A new series of low-speed crash tests shows that fender benders can be wallet busters.
The Insurance Institute for Highway Safety has released cost estimates for the kind of accident that can happen in a parking lot or commuter traffic, when cars are traveling 6 miles per hour.
It found only three midsize cars -- the Mitsubishi Galant, Toyota Camry, and Mazda 6 -- came away with damage of $1,500 or less from each of the four crash tests that checked for damage from front, rear, front corner and rear corner collisions. The Institute tested 17 midsize cars in the low-speed test.
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Meanwhile, four vehicles saw damage of $4,000 or more from a low-speed front-end collision.
The Volkswagen Passat had the most expensive repair bill at $4,594, followed by the Pontiac G6 from General Motors, which cost $4,588 to fix.
Next was the Nissan Maxima with $4,535 in damage, and the Hyundai Sonata, which ended up with a $4,312 repair bill.
The Institute is a nonprofit group funded by the nation's insurers which aims to reduce the losses -- deaths, injuries, and property damage -- from vehicle accidents.
It was critical of changes in the federal government's low-speed crash standards, which it said were weakened in 1982 during the Reagan administration. It said the older vehicles performed much better.
To demonstrate, it included a 1981 Escort from Ford Motor in the test, and it had by far the lowest repair costs. The front corner and rear corner crashes produced no damage, and the cost to repair the front accident was only $86, while the rear collision repair bill came to $383.
Friday, June 29, 2007
Need a Tow? Watch Your Insurance Bill
Imagine you're having a really bad week: Monday, your tire blows out. Tuesday, you lock your keys in the car and Friday, your car battery dies.
Lucky for you, you added an emergency roadside assistance extension to your insurance policy. Think your problems are solved? Think again.
Using an insurance policy's roadside assistance program may seem like an ideal, inexpensive way for consumers to protect themselves against unexpected breakdowns and embarrassing lock-outs.
But buyer beware: insurers keep track of your roadside assistance claims and in some cases, you may find yourself paying a higher premium if your car blows a tire one too many times.
Auto insurers such as Allstate, State Farm, Geico and Progressive offer policyholders the opportunity to add roadside emergency services to their existing policies at a fraction of the cost of independent motor club programs, such as American Automobile Association (AAA) or Allstate Motor Club -- which are open to all consumers and can cost between $45 to over a $100 a year.
By comparison, those insurance policyholders that have added on emergency roadside services through their carrier can receive basic assistance such as towing services, jumpstarts, tire changes, lockout services or gas delivery for as little as $3 to $10 for a six-month policy period -- an attractive price for services you hope you won't have to use too often.
But what you may not know is that many insurers consider roadside assistance claims as one predictor of risk, which can impact premiums.
"Insurance companies have a huge amount of data at their disposal which they use to find correlations to loss history," said George Yates, president of Dayton Ritz & Osborne, a Long Island-based insurance agency.
"If an insurance company could determine eye color correlates with loss history, they'd use it to determine rates. It doesn't always make sense logically and may not always be politically correct but if they can determine a correlation, they'll use it."
Insurers consider a bevy of risk variables when attempting to quote a price on a policy, said Insurance Information Institute spokeswoman Loretta Worters.
"The type of car you drive, your driving record, where you live, your credit history...all that information helps companies measure risk so that they can charge customers a fair premium," she said.
While a one-time jumpstart is unlikely to raise any red flags for insurers or send underwriters running to raise rates, consumer usage of the emergency roadside service will be compared to other variables when insurers are determining a risk profile for a policyholder.
Keeping an eye on towing claims
Spokesmen for State Farm and Allstate -- two of the largest auto insurers in the country -- said their companies take note of roadside emergency claims but the use of those services would only impact a policyholder's premiums if there were multiple claims alongside a number of other risky variables.
"The chance that one of those claims would have an impact premium-wise is probably very minimal," said State Farm spokesman Dick Luedke. "But there is a correlation between those claims and auto insurance risk."
And consumers should know that, in some cases, any claims made under the add-on roadside assistance coverage can be reported as a towing and labor claim.
Towing claims are reported to a national database run by Atlanta-based ChoicePoint, which provides insurers with claims information on consumers to help insurers process insurance applications.
Insurers generally use that information to double-check their applications and make sure an applicant has been forthcoming with their accident and towing claims history. From there, insurers can make pricing determinations.
Richard Collier, senior vice president and general manage of insurance data services at ChoicePoint, said the company does not include autoclub -- such as AAA or Allstate Motor Club -- claims in its database. He said ChoicePoint attempts to keep roadside service claims out of the database and has advised insurers not to submit any claims made under "autoclub type" services.
But Allstate spokesman Mike Siemienas said the company considers all usage of its roadside services -- from jumpstarts to tire changes to gas delivery -- as towing claims.
And that may put consumers at a disadvantage if an insurer sees a towing claim but can't determine whether that claim was made because a car was towed after an accident or if it was made because a driver got a flat tire.
While insurers won't reject an applicant or cancel an existing insurance policy due to towing and labor claims, those types of claims -- particularly if there are a number of them -- may impact a policyholder's premiums, according to the Insurance Information Institute.
Shop around
For those interested in roadside assistance coverage, which can be desirable protection to have in case the unexpected happens, it pays to shop around.
Not all insurers use roadside assistance as a pricing variable. Spokesmen for Progressive and Geico said the companies don't consider usage of their roadside assistance programs in determining rates.
And Geico spokesman Kevin Grenier said the company is also putting a halt to reporting any towing claims to ChoicePoint.
Motor clubs such as AAA and Allstate Motor Club -- which is run by Allstate but is not affiliated with the auto insurance coverage -- may be a good bet for some consumers.
Motor Clubs are pricier but they provide a wider range of services than just basic towing and breakdown help.
AAA provides discounts on car rentals and hotels as well as other travel-related services while Allstate Motor Club also provides members with services such as legal defense for moving violations and arrest bonds.
An added perk? Consumers can rest assured that any claims made will be kept private.
Lucky for you, you added an emergency roadside assistance extension to your insurance policy. Think your problems are solved? Think again.
Using an insurance policy's roadside assistance program may seem like an ideal, inexpensive way for consumers to protect themselves against unexpected breakdowns and embarrassing lock-outs.
But buyer beware: insurers keep track of your roadside assistance claims and in some cases, you may find yourself paying a higher premium if your car blows a tire one too many times.
Auto insurers such as Allstate, State Farm, Geico and Progressive offer policyholders the opportunity to add roadside emergency services to their existing policies at a fraction of the cost of independent motor club programs, such as American Automobile Association (AAA) or Allstate Motor Club -- which are open to all consumers and can cost between $45 to over a $100 a year.
By comparison, those insurance policyholders that have added on emergency roadside services through their carrier can receive basic assistance such as towing services, jumpstarts, tire changes, lockout services or gas delivery for as little as $3 to $10 for a six-month policy period -- an attractive price for services you hope you won't have to use too often.
But what you may not know is that many insurers consider roadside assistance claims as one predictor of risk, which can impact premiums.
"Insurance companies have a huge amount of data at their disposal which they use to find correlations to loss history," said George Yates, president of Dayton Ritz & Osborne, a Long Island-based insurance agency.
"If an insurance company could determine eye color correlates with loss history, they'd use it to determine rates. It doesn't always make sense logically and may not always be politically correct but if they can determine a correlation, they'll use it."
Insurers consider a bevy of risk variables when attempting to quote a price on a policy, said Insurance Information Institute spokeswoman Loretta Worters.
"The type of car you drive, your driving record, where you live, your credit history...all that information helps companies measure risk so that they can charge customers a fair premium," she said.
While a one-time jumpstart is unlikely to raise any red flags for insurers or send underwriters running to raise rates, consumer usage of the emergency roadside service will be compared to other variables when insurers are determining a risk profile for a policyholder.
Keeping an eye on towing claims
Spokesmen for State Farm and Allstate -- two of the largest auto insurers in the country -- said their companies take note of roadside emergency claims but the use of those services would only impact a policyholder's premiums if there were multiple claims alongside a number of other risky variables.
"The chance that one of those claims would have an impact premium-wise is probably very minimal," said State Farm spokesman Dick Luedke. "But there is a correlation between those claims and auto insurance risk."
And consumers should know that, in some cases, any claims made under the add-on roadside assistance coverage can be reported as a towing and labor claim.
Towing claims are reported to a national database run by Atlanta-based ChoicePoint, which provides insurers with claims information on consumers to help insurers process insurance applications.
Insurers generally use that information to double-check their applications and make sure an applicant has been forthcoming with their accident and towing claims history. From there, insurers can make pricing determinations.
Richard Collier, senior vice president and general manage of insurance data services at ChoicePoint, said the company does not include autoclub -- such as AAA or Allstate Motor Club -- claims in its database. He said ChoicePoint attempts to keep roadside service claims out of the database and has advised insurers not to submit any claims made under "autoclub type" services.
But Allstate spokesman Mike Siemienas said the company considers all usage of its roadside services -- from jumpstarts to tire changes to gas delivery -- as towing claims.
