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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...

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Vacant Remodel vs Builders Risk Insurance

Vacant Remodel vs Builders Risk Insurance

A couple of weeks ago, I wrote about insurance for fixer uppers and homes being remodeled and mentioned vacant remodel and builders risk insurance (see http://wiseinsurancegroup.com/home-insurance-remodels-fixer-uppers/). I touched on a couple of their differences but wanted to dive a little deeper into how they are alike, how they are different, and when one may be a better fit than the other. Both builders risk insurance and vacant remodel policies are designed to cover the value of the existing home while it’s being remodeled, as well as the increased value when renovations are complete. Additional similarities include: They provide coverage for common perils such as damage from fire, lightning strike, water, etc. The cover the vacant home during the remodel process and replaced with a home insurance policy when the project’s complete. Personal liability and medical coverage are usually included. Neither covers damage or theft of tools. Both can be written to last up to a year or for a shorter term such as 90 days or 6 months. Vacant remodel and builders risk insurance policies also have their differences which help me determine which one to recommend to a prospective client. These include: Most vacant remodel policies do not provide coverage if structural changes will be made to the home while many builders risk policies will cover them (Note, underwriters will require documentation from a structural engineer before quoting). Structural changes include moving or removing walls, adding a story or wing, etc. Builders risk policies may provide optional coverage for materials, appliances, fixtures, etc. while in transit or stored on-site. Builders risk policies can be written for ground up or all new construction while vacant remodel policies are designed for remodeling of an existing home. Based on the strengths and differences of these policy types, I usually recommend vacant remodel policies when the following circumstances are present: The remodel project will be completed in 30 days to 6 months. The project involves a cosmetic remodel to an existing home. Conversely, I believe builders risk insurance provides a better fit when: For projects lasting 6 months or longer. Projects involving structural changes. Ground up construction whether an all new home on a lot or when tearing down an existing home and building an all new home. When coverage for materials, appliances, and fixtures is needed. Pricing can be comparable between a vacant remodel and builders risk policy or significantly different. This is why I review both types when quoting a prospective client’s project. 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 Share...

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