Know Your Auto Insurance Needs If You Plan to Lease

Posted on February 21, 2012 by Brian Hendricks

While approximately 80 percent of car buyers either pay cash or finance their purchase, you’re considering joining the other 20 percent who are willing to forgo ownership and lease their next set of wheels. Perhaps you’re self-employed and able to deduct your lease payment as a business expense. Or maybe you’re trying to step up to a luxury model for less upfront cash.

Whatever your reason, if you do decide to lease, keep in mind that the amount of insurance protection you need will likely be more than if you decided to purchase. When you lease, your vehicle belongs to the leasing company. They want to ensure their investment is covered should you have an accident that damages or destroys the vehicle, or if the vehicle is stolen. They will also want you to carry sufficient liability coverage in case you are found to be at fault for an accident. This not only protects you from financial disaster, but also covers the leasing company if they should be held partly responsible in a lawsuit. While all 50 states have different requirements, on average, the minimum liability insurance coverage for most states is about one quarter of what leasing companies usually require.

You will also be required to maintain collision and comprehensive coverage, which pays for damages resulting from fire, theft, vandalism, civil riot, and collisions with animals. While you generally have a choice of deductibles, your lease contract may stipulate a dollar cap on the deductible amount.

Your lease contract may also include what is known as “gap insurance.” If you wreck your car, this insurance pays the difference between the outstanding balance on your lease and the claim payment from the primary insurer.

After a major accident in which your car is badly damaged, the insurer has the option of “totaling” the car and paying you or the leasing company the actual cash value of the car, or repairing it. Without gap insurance, if the car is totaled, even after the leasing company receives the claim proceeds from the insurer, you may still not have satisfied your lease contract.

If your lease contract does not include gap insurance, you should consider purchasing it on your own. Otherwise, you could find yourself paying for a car you no longer drive in addition to paying for a replacement vehicle.

If the insurer decides to repair your car, make sure the repairs won’t cause problems for you at the end of your lease. Most lease contracts stipulate that you’re responsible for “excess wear and tear.” This phrase makes you responsible for any damage to the car, even that which was previously covered by your insurance.

To avoid repercussions resulting from the repair of your vehicle, be sure that all of the paint matches, the tires match, and that repairs were completed with original equipment manufacturer (OEM) parts. If the car isn’t returned to the leasing company in its expected condition, you may be responsible for the cost of additional repairs.

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Is Your Golf Cart Properly Insured?

Posted on February 20, 2012 by Brian Hendricks

People are increasingly using golf carts for more than just golf. Many homeowners use them around their properties or even to travel to neighboring properties. For example, a couple may own a vacation home in a gated community located in a rural waterfront area. They have a golf cart that they use on the roads within the community to shuttle between their neighbors’ homes. The cart may suffer damage in some way or even be destroyed in a collision or fire. Also, it may injure another person or damage someone’s property; for example, it could roll over a person’s foot if the user has not parked it correctly. If something like this occurs, the cart’s owners need to have proper and adequate insurance.

Most homeowner’s insurance policies cover liability for injury or damage caused by use of a golf cart under specific conditions. They cover use of a cart while the user is playing golf on a golf course. They also cover her while using a cart for other leisure activities permitted by the golfing facility, while traveling to or from the golf cart storage area at the course, and while crossing public roads to get from one part of the course to another. Finally, it covers her while the cart is inside a “private residential community” that includes her residence, if the community has authority over the roads and has permitted the use of golf carts on those roads. For example, the gated community may designate certain roadways for golf cart use. If the vacation home is in that community, she has coverage for injury or damage she causes with her golf cart while on those roadways.

The policy will provide coverage for damage to a cart the policyholder owns only if she uses it to service her residence. Most people with golf carts use them for other purposes, so the homeowner’s policy offers little protection. However, a policy change (called an “endorsement”) can supplement it. The Owned Motorized Golf Cart – Physical Loss Coverage endorsement covers golf carts designed to carry four passengers or less and not designed or modified to go faster than 25 M.P.H. on level ground. It covers damage resulting from a wide variety of causes, including fire, theft, vandalism, and others; collision coverage is available as an option. The insurance company will pay for the cost (above the deductible) of repairing the cart or the cost of replacing it minus depreciation.