And that may put consumers at a disadvantage if an insurer sees a towing claim but can't determine whether that claim was made because a car was towed after an accident or if it was made because a driver got a flat tire.
While insurers won't reject an applicant or cancel an existing insurance policy due to towing and labor claims, those types of claims -- particularly if there are a number of them -- may impact a policyholder's premiums, according to the Insurance Information Institute.
Shop around
For those interested in roadside assistance coverage, which can be desirable protection to have in case the unexpected happens, it pays to shop around.
Not all insurers use roadside assistance as a pricing variable. Spokesmen for Progressive and Geico said the companies don't consider usage of their roadside assistance programs in determining rates.
And Geico spokesman Kevin Grenier said the company is also putting a halt to reporting any towing claims to ChoicePoint.
Motor clubs such as AAA and Allstate Motor Club -- which is run by Allstate but is not affiliated with the auto insurance coverage -- may be a good bet for some consumers.
Motor Clubs are pricier but they provide a wider range of services than just basic towing and breakdown help.
AAA provides discounts on car rentals and hotels as well as other travel-related services while Allstate Motor Club also provides members with services such as legal defense for moving violations and arrest bonds.
An added perk? Consumers can rest assured that any claims made will be kept private.
10 Answers for Health Insurance Options
As medical care has gotten more complicated, so has the variety of medical insurance options. You've got FSAs, or flexible spending accounts, and HRAs, or health reimbursement accounts, and even HSAs, health savings accounts. Which is best for you? Or should you ignore them all and just buy a medical discount card?You'll need to do some homework, particularly if it's all new to you. Check out Bankrate's story, "Sorting out your medical insurance options," to get a full picture.To help you sort it out, here are the answers to 10 questions you should consider before you make your choice.10 questions about FSAs, HRAs, HSAs and medical discount cards: FSA 1. Who pays? Employee, company or both. 2. How much money goes into them? Company sets limit. Employees decide how much to put into them within that limit. 3. Who owns it? Company. 4. Does the money in it generate interest? No. 5. Can you take it with you when you leave the company? No. 6. Do you have to repay anything if you leave the company before the end of the year? No. 7. Does unused money "roll over" and get added to account at the end of the year? IRS says no. 8. How does the IRS treat employee contributions? Usually not taxed. 9. How does the IRS treat reimbursements for medical treatment? Not taxed. 10. Can the money be used for nonhealth-care purposes? No. HRA1. Who pays? Company. 2. How much money goes into them? Company sets limit. 3. Who owns it? Company. 4. Does the money in it generate interest? No. 5. Can you take it with you when you leave the company? No. 6. Do you have to repay anything if you leave the company before the end of the year? No. 7. Does unused money "roll over" and get added to account at the end of the year? Up to company. 8. How does the IRS treat employee contributions? Does not apply. Employees do not contribute. 9. How does the IRS treat reimbursements for medical treatment? Not taxed. 10. Can the money be used for nonhealth-care purposes? No.HSA1. Who pays?Employee, company or both. 2. How much money goes into them? IRS sets limit. Company and employee each chooses how much to put in within that limit. The 2006 limit is $2,700 for individuals, $5,450 for families. People 55 or older can add $700. 3. Who owns it? Employee. 4. Does the money in it generate interest? Yes (tax free). 5. Can you take it with you when you leave the company? Yes. 6. Do you have to repay anything if you leave the company before the end of the year? No. 7. Does unused money "roll over" and get added to account at the end of the year? Yes. 8. How does the IRS treat employee contributions? Usually not taxed. 9. How does the IRS treat reimbursements for medical treatment? Not taxed. 10. Can the money be used for nonhealth-care purposes? Yes, but there is a tax penalty.MEDICAL DISCOUNT CARDS1. Who pays? Employee, but some companies do supply them. 2. How much money goes into them? Prices generally range from $10 to $40 a month, with different providers offering different discounts for health, dental and vision care. Some also offer prescription drug discounts. 3. Who owns it? Employee. 4. Does the money in it generate interest? There is no money in it. 5. Can you take it with you when you leave the company? Yes, if you paid for it. No, if it is a company-supplied card. 6. Do you have to repay anything if you leave the company before the end of the year? No. 7. Does unused money "roll over" and get added to account at the end of the year? There is no money in it. 8. How does the IRS treat employee contributions? Money spent on cards is taxed, but consult your tax preparer. 9. How does the IRS treat reimbursements for medical treatment? There are no reimbursements. 10. Can the money be used for nonhealth-care purposes? No
Health Care: Cut Your Costs with These Simple Steps
Don't stand by while health care costs keep rising -- an estimated 8% this year and next for most companies, about three times the cost of inflation. Employers and workers are finding that an aggressive, proactive approach can limit annual increases to about 2.5%.
More from Kiplinger's Personal Finance:• Health-Care Reform: It's Coming• Save Big With Generics• Health Savings Account Answers
What can you do? There's no magic bullet, no single step or trick that will work right away for all employers or workers. But a series of small, incremental steps can make a big difference, according to a recent survey by Watson Wyatt Worldwide of businesses that have limited cost increases in recent years.
Keep these basic principles in mind:
Prevention is crucial. Be aggressive in persuading employees to get regular checkups and enroll in disease management programs. Getting workers to care for their illnesses will lower the odds of expensive complications later on.
Give wage earners a stake in lowering costs. Financial incentives are a smart investment if they reduce the number of costly illnesses.
Pay attention to those most at risk, such as employees who smoke, are overweight or who have chronic problems, such as diabetes or heart conditions.
More specifically, many companies are finding that it pays to provide free prevention services, such as flu shots and mammograms. Some also cover the entire cost of drugs for low-income employees with chronic illnesses so they're more likely to take medicines that can control their disease. Marriott International pays for many generic drugs and cuts the cost of many brand-name medicines in half.
Other businesses reward pregnant women for joining prenatal nutrition programs. A premature birth with complications can cost a firm millions of dollars. Fiserv Inc. offers savings bonds to women who go for regular checkups and attend classes, with a big gift certificate when the baby is born.
Also popular are plans that offer incentives for weight-loss, fitness and stop-smoking regimens. IBM, for example, pays up to $300 a year to participants. Employers should be careful, though, to reward all workers for healthy lifestyles. Otherwise, they could inadvertently create morale problems and prompt complaints of unfair treatment.
The key to all efforts is making sure workers have the tools they need, including access to information. Provide specific data on the quality and cost of doctors in your area so employees can be smart consumers. Internet-based systems let them compare the prices and success rates of specific health care providers.
Another option is to charge for spousal coverage if the spouse works and is eligible for other insurance. A typical surcharge is $100 a month.
Health Savings Accounts are also effective in cutting costs. They're tax deductible when combined with a high-deductible insurance policy.
Most of these ideas will work for all businesses, but big firms have additional options. Some provide on-site clinics to make preventive care convenient, and many mine claims data for trends on illnesses. The data can help determine which disease management plans are needed.
More from Kiplinger's Personal Finance:• Health-Care Reform: It's Coming• Save Big With Generics• Health Savings Account Answers
What can you do? There's no magic bullet, no single step or trick that will work right away for all employers or workers. But a series of small, incremental steps can make a big difference, according to a recent survey by Watson Wyatt Worldwide of businesses that have limited cost increases in recent years.
Keep these basic principles in mind:
Prevention is crucial. Be aggressive in persuading employees to get regular checkups and enroll in disease management programs. Getting workers to care for their illnesses will lower the odds of expensive complications later on.
Give wage earners a stake in lowering costs. Financial incentives are a smart investment if they reduce the number of costly illnesses.
Pay attention to those most at risk, such as employees who smoke, are overweight or who have chronic problems, such as diabetes or heart conditions.
More specifically, many companies are finding that it pays to provide free prevention services, such as flu shots and mammograms. Some also cover the entire cost of drugs for low-income employees with chronic illnesses so they're more likely to take medicines that can control their disease. Marriott International pays for many generic drugs and cuts the cost of many brand-name medicines in half.
Other businesses reward pregnant women for joining prenatal nutrition programs. A premature birth with complications can cost a firm millions of dollars. Fiserv Inc. offers savings bonds to women who go for regular checkups and attend classes, with a big gift certificate when the baby is born.
Also popular are plans that offer incentives for weight-loss, fitness and stop-smoking regimens. IBM, for example, pays up to $300 a year to participants. Employers should be careful, though, to reward all workers for healthy lifestyles. Otherwise, they could inadvertently create morale problems and prompt complaints of unfair treatment.
The key to all efforts is making sure workers have the tools they need, including access to information. Provide specific data on the quality and cost of doctors in your area so employees can be smart consumers. Internet-based systems let them compare the prices and success rates of specific health care providers.
Another option is to charge for spousal coverage if the spouse works and is eligible for other insurance. A typical surcharge is $100 a month.
Health Savings Accounts are also effective in cutting costs. They're tax deductible when combined with a high-deductible insurance policy.
Most of these ideas will work for all businesses, but big firms have additional options. Some provide on-site clinics to make preventive care convenient, and many mine claims data for trends on illnesses. The data can help determine which disease management plans are needed.
