Everyone knows “that guy” whom you wouldn’t trust behind the wheel of your car, even in a matter of life and death. For the truly unfortunate, “that guy” is a member of your household—and looks not only to your vehicles as a source of transportation but also to your auto insurance as a source for coverage.
Personal auto policies can be extremely broad, extending coverage for not only members of your household but others while using your auto with your permission. The broad nature of the policy is excellent from a coverage perspective, seeing as driving other cars is an accepted habit in our society. A common course of action is for the auto insurance company to pay the claim if the person driving the car at the time of the accident is you, your spouse, family member, or a permitted user. The company will then adjust your policy to reflect for the increased risk of damage or worse, issue a notice of non-renewal. The latter makes it more difficult to obtain comparable auto insurance from another company. Over time, many auto insurance companies have attempted to put the kibosh on the driver free-for-all, creating specific amendments, typically called exclusions, to policies that eliminate coverage for specifically named people. These exclusions are placed on policies by companies that determine—through information you provide and general driver information—that a person with access to your vehicle is too risky. So what kind of red flags do insurance companies notice? In most personal policies, exclusions are designed for people with lousy driving records or who have been convicted of certain traffic-related crimes, such as DUI. Some companies have even drafted exclusions intended to eliminate coverage in cases where an insured person knowing allowed someone with a suspended license drive the car. Others have gone as far as to try to limit coverage to apply only to accidents caused by drivers who are licensed—a scary thought for parents of teens who are cruising nervously around parking lots learning manual transmission. Other exclusions seek to remove coverage for damage to the vehicle itself caused by a collision while continuing to extend ever-important liability coverage for injuries or damage to a third party. As stated earlier, the good news is that most personal auto policies will apply to the persons specifically named on the policy, their family members and others using with permission if involved in an accident. However, the fact that such exclusions are available should remind you of the importance of reviewing your policy with Jon Jepsen at SentryWest Insurance, your Trusted Choice® insurance professional, before letting someone else drive your car. You don’t want to end up paying damages out-of-pocket. Just when you think you can still hang out at the club or with friends all night, your kiddies grow up and make you feel old (better yet, more mature). Before you know it, 10pm begins to feels like 2am. Last week, an old high school friend (yes, we’re approaching old now) was complaining about the increased cost of her personal auto insurance premium due to adding her first teen driver. I sent her a couple of links from TrustedChoice.com that shed some light on the situation. Below is one of those articles. It’s a good article if you have concerns about insurance costs for your teen driver.
Have a read: The only thing more stressful than giving your teen-aged child the keys to your car for the first time is giving them the keys to their own car. Teenagers lead busy lives. Whether your child needs to be able to drive directly from school to a part-time job or needs transportation to sports practice sessions and other activities, sometimes it is necessary that they have a car of their own. So how do you, as a parent, make the best decision about which car to buy? The following are some frequently asked questions posed by people in your situation. Should I buy a new or a used car? Many parents grapple with this question before purchasing cars for their children. On the one hand, insurance rates will be higher for new cars, but on the other, these cars may have fewer maintenance and reliability issues. There is no right or wrong answer to this question. What it boils down to is your own personal preference, how much you are prepared to spend on a vehicle and the likelihood that your child will treat this large purchase as the investment that it is. What should I look for if I’m buying a used car for my teen? Many parents do not want to spend a lot of money on their child’s first car. Insurance rates for teen drivers will already be very high, and putting them behind the wheel of a new car will only exacerbate these costs. This is why the majority of parents elect to purchase used cars for their kids. When shopping for a used car, it may be best to purchase it from a lot where the vehicle will be dealer-certified and will come with a limited warranty. When you purchase a used vehicle from a private seller, you may be unaware of the car’s history as well as whether it has safety or reliability issues. If you find a private seller that is offering a deal that you feel is too good to pass by, insist on being permitted to have it looked at by a mechanic before you make the purchase. What should I look for when purchasing a new car for my teen? If money is no object, or if you just feel more secure knowing that your child is behind the wheel of a new car, keep in mind that some studies have shown that brightly colored cars are the easiest to see on the road. The AAA Foundation reports that studies have shown:
Also, you may not want to skimp on optional safety features. Adaptive headlights and rear-view cameras may seem like luxury additions, but for an inexperienced teen driver, they may prove vital. While adding optional safety features may increase your purchase price, you may be able to recoup a portion of these costs in the form of reductions on your insurance premiums. What is the safest type of car to buy? Above all else, the safety of your child is extremely important. Safe driving habits, including seatbelt use and avoidance of cell phones while driving, are important; it’s also important to be behind the wheel of a safe vehicle. Regardless of the type of vehicle you give your child, keeping it well-maintained is crucial. While subcompact cars are efficient and inexpensive, they may not be he best choice for teen drivers. These vehicles have very small crumple zones and are therefore the least safe in a collision. Some parents feel that sport utility vehicles are ideal for their teens as many have all-wheel drive and these larger vehicles fare well in collisions. However, SUVs have a high center of gravity which makes them prone to roll-overs and many do not hold up well in accidents that test their roof strength. Sports cars look great but many are very powerful. With a teen-driver behind the wheel, insurance rates will be very high as accidents are more likely. Your child may also be tempted by a convertible, but these cars have weak roofs that may lead to excessive injuries in the event of a collision. Your child may not want to hear it, but a simple sedan is typically the best option. A recent study done by the Lawrence Berkeley National Laboratory found that in traffic accidents involving male drivers under the age of 25, the vehicles in which the driver was least likely to suffer fatal injuries were:
The vehicles in which the driver was most likely to suffer a fatality were:
Before purchasing any vehicle, be sure to check out its safety ratings by consulting the Insurance Institute for Highway Safety (IIHS) and the National Highway Safety Administration (NHSA). These groups put vehicles through rigorous safety testing and publish their results on their websites. How do I know if the car I am purchasing is reliable? You do not want your child to be stranded somewhere because a vehicle will not start or because it breaks down on the side of the road. Keeping your car well-maintained and getting it inspected annually will go a long way toward ensuring its reliability. Some cars, however, are known to have problems. If you are purchasing a used car, you will be able to easily look up the model’s reliability ratings. Less-reliable cars will be priced lower, but when it comes to your child, this is probably not an area where you will want to be trying to save money. If you are purchasing a new car, you will need to base its potential reliability on the maker’s track record. Be sure that your child knows what to do in the event of a break down. Also, if your insurance provider offers roadside assistance as a coverage option, you may want to seriously consider purchasing it so that your child will have a number to call in an emergency. Is my insurance going to skyrocket? It is an unfortunate fact that teen drivers are among the most likely to be involved in motor vehicle collisions. In fact, the CDC reports that 16 to 19 year old drivers are the group most frequently injured in car accidents. This is due in part to driver-inexperience and in part to distractions and careless behavior. When you add a teen driver to your insurance, you can expect your rates to rise significantly. If your child has the opportunity to enroll in a defensive driving course, encourage doing so. Not only will these courses provide your teen with the tools and knowledge needed to be a safe and defensive driver, course completion can also lead to discounts on your insurance rates. Additionally, some insurance providers will offer discounts to teens who get good grades in school or who go away to college but leave their cars at home during the school year. Be sure to speak with a representative at your insurance company to learn how you can keep your costs at a reasonable level. Should the age or value of your car make any difference to the cost of your auto insurance? For some insurance coverages, the answer is no.
Take liability coverages, for instance. These are the limits that protect you when you injure someone or someone else’s property with your car and are being held liable for the damages. It doesn’t matter whether you run over someone with an old clunker or a new SUV. And you will need liability insurance to cover your legal costs and pay the damages if you are found responsible. Medical coverages? Uninsured or underinsured motorist coverage? Again, it does not matter if you or your passengers are injured in a 1979 Dodge or a 2002 Mercedes. These coverages are still necessary. The only coverages you should consider altering simply due to the age or value of your vehicle are the ones that will actually pay for damages or loss of your car. For example, if your car is stolen and never recovered, your insurance carrier owes you the actual value of your car less any deductible. If your car at the time of the theft is worth $11,500 and you have a $250 deductible, your insurance should pay $11,250. If you have an old car worth $1,150 with the same $250 deductible, you are due only $900. Quite a difference! And the math works the same for a collision or any other type of covered damage. Naturally the price you pay for your physical damage coverages goes down along with the value of your car. And as long as you still are making car payments, the bank will require you to keep these coverages in effect. Once you pay off the car loan, consider if the amount you may receive for a total loss (minus your deductible) is worth the premium. One rule of thumb is to consider the car’s remaining useful life. Multiply the number of years by the annual premium. Compare that to how much you will receive for a total loss. How good a deal do you think it would be to keep paying that part of the premium? This is totally subjective. Consider your peace of mind. Even a car that some consider worthless is worth insuring if the loss would cause you to lose your sole method of transportation. Even if your insurance didn’t pay much, if it is enough to get you into another car that meets your needs, then that is a price that may be worth paying. How do you know how much you will get for a total loss? Generally insurance companies will look at common references for valuing vehicles, such as the “blue book” or average price a similar vehicle is selling for in your area. Contact me, Jon Jepsen at SentryWest Insurance of Salt Lake City, Utah (a Trusted Choice® insurance professional) about what guidelines your particular insurance carrier will use and plan accordingly. Physical damage to your old car is the one place in your personal auto insurance it may actually make sense to minimize or eliminate coverages. You not only face getting less money from a settlement, but if you are like many, a scratched fender may not seem nearly as important to fix when the rest of the car is being held together with duct tape. |
AuthorJonny Jepsen, CIC Categories
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