Another alternative is to ask for coverage to be added to an auto insurance policy. The Miscellaneous Type Vehicle Endorsement covers golf carts, and the policyholder can choose to cover the vehicle for some or all of the coverages that apply to cars on the policy. This coverage may be much broader than what the endorsement to the homeowner’s policy provides. For example, the auto endorsement can provide uninsured motorist coverage and No Fault coverage (if the policy is purchased in a state with a No Fault insurance law). However, not all auto insurance companies offer this; an insurance agent should be able to give advice on which companies will do so. It may be necessary to buy a separate policy for the golf cart if the auto insurance company declines to cover it.

Like any other type of machinery or equipment, a golf cart can offer great convenience, but can also involve the user in an accident. The financial costs of an accident can be significant. A homeowner who owns a golf cart should speak with an insurance agent about getting the insurance protection that makes the most sense for her.

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Insuring Your Student Away at College

Posted on February 19, 2012 by Brian Hendricks

Sending a child off to college is always an exciting and anxious time for parents. They worry about their child’s safety, whether she has everything she needs, how she’ll get along with her roommates, and whether she’s ready for independent living. Between making sure that textbooks and supplies have been purchased, tuition bills paid and course registrations completed, it’s natural that parents won’t think about insurance considerations. However, accidents can happen at college just as easily as they can at home, so it’s worth taking a few minutes to think about insurance coverage.

A homeowner’s insurance policy may not cover a part-time student or one over a certain age. For example, policies often state that a person has coverage if she is a full-time student and was a resident of the policyholder’s household before moving out to attend school. They also limit coverage to students who are either under the age of 24 and related to the policyholder or in the policyholder’s care and under the age of 21. This could become an issue when the child is attending college at a later age, or at graduate school, law or medical school, where students are often in their mid-twenties. The parents should discuss this with an insurance agent and consider asking for a change to the policy that would eliminate these restrictions.

A typical policy covers the student’s belongings while at college, but limits coverage to 10 percent of the amount of insurance covering the parents’ personal property. For example, if the policy shows a limit of $100,000 for coverage of personal property, it will cover the student’s property up to a maximum of $10,000. If this amount of insurance is too low, parents should consider higher limits.

Many colleges require students to own a laptop computer. A standard homeowner’s policy will cover a laptop, but only for a small number of causes of loss. These include perils like fire, theft, lightning, explosion, and vehicle damage. The policy does not cover damage from someone dropping the computer, spilling a beverage on it, or damage to its circuitry from a power surge. However, many insurance companies offer special computer coverage that will pay for damage from these types of accidents. An agent can explain to the parents what the coverage includes and how much it will cost.

The homeowner’s policy will also cover the student’s liability for any injuries or damages she may cause to others while at school. For example, the policy would pay for repair or replacement of dormitory furniture that she may accidentally damage.

If the student brings a car to college and the parents’ auto insurance policy lists it, the student will have coverage for its use. Of course, the student could also buy her own policy. If she does, she should buy liability coverage in an amount at least equal to what the parents have. Purchasing only the minimum limits required by state law could leave her owing a large amount out of pocket if she causes serious injuries to others in an accident. If she doesn’t bring a car with her, the parents’ policy will cover her while using someone else’s car unless it’s regularly available to her. The car owner’s policy should also provide her with coverage.

Parents’ insurance policies will automatically cover many student situations. However, parents should read their policies to verify the coverage they have. A discussion with an insurance agent is in order if anything is unclear or appears inadequate. A little bit of advance checking can save a lot of worry and expense later.

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Does Your Auto Insurance Policy Cover Your GPS?

Posted on February 18, 2012 by Brian Hendricks

If you’ve recently gone somewhere on vacation and your car did not have a Global Positioning System (GPS), you probably wish it did. GPS systems have become increasingly popular as their prices have dropped. Navigationally challenged drivers who used to decipher hard-to-read maps can now rely on these small devices to help them reach their destinations. However, the popularity of GPS devices makes them particularly attractive to thieves. They are also susceptible to damage in car crashes, like any other item in a car. How will an auto insurance policy cover a stolen or damaged GPS?