Four Ways to Save on Car Insurance
When was the last time you reviewed your car insurance? If you are like most people, it was probably when you first purchased the policy and you have had it automatically renewed ever since.
If that is the case, or if you haven't reviewed your insurance in the past year, you are likely spending more than you need to on your auto insurance.
You should review your car insurance on a yearly basis. Many people like their current insurance company and don't want to switch. But even if you are perfectly satisfied with the insurance company, bringing in competitive offers from other insurers can help you negotiate a better rate. If you are willing to switch companies, you can likely save even more money.
Here are a few steps you can take to save money on your auto insurance:
1. Use the Internet
The Internet has greatly evened the playing field when it comes to insurance. It has increased competition between car insurance companies and given consumers a much easier way to compare rates and analyze coverage that insurance companies offer.
There are a wide variety of insurance comparison sites that you can use to compare rates. Simply use any search engine and plenty will show up. It pays to use several since they may contain different car insurance companies in their engines. All you need to do is input your information and if a better deal appears, you're on your way to saving money.
If you don't want to switch car insurance companies, take in your lower quote and explain that you don't want to switch, but have received a better offer. Your insurance agent will do everything in his or her power to get you a competitive price. From there you can choose whether to stay or go to the other company. Either way, you will be paying less on your insurance premiums.
2. Raise Your Deductible
Another way to lower your car insurance premiums is to raise your deductible -- the amount you have to pay before your insurance kicks in to cover a claim.
If you have $1,500 worth of damage to your car and a $500 deductible, you must pay the first $500 and the insurance company would pay the rest. While a lower deductible may sound preferable, it means you'll pay much more for the insurance -- even if you don't use it.
You should raise your deductible as high as possible, as long as you will have the money to cover it should you ever have an accident. Moving your deductible from $500 to $1,000 can knock up to 30% off your yearly car insurance payments.
3. Drop Collision and/or Comprehensive Coverage
You also need to take into consideration what your car is worth. If your car is older, you may be carrying too much collision insurance, which covers damage to the vehicle sustained in an accident, or comprehensive coverage, which covers the cost of the car if it is stolen or damaged in some other way.
If the car has a Kelley Blue Book value of $2,000 or less, you may want to drop these coverages altogether. It's important to run the numbers and compare what you will pay for the insurance vs. how much you could get back if you ever have to make a claim. Between the insurance payments and the deductible, you'll likely come out ahead without any collision or comprehensive coverage for an older, less valuable car, even if something happens to it.
4. Get a List of Discounts
You may be surprised at the number of things that can get you a discount on your auto insurance, many of which you probably never knew about. That is because many insurance agents won't always tell you all the discounts available unless you specifically ask for them.
Since each insurance company is independent of the others, some may offer specific discounts that others don't. Here is a list of some of the possible discounts:
Safe drivers: If you have had a safe driving record, it can qualify you for a discount.
Courses: Some companies have approved defensive-driving courses you can take to brush up on your driving skills that will entitle you to a discount. These courses can sometimes cost you a few dollars, but the savings outweigh the expense and can be applied to several years of insurance bills. Much like defensive-driving courses, a driver's education class may also qualify you for a discount.
Anti-theft and recovery devices: Some anti-theft devices, like steering wheel locks, will get you a discount on your insurance. Likewise, devices like LoJack or OnStar that help locate a stolen vehicle also can lessen your premium.
Seat belts: By signing a paper that indicates that you always wear your seat belt when driving, you can get a discount.
Passive restraint systems: If your car comes with passive restraint systems, you may be eligible for a discount.
Multiple vehicles: If you insure more than one vehicle with the company, the vehicles after the first car usually will be eligible for a hefty discount.
Multiple products: Most insurance companies offer more than just car insurance. If you also buy homeowner's, renter's or life insurance from the same company, you will usually get a discount.
Policy renewal: If you have been with the same company for a number of years, you may qualify for a discount when renewing your policy.
Senior citizens: Many car insurance companies offer discounts for senior citizens.
Low mileage: If you don't drive a lot, you can qualify for a discount.
Good students: Students that meet a certain grade-point average may get a discount.
Military service members: Those who serve in the armed forces can often get a discount.
Low-risk occupations: If you work in a job that is deemed a "low-risk" occupation by the insurance company, you may get a discount.
Professional organizations and clubs: If you belong to certain organizations such as AAA or AARP, you may qualify for a discount.
Credit score: Insurance companies have found a correlation between credit scores and claims. If you improve your credit score, you'll likely get a discount on your insurance.
Dependable cars: While this won't necessarily save you money at the moment, the type of car you own can have a dramatic effect on the cost of your insurance and is something to consider the next time you purchase a car. Choosing a safe, dependable car that doesn't have a lot of costly repairs can save you a lot in insurance payments over the years. Your insurance company can provide you with a list of cars that are the least expensive to insure.
By taking the time to review your car insurance rates yearly, you'll make sure that you save money and aren't paying more than you need to be.
If that is the case, or if you haven't reviewed your insurance in the past year, you are likely spending more than you need to on your auto insurance.
You should review your car insurance on a yearly basis. Many people like their current insurance company and don't want to switch. But even if you are perfectly satisfied with the insurance company, bringing in competitive offers from other insurers can help you negotiate a better rate. If you are willing to switch companies, you can likely save even more money.
Here are a few steps you can take to save money on your auto insurance:
1. Use the Internet
The Internet has greatly evened the playing field when it comes to insurance. It has increased competition between car insurance companies and given consumers a much easier way to compare rates and analyze coverage that insurance companies offer.
There are a wide variety of insurance comparison sites that you can use to compare rates. Simply use any search engine and plenty will show up. It pays to use several since they may contain different car insurance companies in their engines. All you need to do is input your information and if a better deal appears, you're on your way to saving money.
If you don't want to switch car insurance companies, take in your lower quote and explain that you don't want to switch, but have received a better offer. Your insurance agent will do everything in his or her power to get you a competitive price. From there you can choose whether to stay or go to the other company. Either way, you will be paying less on your insurance premiums.
2. Raise Your Deductible
Another way to lower your car insurance premiums is to raise your deductible -- the amount you have to pay before your insurance kicks in to cover a claim.
If you have $1,500 worth of damage to your car and a $500 deductible, you must pay the first $500 and the insurance company would pay the rest. While a lower deductible may sound preferable, it means you'll pay much more for the insurance -- even if you don't use it.
You should raise your deductible as high as possible, as long as you will have the money to cover it should you ever have an accident. Moving your deductible from $500 to $1,000 can knock up to 30% off your yearly car insurance payments.
3. Drop Collision and/or Comprehensive Coverage
You also need to take into consideration what your car is worth. If your car is older, you may be carrying too much collision insurance, which covers damage to the vehicle sustained in an accident, or comprehensive coverage, which covers the cost of the car if it is stolen or damaged in some other way.
If the car has a Kelley Blue Book value of $2,000 or less, you may want to drop these coverages altogether. It's important to run the numbers and compare what you will pay for the insurance vs. how much you could get back if you ever have to make a claim. Between the insurance payments and the deductible, you'll likely come out ahead without any collision or comprehensive coverage for an older, less valuable car, even if something happens to it.
4. Get a List of Discounts
You may be surprised at the number of things that can get you a discount on your auto insurance, many of which you probably never knew about. That is because many insurance agents won't always tell you all the discounts available unless you specifically ask for them.
Since each insurance company is independent of the others, some may offer specific discounts that others don't. Here is a list of some of the possible discounts:
Safe drivers: If you have had a safe driving record, it can qualify you for a discount.
Courses: Some companies have approved defensive-driving courses you can take to brush up on your driving skills that will entitle you to a discount. These courses can sometimes cost you a few dollars, but the savings outweigh the expense and can be applied to several years of insurance bills. Much like defensive-driving courses, a driver's education class may also qualify you for a discount.
Anti-theft and recovery devices: Some anti-theft devices, like steering wheel locks, will get you a discount on your insurance. Likewise, devices like LoJack or OnStar that help locate a stolen vehicle also can lessen your premium.
Seat belts: By signing a paper that indicates that you always wear your seat belt when driving, you can get a discount.
Passive restraint systems: If your car comes with passive restraint systems, you may be eligible for a discount.
Multiple vehicles: If you insure more than one vehicle with the company, the vehicles after the first car usually will be eligible for a hefty discount.
Multiple products: Most insurance companies offer more than just car insurance. If you also buy homeowner's, renter's or life insurance from the same company, you will usually get a discount.
Policy renewal: If you have been with the same company for a number of years, you may qualify for a discount when renewing your policy.
Senior citizens: Many car insurance companies offer discounts for senior citizens.
Low mileage: If you don't drive a lot, you can qualify for a discount.
Good students: Students that meet a certain grade-point average may get a discount.
Military service members: Those who serve in the armed forces can often get a discount.
Low-risk occupations: If you work in a job that is deemed a "low-risk" occupation by the insurance company, you may get a discount.
