study conducted at a Texas university. The study found people with poor credit are more likely to file an insurance claim than people with good credit, therefore, insurance companies determined that your credit score is a good predictor of future claim activity.  This is why people with good credit pay less for their insurance while people with lower credit scores pay more.

As I’ve talked with clients and prospective clients, there are two questions that are routinely asked:

  • What does credit have to do with a person’s home or car rate if they haven’t filed a claim? There is no link between prior claim activity; this is a predictor of future claim activity.
  • This practice seems to be unfair, penalizing people with a lower economic standing. I don’t disagree. There are many reasons a person can have poor credit such as medical issues and expenses, a layoff, divorce, etc. It’s the reality of insurance in Texas and to know that credit is a factor is to be able to do something about it.

The first step in improving one’s credit is to know what it is which is why I encourage people to order your free credit report each year. The free version won’t give you your FICO or numeric score but it will help you see what the three bureaus have noted on you. This can be enough information to clear up any incorrect items on your report.  I also recommend paying for the reports credit score versions of your reports.  Knowing your number can be very helpful in creating your goal to a better score.

Improving your credit doesn’t happen overnight, it takes time and discipline.  The reward for improving it has many financial benefits including paying less for your insurance! Share any suggestions you have for improving your credit, along with your questions and comments on my Facebook, Google +, and LinkedIn pages.  I’d love to hear from you!

Thanks!

Ed Wise

Wise Insurance Group

When to Drop Full Coverage on Your Car Insurance

Posted by on Jul 12, 2017 in Blog | Comments Off on When to Drop Full Coverage on Your Car Insurance

When to Drop Full Coverage on Your Car Insurance

I’ve had a couple of conversations over the past two weeks on the topic of when to drop, or not even start with, full coverage car insurance (for more on what is full coverage car insurance vs liability only coverage, see last week’s post http://wiseinsurancegroup.com/full-coverage-vs-liability-car-insurance/). Some believe in dropping full coverage when the vehicle’s loan is paid off while others use the car’s age to make that decision. Let’s look at these two criteria, as well as one more.

Loan Paid Off: If you took out a loan to buy your car, the finance company will insist you have full coverage car insurance to protect their loan. That’s why some car owners consider dropping full coverage once the loan’s paid off. Considering cars and trucks are more expensive and last longer, this may not be the best decision criteria.

The average cost of a new car in 2016 was approximately $34,000 and you have a loan for 5 or 6 years. Even if the resale value of the car has dropped 50%, you still have a vehicle worth about $17,000. If you did drop full coverage at that time, your annual savings may be $500 to $700. Paying that vs losing $17,000 or even $10,000 due to an accident doesn’t makes financial sense unless you’re able to absorb the loss financially.

Vehicle Age: Some people make the decision to drop full coverage once a car hits a certain age, such as 7 years, 10, years, or some other number. If cars were not as well made as they are now, that may be a perfectly good basis. However, I believe making the decision to drop full coverage just because a car or truck is 7 or 10 years old misses one key factor – the value of the car.

For example, Honda Accords made in 2006 and 2007, are currently listing for $7,000 to $8,900 on Auto Trader in the D/FW area depending on the mileage and trim level. Is it worth it to pay a little more to maintain full coverage for a car with a similar value as opposed to losing it in an accident where the vehicle may be totaled?

Vehicle Value: As you’ve already guessed, I believe the best criteria to use when considering dropping full coverage is the vehicle’s value. This will vary by individual. For some it may be when the car’s worth $2,000 or $5,000, but there is a value most vehicles will hit where the cost to keep full coverage doesn’t make sense.

For example, one of my clients purchased an older vehicle for $600. That clearly doesn’t make sense to have full coverage on it so we went with liability coverage. For another prospective client, his vehicle is worth maybe $2,500 to $3,000. For him, it made sense to look at carrying on liability car insurance. In both cases, the risk of losing their cars was worth the savings to have liability only coverage.

What do you think? Share your thoughts, questions, and experiences with me on my Facebook, Google +, and LinkedIn pages. I’d love to hear from you!

Thanks!

Ed Wise

Wise Insurance Group