Unfortunately, standard policies provide little or no coverage for a GPS. Many older policy editions explicitly state that they do not cover losses to any electronic equipment that receives or transmits data signals. A GPS would seem to fall within that description. More recent policy editions do cover electronic equipment, but only if it is permanently installed in the vehicle. These policies provide a small amount of insurance for electronic equipment; $1,000 coverage is typical.

It is possible to buy additional coverage for GPS devices. Any car owner with equipment worth more than $1,000 should speak with her insurance agent about buying a special policy form. It increases the coverage to a specific amount shown on the form. Typically, insurance companies will not offer more than $5,000 coverage.

If the policyholder has an older edition of the policy, she will need a different form to cover a GPS. This form covers sound reproducing equipment; audio, visual and data electronic equipment; and tapes, records and disks while in a vehicle. A GPS device falls within the data electronic equipment category. Coverage applies if the unit is permanently installed in the vehicle or if it is removable from a permanently installed housing unit, designed to be powered solely by the car’s electrical system, and in or upon the car at the time of the loss. The form provides coverage for devices in cars the policyholder owns and those she rents or borrows. As with the other form, she can buy coverage in amounts up to $5,000.

The additional premium for this coverage is normally small. A rate of $4 for every $100 of coverage is typical. For example, the cost for $2,500 of coverage might be around $100.

As car buyers ask carmakers to add more and more gadgets to cars, insurance coverage for those gadgets will continue to evolve. It is unwise to assume that an insurance policy automatically provides much coverage for these gadgets. All insurance buyers should carefully review their policies and ask their agents questions if GPS coverage is a concern. With a GPS and the right insurance coverage, a driver can be confident that she’s going in the right direction.

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Understanding When Your Coverage Ends

Posted on February 16, 2012 by Brian Hendricks

Roy is a retiree who owns two cars – one that he drives during the winter, the other for the warmer months. He keeps license plates on only one car at a time. When the time comes to take one off the road and put the other one on, he visits his local motor vehicle bureau’s office, fills out a form and transfers the license plates. Last spring, he phoned his car insurance agent on a Tuesday and informed the service representative that he would be switching the plates that Friday. He asked her to remove coverage from the old vehicle and add coverage to the new one, with the changes to take effect on Friday. The service rep ordered the policy change as he requested.

On Friday morning as Roy drove to the motor vehicle bureau, he changed lanes without checking his blind spot. His car struck a vehicle in the right lane, damaging it and his car. He notified his insurance agent at once, the agent notified his insurance company, and the company promptly told him that he had no coverage. Roy, already not in the best of moods, demanded an explanation.

Why did Roy not have the insurance coverage he expected? The answer lies in the instructions he gave his insurance agent. The standard practice in the insurance industry is for coverage to both begin and cease at 12:01 AM on the effective date. For example, an auto insurance policy that takes effect on January 1, 2009 will state on its information page that coverage will begin at 12:01 AM on January 1, 2009 and end at the same time on January 1, 2010. Further, when an insurance company sends a formal notice to a customer that it is canceling his policy, the notice always states that the policy will cancel at 12:01 AM on the specified date. The purpose of this is to set clearly defined moments when coverage begins and ends. By setting the time at 12:01, there can be no doubt as to the date when that moment occurs.

When Roy asked his agent to remove coverage from the first car on Friday, his insurance on that vehicle ended at 12:01 AM Friday. Unfortunately, he was still using it; his accident occurred several hours later. Unbeknownst to him, he was driving an uninsured vehicle at his own request.

This problem is not limited to auto insurance. Suppose John and Mary Smith are selling a house and buying another one. Closings on both sales are scheduled for June 15. If John and Mary cancel the homeowner’s insurance policy covering the first house effective June 15, they are without coverage on it after 12:01 AM, even though they have not yet closed on the sale. If a window were to break in the early morning hours and allow rain to enter the house and damage carpeting, John and Mary have no insurance to pay for the new carpeting their buyers will expect.

Anyone selling a house or a car or taking a car off the road should ask the insurance company to remove coverage the day after the sale. He needs coverage on the property while he has ownership, even if it is only for a fraction of the day. If he has any doubts about the right time to remove coverage, he should discuss it with his insurance agent. While he may end up paying for insurance that he doesn’t need for a few hours after he sells the property, it is a small price to pay for avoiding an uninsured loss.

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