Professional organizations and clubs: If you belong to certain organizations such as AAA or AARP, you may qualify for a discount.
Credit score: Insurance companies have found a correlation between credit scores and claims. If you improve your credit score, you'll likely get a discount on your insurance.
Dependable cars: While this won't necessarily save you money at the moment, the type of car you own can have a dramatic effect on the cost of your insurance and is something to consider the next time you purchase a car. Choosing a safe, dependable car that doesn't have a lot of costly repairs can save you a lot in insurance payments over the years. Your insurance company can provide you with a list of cars that are the least expensive to insure.
By taking the time to review your car insurance rates yearly, you'll make sure that you save money and aren't paying more than you need to be.
Do you need life insurance now?
If you're saving money regularly now, will you still need your life insurance policy when you retire? And will the same policy you have today meet your needs after you leave your job? It's better to answer these questions sooner rather than later.
"This is not something to be thinking about the day before you retire," says Bruno Graziano, a senior analyst with CCH, a tax consulting firm in Riverwoods, Ill. Before you can figure out the future of your policy, however, it's important to understand the assets you have today.
Lilfe insurance checklist Understanding these points will help you determine if life insurance is necessary during retirement.
7 tips to determine your life insurance needs
1. Term insurance: cheap until you get older
2. Permanent insurance: a costly alternative
3. Understand federal estate tax rules
4. Shop around
5. Look beyond employer insurance
6. Don't expect insurance to replace retirement savings
7. Consider your settlement options
1. Term insurance: cheap until you get olderLife insurance is generally defined as either term or permanent, and there are several flavors of the latter, including universal, whole life and variable life. It's important to understand the basics of each type of product as well as their advantages and disadvantages.
With term insurance, a policyholder purchases insurance and pays premiums for a set period, typically 10-20 years. If the policyholder dies within that period of time, a death benefit is paid to the policy's beneficiaries. When the policy ends, it can usually be renewed for another term. However, as the policyholder gets older, the rates for term insurance usually increase and may become cost-prohibitive.
According to Bruce Udell, author of "Advanced Estate Planning, Simple Solutions to Complex Problems," 65-year-olds who want to buy policies with 20-year terms should expect to pay about three to four times more for coverage than if they were 50 years old. The advantage of term insurance is that even though premiums increase with the age of the policyholder, they are still cheaper than permanent life insurance.
A term policy purchased during the working years could be timed to expire when the insured is ready to retire. Once the term is over, however, there's no death benefit, and your beneficiaries don't receive any payout.
"One of the things you always have to look at with term insurance is what happens when the clock stops," says Ben Jacoby, a senior financial adviser with Brinton Eaton Wealth Advisors in Morristown, N.J. If you have enough money saved to fund your own expenses and your children are grown and aren't dependent on your income, then you probably don't need another policy.
"From an income protection standpoint, I don't see a need for most people to have life insurance at the point of retirement," says Brad Levin, a certified financial planner with Householder Group, a financial planning company in Encino, Calif. "If they do, they're probably going to need a policy for just a few years anyway. It would be cheaper for them to just find another term policy."
Term policyholders will likely have the option to convert their existing term insurance into a permanent one. To determine if it's worth it, check the language of your contract to find out when you can do it, how much more you'll pay in premiums, and if you'll need a medical exam to prove that you're healthy.
2. Permanent insurance a costly alternativeIf you anticipate that you will need insurance for several years longer than what term insurance offers, another option is to purchase a permanent policy. It could be kept for life as long as the premiums are paid. However, the premiums are much higher than comparable term insurance rates.
The premium is higher because part of it is placed in a special savings fund known as the policy's "cash value." Over several years of payments, the cash value amount adds up and earns interest.
"Eventually, you could stop paying the premiums and the cash value should support the policy for the rest of your lifetime," says Levin. This would be one less expense in a fixed income retirement.
"On the other hand, if the policy performed well according to expectations, you as the policyholder could be able to start taking loans against the cash value of the policy on a tax-free basis." As an example, a life insurance policy with a death benefit of $100,000 might build up a cash value of $25,000 after several years. The policyholder could then borrow some of that money, effectively generating an additional stream of retirement income. It's important to note that the death benefit could be significantly reduced if a loan is taken out, and withdrawing the entire cash value would effectively cancel the policy.
In order to keep the death benefit, the policyholder would have to repay the loan with interest. The insured would once again be making payments on the policy.
3. Understand federal estate tax rulesPermanent insurance can be a good estate planning tool for high net worth individuals if structured properly.
"The federal estate tax currently kicks in for estates above $2 million," and life insurance payouts figure into the equation, says Graziano. "Although the death benefit from a life insurance policy is excluded from the recipient's income, unless the policy is owned in the correct manner, the proceeds will be included in the estate for tax purposes."
Owning it "in the correct manner" means not owning it at all. "The life insurance policy should be in an irrevocable trust or owned by your children or somebody other than you, so that it's not taxed in your estate," says Udell.
If you already own a policy, transferring it to a trust after the fact is possible, but it can be tricky. "If the insured dies within three years of the transfer, the insurance proceeds are going to be drawn back into his estate just as if the policy had never been transferred," says Graziano. Work with an estate planning professional for specific advice. Other insurance products may be suggested, such as survivorship insurance (also known as second-to-die insurance), that are appropriate for estate planning.
4. Shop aroundNo matter how old you are, it's a good idea to periodically compare your life insurance policy to others on the market. "Every now and then the National Association of Insurance Commissioners changes the interest rates that are required to be used for guarantees in life insurance policies," says Udell. "It behooves you to shop your policy every five years, especially if you currently have cash value insurance. If you are in good enough health, you could get a cheaper policy."
Before making a switch, check the terms and conditions of your current policy. You'll probably have to pay surrender charges, and you might owe taxes after the transaction.
If you have a cash value policy, monitor its performance just as you monitor the funds in your retirement accounts. "Get an 'in-force ledger' from your insurance company every single year to make sure the policy is performing the way that it was illustrated," says Udell. "Otherwise, if the policy earns a lower interest rate than was projected at the beginning, the cash value could run out, and you'd have to start over with a new policy."
An alternative option is to buy insurance that has a guaranteed payout, but the premiums would be higher.
If you want another policy, you might be able to exchange it for your old one tax-free. "There are some mechanisms in the tax code that allow you to exchange a life insurance policy for another or for an annuity, similar to a 1031 exchange in real estate. For life insurance, it's called a 1035 exchange," says Udell.
5. Look beyond employer insuranceThe cheapest life insurance available may be the group insurance sponsored by your employer, but it shouldn't be your only source of coverage. "Employer insurance is clearly a benefit, but you don't want to depend exclusively on it. When you leave the company, you may not have the right to convert that group policy to an individual policy," says Udell. "You'll want to buy some term insurance of your own. Otherwise, you're basing your insurance program and the financial security of your family on this employer's plan."
6. Don't expect insurance to replace retirement savings If you don't have a lot of money saved for retirement, don't expect a cash value policy to be your only savings strategy. It takes several years for cash value insurance to build up a substantial savings. If you're older and hope to retire in a few years, it's probably best to buy a term insurance policy to protect your dependents and fund a retirement account to build wealth.
"It's not financially beneficial for someone in their late 50s to purchase a cash value policy just for asset accumulation purposes," says Levin. "The cost of insurance is going to be higher and there's not going to be a lot of time to let the cash value build up significantly.
"If you're not financially ready for retirement, you'll be better off maximizing an investment vehicle that's not an insurance policy -- like a 401(k), IRA or Roth IRA."
7. Consider your settlement optionsAfter retirement, if you don't need your life insurance policy, you could sell it in a "life settlement" transaction. According to the Life Insurance Settlement Association, a life settlement is the sale of an existing life insurance policy to a third party for more than its cash surrender value, but less than its net death benefit. The original owner of the policy is typically someone who is age 65 or older. The policy would eventually pay the investor the benefit. "For a person who's over age 70, they could receive around 20-25 percent of the policy's face value," says Graziano. So someone might receive $250,000 cash to sell a policy that has a $1 million death benefit.
Not everyone believes third party life insurance settlements are a good idea. "They are very controversial," says Jacoby. "They're getting a lot of states' attention these days, both from an ethics point of view and an abuse point of view."
The problem occurs when a person takes out a policy with no intention of receiving the benefit. They just buy it to cash out with an investor. "Most policies do not have a specific prohibition of them," says Jacoby, but insurance companies may include language in future policies prohibiting third party sales. Settlements are regulated by state insurance departments, so different rules apply by state.
A third party life settlement is not to be confused with a viatical settlement. The latter is an existing policy owned by a terminally ill client who would presumably use the money for medical expenses and final estate planning. Generally speaking, life insurance settlements are offered to individuals who do not have catastrophic medical problems.
Life insurance isn't for everyone. As you approach retirement, be sure to evaluate whether or not you still have a need for it. It's probably best to get an opinion from a disinterested third party, such as a fee-based financial planner who does not sell insurance products at all.
"This is not something to be thinking about the day before you retire," says Bruno Graziano, a senior analyst with CCH, a tax consulting firm in Riverwoods, Ill. Before you can figure out the future of your policy, however, it's important to understand the assets you have today.
Lilfe insurance checklist Understanding these points will help you determine if life insurance is necessary during retirement.
7 tips to determine your life insurance needs
1. Term insurance: cheap until you get older
2. Permanent insurance: a costly alternative
3. Understand federal estate tax rules
4. Shop around
5. Look beyond employer insurance
6. Don't expect insurance to replace retirement savings
7. Consider your settlement options
1. Term insurance: cheap until you get olderLife insurance is generally defined as either term or permanent, and there are several flavors of the latter, including universal, whole life and variable life. It's important to understand the basics of each type of product as well as their advantages and disadvantages.
With term insurance, a policyholder purchases insurance and pays premiums for a set period, typically 10-20 years. If the policyholder dies within that period of time, a death benefit is paid to the policy's beneficiaries. When the policy ends, it can usually be renewed for another term. However, as the policyholder gets older, the rates for term insurance usually increase and may become cost-prohibitive.
According to Bruce Udell, author of "Advanced Estate Planning, Simple Solutions to Complex Problems," 65-year-olds who want to buy policies with 20-year terms should expect to pay about three to four times more for coverage than if they were 50 years old. The advantage of term insurance is that even though premiums increase with the age of the policyholder, they are still cheaper than permanent life insurance.
A term policy purchased during the working years could be timed to expire when the insured is ready to retire. Once the term is over, however, there's no death benefit, and your beneficiaries don't receive any payout.
"One of the things you always have to look at with term insurance is what happens when the clock stops," says Ben Jacoby, a senior financial adviser with Brinton Eaton Wealth Advisors in Morristown, N.J. If you have enough money saved to fund your own expenses and your children are grown and aren't dependent on your income, then you probably don't need another policy.
"From an income protection standpoint, I don't see a need for most people to have life insurance at the point of retirement," says Brad Levin, a certified financial planner with Householder Group, a financial planning company in Encino, Calif. "If they do, they're probably going to need a policy for just a few years anyway. It would be cheaper for them to just find another term policy."
Term policyholders will likely have the option to convert their existing term insurance into a permanent one. To determine if it's worth it, check the language of your contract to find out when you can do it, how much more you'll pay in premiums, and if you'll need a medical exam to prove that you're healthy.
2. Permanent insurance a costly alternativeIf you anticipate that you will need insurance for several years longer than what term insurance offers, another option is to purchase a permanent policy. It could be kept for life as long as the premiums are paid. However, the premiums are much higher than comparable term insurance rates.
The premium is higher because part of it is placed in a special savings fund known as the policy's "cash value." Over several years of payments, the cash value amount adds up and earns interest.
"Eventually, you could stop paying the premiums and the cash value should support the policy for the rest of your lifetime," says Levin. This would be one less expense in a fixed income retirement.
"On the other hand, if the policy performed well according to expectations, you as the policyholder could be able to start taking loans against the cash value of the policy on a tax-free basis." As an example, a life insurance policy with a death benefit of $100,000 might build up a cash value of $25,000 after several years. The policyholder could then borrow some of that money, effectively generating an additional stream of retirement income. It's important to note that the death benefit could be significantly reduced if a loan is taken out, and withdrawing the entire cash value would effectively cancel the policy.
In order to keep the death benefit, the policyholder would have to repay the loan with interest. The insured would once again be making payments on the policy.
3. Understand federal estate tax rulesPermanent insurance can be a good estate planning tool for high net worth individuals if structured properly.
"The federal estate tax currently kicks in for estates above $2 million," and life insurance payouts figure into the equation, says Graziano. "Although the death benefit from a life insurance policy is excluded from the recipient's income, unless the policy is owned in the correct manner, the proceeds will be included in the estate for tax purposes."
Owning it "in the correct manner" means not owning it at all. "The life insurance policy should be in an irrevocable trust or owned by your children or somebody other than you, so that it's not taxed in your estate," says Udell.
If you already own a policy, transferring it to a trust after the fact is possible, but it can be tricky. "If the insured dies within three years of the transfer, the insurance proceeds are going to be drawn back into his estate just as if the policy had never been transferred," says Graziano. Work with an estate planning professional for specific advice. Other insurance products may be suggested, such as survivorship insurance (also known as second-to-die insurance), that are appropriate for estate planning.
4. Shop aroundNo matter how old you are, it's a good idea to periodically compare your life insurance policy to others on the market. "Every now and then the National Association of Insurance Commissioners changes the interest rates that are required to be used for guarantees in life insurance policies," says Udell. "It behooves you to shop your policy every five years, especially if you currently have cash value insurance. If you are in good enough health, you could get a cheaper policy."
Before making a switch, check the terms and conditions of your current policy. You'll probably have to pay surrender charges, and you might owe taxes after the transaction.
If you have a cash value policy, monitor its performance just as you monitor the funds in your retirement accounts. "Get an 'in-force ledger' from your insurance company every single year to make sure the policy is performing the way that it was illustrated," says Udell. "Otherwise, if the policy earns a lower interest rate than was projected at the beginning, the cash value could run out, and you'd have to start over with a new policy."
An alternative option is to buy insurance that has a guaranteed payout, but the premiums would be higher.
If you want another policy, you might be able to exchange it for your old one tax-free. "There are some mechanisms in the tax code that allow you to exchange a life insurance policy for another or for an annuity, similar to a 1031 exchange in real estate. For life insurance, it's called a 1035 exchange," says Udell.
5. Look beyond employer insuranceThe cheapest life insurance available may be the group insurance sponsored by your employer, but it shouldn't be your only source of coverage. "Employer insurance is clearly a benefit, but you don't want to depend exclusively on it. When you leave the company, you may not have the right to convert that group policy to an individual policy," says Udell. "You'll want to buy some term insurance of your own. Otherwise, you're basing your insurance program and the financial security of your family on this employer's plan."
6. Don't expect insurance to replace retirement savings If you don't have a lot of money saved for retirement, don't expect a cash value policy to be your only savings strategy. It takes several years for cash value insurance to build up a substantial savings. If you're older and hope to retire in a few years, it's probably best to buy a term insurance policy to protect your dependents and fund a retirement account to build wealth.
"It's not financially beneficial for someone in their late 50s to purchase a cash value policy just for asset accumulation purposes," says Levin. "The cost of insurance is going to be higher and there's not going to be a lot of time to let the cash value build up significantly.
"If you're not financially ready for retirement, you'll be better off maximizing an investment vehicle that's not an insurance policy -- like a 401(k), IRA or Roth IRA."
7. Consider your settlement optionsAfter retirement, if you don't need your life insurance policy, you could sell it in a "life settlement" transaction. According to the Life Insurance Settlement Association, a life settlement is the sale of an existing life insurance policy to a third party for more than its cash surrender value, but less than its net death benefit. The original owner of the policy is typically someone who is age 65 or older. The policy would eventually pay the investor the benefit. "For a person who's over age 70, they could receive around 20-25 percent of the policy's face value," says Graziano. So someone might receive $250,000 cash to sell a policy that has a $1 million death benefit.
Not everyone believes third party life insurance settlements are a good idea. "They are very controversial," says Jacoby. "They're getting a lot of states' attention these days, both from an ethics point of view and an abuse point of view."
The problem occurs when a person takes out a policy with no intention of receiving the benefit. They just buy it to cash out with an investor. "Most policies do not have a specific prohibition of them," says Jacoby, but insurance companies may include language in future policies prohibiting third party sales. Settlements are regulated by state insurance departments, so different rules apply by state.
A third party life settlement is not to be confused with a viatical settlement. The latter is an existing policy owned by a terminally ill client who would presumably use the money for medical expenses and final estate planning. Generally speaking, life insurance settlements are offered to individuals who do not have catastrophic medical problems.
Life insurance isn't for everyone. As you approach retirement, be sure to evaluate whether or not you still have a need for it. It's probably best to get an opinion from a disinterested third party, such as a fee-based financial planner who does not sell insurance products at all.
How Much Policy Do You Need?
One tried and true way to reduce your auto insurance premium is to hike the deductible on your collision coverage and skimp on your liability coverage. Sometimes this can make sense, but often it's not worth the extra risk. In this section we'll explain several of the coverages you're likely to be offered as you shop for insurance (some are mandatory). Then we'll help you figure out how much to carry of each type.
Bodily Injury LiabilityThis coverage, which is required in most states, compensates the driver of the other car and its passengers in the event you get into an accident. It also covers the passengers in your car. The main consideration here is protecting your assets against lawsuits that arise from auto accidents. "But I'm a careful driver," you say. It doesn't matter. You can get sued even if the accident is not your fault.
Bodily injury liability is sold in standard increments that designate both how much coverage you have per person in an accident, with an additional limit per accident. For example, if you buy bodily injury worth $100,000/$300,000, each of the people you injured could be compensated $100,000, but only up to $300,000 per accident.
How much coverage you need is a function of what assets you have to protect. If you make $30,000 a year and rent your apartment, $50,000/$100,000 should suffice. But if you make more than $75,000 a year, own a house worth $150,000 and have $40,000 in mutual funds, you should consider at least $100,000/$300,000 of coverage. Our Net Worth Calculator can help you estimate just how much coverage you should get.
How much you'll pay to increase your bodily injury liability coverage depends on several factors, including your age, marital status and driving record. It also depends on where you live. For example, in rural Cortland County, New York, a 35-year old married male would pay an average of $86 annually to boost his coverage from $25,000/$50,000 to $100,000/$300,000, according to the New York State Department of Insurance. In New York City, however, where the frequency of bodily injury is much higher, that same man would have to shell out an average of $240 more a year.
One more option: If you have substantial assets, buy $300,000 in bodily injury on your auto policy and $300,000 on the liability portion of your homeowners policy. Then spend another $150 to $300 for a $1 million umbrella policy, which covers you against all manner of liability claims. Should you want still more coverage, the cost for an additional $1 million in coverage is minimal: It's typically $75 to increase your coverage to $2 million, and then $50 for each million after that, according to the Insurance Information Institute. Back to Top
Property Damage LiabilityThis coverage will pay for the repair and replacement of the other guy's car or property in the event of an accident. State-required minimums are as low as $5,000, but if you total somebody's Lexus, that won't begin to cover the damage.
You're better off with a minimum of $50,000 for each vehicle you own. And to be truly safe, you should have a total of $100,000 coverage. Back to Top
Personal Injury ProtectionThis is definitely one coverage you can skimp on. PIP coverage pays for the medical and funeral costs associated with an accident for you and your family — regardless of whose fault it was. But if you already have separate health, life and disability policies, you can probably forgo this one altogether. Check those policies first, but chances are those sort of expenses are already covered. Back to Top
Uninsured or Underinsured MotoristThis coverage pays for medical and funeral costs for you and your family in the event you get in an accident with either a hit-and-run driver or a driver who doesn't have enough auto insurance. These policies usually cover bike and pedestrian accidents, too. Given the prevalence of uninsured drivers nationally, this coverage is essential. On average, it costs less than $40 a year for $100,000 worth and will make up for anything your medical insurance doesn't cover. Back to Top
Collision and ComprehensiveCollision reimburses you for the full cost of repairs or replacement of your car after an accident. Comprehensive covers you in the event your car falls victim to a natural disaster, vandalism or theft. With either coverage, the lower the deductible you choose, the more the policy will cost you. We recommend that you always choose the highest deductible you can afford ($1,000 is fine). After all, the purpose of insurance is to protect you against big losses, not to make you whole to the last dollar. If you have an older car, you might drop this coverage altogether.
Collision and comprehensive — which can account for 30% to 40% of your total premium — are cash-value coverages. That means if your car is damaged, the most you'll recoup is the Kelley Blue Book value, which declines precipitously as your car ages. Here's a good rule of thumb: If the cost of your collision and comprehensive is more than 10% of your car's Blue Book value, it probably makes sense to drop these coverages and save a tidy sum. With most cars, you should approach this limit as the car turns five years old. Understand, however, that if you eliminate the coverages, you'll have to foot the repair bill if you get in an accident that's your fault, or if the car is totalled or stolen. Back to Top
ExtrasWhile insurance companies will try their hardest to sell you any number of extras to go along with the essentials, most of them aren't worth it. Consider rental-car reimbursement, which pays a paltry $15 or so a day while your car is in the repair shop after a collision. Not only is the reimbursement small, the odds you'll need it are remote. The chances are at least even that the other guy will be at fault, and his insurance will pay the full cost of this. Another dubious extra is towing coverage. It costs $25 or more per year on a policy, money you'd be better off putting toward an auto-club membership that would be exponentially more useful. One extra that is worthwhile: Full glass coverage. Auto glass is expensive and an errant stone can ruin a $500 windshield in the blink of an eye. Back to Top
Bodily Injury LiabilityThis coverage, which is required in most states, compensates the driver of the other car and its passengers in the event you get into an accident. It also covers the passengers in your car. The main consideration here is protecting your assets against lawsuits that arise from auto accidents. "But I'm a careful driver," you say. It doesn't matter. You can get sued even if the accident is not your fault.
Bodily injury liability is sold in standard increments that designate both how much coverage you have per person in an accident, with an additional limit per accident. For example, if you buy bodily injury worth $100,000/$300,000, each of the people you injured could be compensated $100,000, but only up to $300,000 per accident.
How much coverage you need is a function of what assets you have to protect. If you make $30,000 a year and rent your apartment, $50,000/$100,000 should suffice. But if you make more than $75,000 a year, own a house worth $150,000 and have $40,000 in mutual funds, you should consider at least $100,000/$300,000 of coverage. Our Net Worth Calculator can help you estimate just how much coverage you should get.
How much you'll pay to increase your bodily injury liability coverage depends on several factors, including your age, marital status and driving record. It also depends on where you live. For example, in rural Cortland County, New York, a 35-year old married male would pay an average of $86 annually to boost his coverage from $25,000/$50,000 to $100,000/$300,000, according to the New York State Department of Insurance. In New York City, however, where the frequency of bodily injury is much higher, that same man would have to shell out an average of $240 more a year.
One more option: If you have substantial assets, buy $300,000 in bodily injury on your auto policy and $300,000 on the liability portion of your homeowners policy. Then spend another $150 to $300 for a $1 million umbrella policy, which covers you against all manner of liability claims. Should you want still more coverage, the cost for an additional $1 million in coverage is minimal: It's typically $75 to increase your coverage to $2 million, and then $50 for each million after that, according to the Insurance Information Institute. Back to Top
Property Damage LiabilityThis coverage will pay for the repair and replacement of the other guy's car or property in the event of an accident. State-required minimums are as low as $5,000, but if you total somebody's Lexus, that won't begin to cover the damage.
You're better off with a minimum of $50,000 for each vehicle you own. And to be truly safe, you should have a total of $100,000 coverage. Back to Top
Personal Injury ProtectionThis is definitely one coverage you can skimp on. PIP coverage pays for the medical and funeral costs associated with an accident for you and your family — regardless of whose fault it was. But if you already have separate health, life and disability policies, you can probably forgo this one altogether. Check those policies first, but chances are those sort of expenses are already covered. Back to Top
Uninsured or Underinsured MotoristThis coverage pays for medical and funeral costs for you and your family in the event you get in an accident with either a hit-and-run driver or a driver who doesn't have enough auto insurance. These policies usually cover bike and pedestrian accidents, too. Given the prevalence of uninsured drivers nationally, this coverage is essential. On average, it costs less than $40 a year for $100,000 worth and will make up for anything your medical insurance doesn't cover. Back to Top
Collision and ComprehensiveCollision reimburses you for the full cost of repairs or replacement of your car after an accident. Comprehensive covers you in the event your car falls victim to a natural disaster, vandalism or theft. With either coverage, the lower the deductible you choose, the more the policy will cost you. We recommend that you always choose the highest deductible you can afford ($1,000 is fine). After all, the purpose of insurance is to protect you against big losses, not to make you whole to the last dollar. If you have an older car, you might drop this coverage altogether.
Collision and comprehensive — which can account for 30% to 40% of your total premium — are cash-value coverages. That means if your car is damaged, the most you'll recoup is the Kelley Blue Book value, which declines precipitously as your car ages. Here's a good rule of thumb: If the cost of your collision and comprehensive is more than 10% of your car's Blue Book value, it probably makes sense to drop these coverages and save a tidy sum. With most cars, you should approach this limit as the car turns five years old. Understand, however, that if you eliminate the coverages, you'll have to foot the repair bill if you get in an accident that's your fault, or if the car is totalled or stolen. Back to Top
ExtrasWhile insurance companies will try their hardest to sell you any number of extras to go along with the essentials, most of them aren't worth it. Consider rental-car reimbursement, which pays a paltry $15 or so a day while your car is in the repair shop after a collision. Not only is the reimbursement small, the odds you'll need it are remote. The chances are at least even that the other guy will be at fault, and his insurance will pay the full cost of this. Another dubious extra is towing coverage. It costs $25 or more per year on a policy, money you'd be better off putting toward an auto-club membership that would be exponentially more useful. One extra that is worthwhile: Full glass coverage. Auto glass is expensive and an errant stone can ruin a $500 windshield in the blink of an eye. Back to Top
Wednesday, June 27, 2007
4 Ways Most People Overpay for Car Insurance
Tax-Time: you’re either waiting for your gravy train tax refund, or you’re fearing the event of paying even more to Uncle Sam. Car insurance can take on a similar dichotomy, but the difference is that you don’t get a refund for overpaying for coverage — it just renews and overcharges you until you find a more affordable policy. Most people don’t see this, and miss out on hundreds of dollars in savings that could be used like a big fat tax refund.
Auto Insurance Quotes are Not Final: How to Make Them Lower
When you shop and compare multiple auto insurance quotes, recognize that even if the quotes are about the same as your current policy, or lower for that matter, they can still be even lower. There may be too much coverage, or extra options tucked into the quote that you really don’t need.
Although higher limits provide you with greater protection against possible losses, you may be carrying limits that are not in line with the value of your total assets and your lifestyle. As you review your quote, consult with an insurance agent before making any final coverage decisions. Additionally, you may be a member of an auto club that provides towing and labor protection, therefore, paying for it in your auto policy could be unnecessary. The same may hold true for car rental coverage: do you really need it?
Trying to Make “Accidents” More Affordable
Many drivers make the mistake of carrying the lowest deductibles in order to help offset the costs associated with filing a claim. The fact remains, the higher your deductible, the lower your premium. Indeed the cost of an accident will be that much more expensive; however, if the damage is minor, you could be spending the same out-of-pocket amount regardless. Save on your policy, not the accident; raise your deductibles if you can afford to.
Paying for the Policy in Monthly Installments
Just like any bill, it is common to pay for insurance in monthly installments, either by check or automatic bank withdrawal. Be aware that additional administrative fees are commonly applied to payments when you split your premium into installments (i.e. monthly, semi-annual, annual). A monthly fee of even $7 can add up to $84 over 12 months.
Overpaying for Tickets and Moving Violations
Perhaps you deserve a higher rate for your driving record, but don’t let the insurance company unduly punish you. Although having moving violations on your driving record can limit your selection of insurance companies, don't believe that finding affordable car insurance is as intimidating as appearing in traffic court and paying fines. To the contrary, there are companies that specialize in insuring higher risk drivers at reasonable prices. The only way to identify such companies though, is to compare multiple quotes from multiple companies.
Don’t count on your tax refund to save money! Instead, you may be able to save hundreds by simply taking 10 minutes to analyze your auto insurance policy. Even if last year seemed uneventful, the chances are good that your individual circumstances have changed enough to qualify you for lower car insurance rates. And even if nothing changed on your end, many large insurance companies may have reduced their rates since you last shopped.
Auto Insurance Quotes are Not Final: How to Make Them Lower
When you shop and compare multiple auto insurance quotes, recognize that even if the quotes are about the same as your current policy, or lower for that matter, they can still be even lower. There may be too much coverage, or extra options tucked into the quote that you really don’t need.
Although higher limits provide you with greater protection against possible losses, you may be carrying limits that are not in line with the value of your total assets and your lifestyle. As you review your quote, consult with an insurance agent before making any final coverage decisions. Additionally, you may be a member of an auto club that provides towing and labor protection, therefore, paying for it in your auto policy could be unnecessary. The same may hold true for car rental coverage: do you really need it?
Trying to Make “Accidents” More Affordable
Many drivers make the mistake of carrying the lowest deductibles in order to help offset the costs associated with filing a claim. The fact remains, the higher your deductible, the lower your premium. Indeed the cost of an accident will be that much more expensive; however, if the damage is minor, you could be spending the same out-of-pocket amount regardless. Save on your policy, not the accident; raise your deductibles if you can afford to.
Paying for the Policy in Monthly Installments
Just like any bill, it is common to pay for insurance in monthly installments, either by check or automatic bank withdrawal. Be aware that additional administrative fees are commonly applied to payments when you split your premium into installments (i.e. monthly, semi-annual, annual). A monthly fee of even $7 can add up to $84 over 12 months.
Overpaying for Tickets and Moving Violations
Perhaps you deserve a higher rate for your driving record, but don’t let the insurance company unduly punish you. Although having moving violations on your driving record can limit your selection of insurance companies, don't believe that finding affordable car insurance is as intimidating as appearing in traffic court and paying fines. To the contrary, there are companies that specialize in insuring higher risk drivers at reasonable prices. The only way to identify such companies though, is to compare multiple quotes from multiple companies.
Don’t count on your tax refund to save money! Instead, you may be able to save hundreds by simply taking 10 minutes to analyze your auto insurance policy. Even if last year seemed uneventful, the chances are good that your individual circumstances have changed enough to qualify you for lower car insurance rates. And even if nothing changed on your end, many large insurance companies may have reduced their rates since you last shopped.
Monday, June 25, 2007
Funny insurance claims
The statements below are taken from actual insurance accident claims forms. They are real, true (you can't make up this kind of stuff). Read 'em and laugh and be glad it wasn't you.
Incidents with Pedestrians.
The pedestrian ran for the pavement, but I got him.
The guy was all over the road. I had to swerve a number of times before I hit him.
I was sure the old fellow would never make it to the other side of the road when I struck him.
To avoid hitting the bumper of the car in front I struck a pedestrian.
The pedestrian had no idea which way to run as I ran over him.
The car in front hit the pedestrian but he got up so I hit him again.
I saw a slow moving, sad faced old gentleman as he bounced off the roof of my car.
A pedestrian hit me and went under my car.
I saw her look at me twice. She appeared to be making slow progress when we met on impact.
Accidents with other vehicles
I collided with a stationary truck coming the other way.
A truck backed through my windshield into my wife's face.
The other car collided with mine without giving warning of its intention.
My car was legally parked as it backed into another vehicle.
When I saw I could not avoid a collision I stepped on the gas and crashed into the other car.
I started to slow down but the traffic was more stationary than I thought.
The accident occurred when I was attempting to bring my car out of a skid by steering it into the other vehicle.
I was backing my car out of the driveway in the usual manner, when it was struck by the other car in the same place it had been struck several times before.
I was unable to stop in time and my car crashed into the other vehicle.
The driver and passengers then left immediately for a vacation with injuries.
The gentleman behind me struck me on the backside.
He then went to rest in a bush with just his rear end showing.
The car in front of me stopped for a yellow light, so I had no choice but to hit him. (She pushed him through the intesection)
Collisions, calamities, and injuries.
Coming home I drove into the wrong house and collided with a tree I don't have.
I told the police that I was not injured, but on removing my hat found that I had a fractured skull.
I pulled away from the side of the road, glanced at my mother-in-law and headed over the embankment.
I thought my window was down, but I found it was up when I put my head through it.
As I approached an intersection a sign suddenly appeared in a place where no stop sign had ever appeared before. I was unable to stop in time to avoid the accident.
In an attempt to kill a fly, I drove into a telephone pole.
I saw two kangaroos having it off in the middle of the road. So I hit them, which caused me to ejaculate through the sunroof.
I was thrown from my car as it left the road. I was later found in a ditch by some stray cows.
The telephone pole was approaching. I was attempting to swerve out of the way when I struck the front end.
I pulled in to the side of the road because there was smoke coming from under the hood.
I realized there was a fire in the engine, so I took my dog and smothered it with a blanket.
The claimant had collided with a cow. The questions and answers on the claim form were - Q: What warning was given by you? A: Horn. Q: What warning was given by the other party? A: Moo.
Who is to Blame?
No one was to blame for the accident but it would never have happened if the other driver had been alert.
I didn't think the speed limit applied after midnight.
I had been shopping for plants all day and was on my way home. As I reached an intersection a hedge sprang up, obscuring my vision and I did not see the other car.
The indirect cause of the accident was a little guy in a small car with a big mouth.
I was going at about 70 or 80 mph when my girlfriend reached over and grabbed my testicles so I lost control.
I was on the way to the doctor with rear end trouble when my universal joint gave way causing me to have an accident.
On approach to the traffic lights the car in front suddenly broke.
The accident was caused by me waving to the man I hit last week.
Windshield broke. Cause unknown. Probably Voodoo.
No witnesses would admit having seen the mishap until after it happened.
I had been learning to drive with power steering. I turned the wheel to what I thought was enough and found myself in a different direction going the opposite way.
The accident happened when the right front door of a car came round the corner without giving a signal.
I had been driving for forty years when I fell asleep at the wheel and had an accident.
I left for work this morning at 7am as usual when I collided straight into a bus. The bus was 5 miniutes early.
An invisible car came out of nowhere, struck my car and vanished.
I knew the dog was possessive about the car but I would not have asked her to drive it if I had thought there was any risk.
The accident happened because I had one eye on the truck in front, one eye on the pedestrian, and the other on the car behind.
I started to turn and it was at this point I noticed a camel and an elephant tethered at the verge. This distraction caused me to lose concentration and hit a bollard.
Actual Auto Insurance Statements
The other car collided with mine without giving warning of its intentions.
Windscreen broken. Cause unknown. Probably voodoo.
I thought my window was down, but I found out it was up when I put my head through it.
A truck backed through my windshield into my wife's face.
A pedestrian hit me and went under my car.
The guy was all over the road. I had to swerve a number of times before I hit him.
I pulled away from the side of the road, glanced at my mother-in-law, and headed over the embankment.
In my attempt to kill a fly, I drove into a telephone pole.
I had been shopping for plants all day and was on my way home.
As I reached an intersection, a hedge sprang up, obscuring my vision and I did not see the other car.
I had been driving for 40 years when I fell asleep at the wheel and had an accident.
I was on my way to the doctor with rear end trouble when my universal joint gave way, causing me to have an accident.
As I approached the intersection, a sign suddenly appeared in a place where no stop sign had ever appeared before. I was unable to stop in time to avoid the accident.
I saw a slow moving, sad faced old gentleman...as he bounced off the roof of my car.
No witnesses would admit having seen the mishap until after it happened.
To avoid hitting the bumper of the car in front, I struck the pedestrian.
My car was legally parked as it backed into the other vehicle. An invisible car came out of nowhere, struck my car and vanished.
On approach to the traffic lights the car in front suddenly broke.
No one was to blame for the accident, but it would never have happened if the other driver had been alert.
I was sure the old fellow would never make it to the other side of the road when I struck him.
The pedestrian had no idea which direction to run, so I ran over him.
The indirect cause of the accident was a little guy in a small car with a big mouth.
The car in front hit the pedestrian, but he got up so I hit him again.
I was thrown from my car as it left the road. I was later found in a ditch by some stray cows.
I didn't think the speed limit applied after midnight.
I told the police that I was not injured, but on removing my hat found that I had a fractured skull.
The telephone pole was approaching, I was attempting to swerve out of its way, when it struck my front end.
Windscreen broken. Cause unknown. Probably voodoo.
I thought my window was down, but I found out it was up when I put my head through it.
A truck backed through my windshield into my wife's face.
A pedestrian hit me and went under my car.
The guy was all over the road. I had to swerve a number of times before I hit him.
I pulled away from the side of the road, glanced at my mother-in-law, and headed over the embankment.
In my attempt to kill a fly, I drove into a telephone pole.
I had been shopping for plants all day and was on my way home.
As I reached an intersection, a hedge sprang up, obscuring my vision and I did not see the other car.
I had been driving for 40 years when I fell asleep at the wheel and had an accident.
I was on my way to the doctor with rear end trouble when my universal joint gave way, causing me to have an accident.
As I approached the intersection, a sign suddenly appeared in a place where no stop sign had ever appeared before. I was unable to stop in time to avoid the accident.
I saw a slow moving, sad faced old gentleman...as he bounced off the roof of my car.
No witnesses would admit having seen the mishap until after it happened.
To avoid hitting the bumper of the car in front, I struck the pedestrian.
My car was legally parked as it backed into the other vehicle. An invisible car came out of nowhere, struck my car and vanished.
On approach to the traffic lights the car in front suddenly broke.
No one was to blame for the accident, but it would never have happened if the other driver had been alert.
I was sure the old fellow would never make it to the other side of the road when I struck him.
The pedestrian had no idea which direction to run, so I ran over him.
The indirect cause of the accident was a little guy in a small car with a big mouth.
The car in front hit the pedestrian, but he got up so I hit him again.
I was thrown from my car as it left the road. I was later found in a ditch by some stray cows.
I didn't think the speed limit applied after midnight.
I told the police that I was not injured, but on removing my hat found that I had a fractured skull.
The telephone pole was approaching, I was attempting to swerve out of its way, when it struck my front end.
Honey, I Wrecked the Porsche
Call it a metaphor for a prosperous, risk-embracing age or just call it bad driving.
Auto makers are turning out a new breed of supremely fast sports cars that sell for upwards of $250,000 and share many characteristics of purebred racecars. But as more of them hit the road, often in the hands of inexperienced drivers, a growing number are ending up wrapped around trees, smashed into guardrails or otherwise totaled in accidents.
In the past 18 months, drivers across the world have cracked up at least six rare $1 million Ferrari Enzos -- only 400 of which were built. In March, a California man rammed his $300,000 Lamborghini Murcielago into five parked cars; while in England, a 39-year-old driver caused an international stir among car enthusiasts by crashing a Bugatti Veyron -- an extremely rare $1.5 million turbocharged missile with a top speed of 253 miles per hour.
It's not just drunken celebrities doing the damage. On the way to an M.B.A. class near San Diego one recent morning, Nasar Aboubakare, a 40-year-old private-equity firm president, lost control of his new 550-horsepower Ford GT and wrenched it over a lane divider. "The car is like a wild animal," he says.
To compound matters, it's tough to be inconspicuous when you damage a $150,000 automobile. After Mr. Aboubakare's accident, several passing motorists snapped pictures while one leaned out the window of his pickup truck and shouted: "What an idiot!"
Police in wealthy enclaves across the country say these accidents are not unusual. A spokesman for the Beverly Hills Police Department says his officers "regularly" handle accidents involving exotic vehicles, while Sgt. Jeffrey Kelly from Boca Raton, Fla., says his department has logged two Ferrari crashes in the past two years. "We've had our fair share," he says.
According to the California Highway Patrol, the total number of accidents involving Aston Martins, Bentleys, Ferraris, Lamborghinis, Lotuses and Maseratis rose to 141 last year, an 81% increase from 2002, while overall crashes declined statewide during that period. Porsche, BMW and Mercedes-Benz, which sell a wider range of models, saw a 22% increase during that time frame.
These accidents are happening so regularly that a Web site called WreckedExotics.com2 -- which contains photos of dream cars reduced to smoking heaps -- added as many as 700 new examples to its gallery last year and says it attracts about 650,000 visitors a month. Founder Gregg Fidan explains the attraction this way: "It's like seeing a supermodel fall off the runway."
More Cars, More Crashes
See some of the top-of-the-line supercars and prototypes that auto makers have unveiled recently.One reason for the increase is that there are simply more of these so-called "supercars" on the road. CNW Marketing Research, a firm that analyzes the auto market, says Americans bought about 8,400 "ultra-luxury" sports cars last year -- more than three times the number from 2003. While the number of supercars registered in California is up sharply, the rate at which they are getting into accidents is still small -- just over 1% -- and hasn't changed appreciably since the state began breaking data down by make in 2002. (The statewide accident rate for all vehicles was 3%.)
Stefan Winkelmann, president and chief executive officer of Lamborghini, a unit of Volkswagen's Audi Group, says he's aware of "four or five" incidents involving one of the company's new 640-horsepower Murcielagos -- a small fraction of the nearly 500 models the company sold last year. Toscan Bennett, a spokesman for Ferrari, a unit of Fiat Group, says the company does not track the number of accidents involving its cars, but adds that several high-profile incidents may have contributed to a false impression that these crashes are common.
Auto makers say the rising horsepower is being offset by safety advancements ranging from all-wheel drive to ceramic brakes, rear-view cameras, extra airbags and monocoque safety cages that direct impact forces away from passengers. "The cars give themselves up for the safety of the driver," says Porsche spokesman Tony Fouladpour. Many supercars come with traction and stability control systems that automatically vary the power delivered to the wheels to help prevent drivers from sliding and skidding.
Insurance companies say that while the majority of supercar accidents do not result in serious injuries, there has been an uptick in collision claims on these cars. In some cases, rates are rising. Based on the rising cost of claims, State Farm says the same driver would have paid 9% more last year to buy physical damage insurance for a new Lamborghini Murcielago than in 2003.
Expensive sports cars have always been intimidatingly fast, but experts say the latest models are not just more powerful, they're also lighter: Ferrari's new 599 GTB Fiorano produces about .164 horsepower per pound -- a 21% improvement over the model it replaced. The trouble begins when overconfident drivers start trying to push the cars to speeds that even experienced drivers may not be capable of handling. "Generally speaking, the cars are well over the heads of the drivers," says Glenn Roberts, the owner of an auto-body shop in Fountain Hills, Ariz., that repairs damaged exotic cars.
The people buying these cars are also changing. Unlike previous supercar collectors who often babied their machines, they tend to drive about 4,000 to 6,000 miles per year -- more than double the average from a decade ago. And they're not getting any more mature: the median age for ultra-luxury sports-car buyers dropped to 47 last year from an average of 56 just 10 years ago, according to CNW. And you don't have to be an actuary to know that younger people are more likely to drive aggressively. A spokeswoman for Leland-West Insurance Brokers says most of the supercar claims the company handles each year involve men aged 25 to 40 driving newer high-performance cars too fast and losing control.
'Controllable' Speed
Adnan K. Mehmood, a 32-year-old fabric importer and stock trader from Miami, counts himself among those who don't believe a high-performance car should be pampered. He says he has driven his 2006 Lamborghini Murcielago Roadster faster than 191 mph a number of times on freeways. Mr. Mehmood says it's the engineering that gives him the confidence to go that fast. "When you are in the car, it's so stable," he says. "It's such a controllable speed. In a normal car when you are going 80 or 90, it feels like you are going really, really fast. In the Lambo, you are going 120 or 140 and honestly, it feels like it's stopped on the freeway. It feels like it's not moving."
He is awaiting delivery of Lamborghini's new Murcielago LP640 Roadster, which has an extra 60 horsepower and a new suspension design that will help make it one of the fastest cars the company has ever built -- traveling up to 211 mph and from 0 to 60 in 3.7 seconds. "I want to go to 200 mph," Mr. Mehmood says.
Veteran sports-car connoisseur Michael Fux says he has a pretty good idea why all these crashes are happening. The 64-year-old mattress entrepreneur from Miami, whose collection includes a Bugatti Veyron, a Ferrari 599, an Enzo and five Lamborghinis, says younger drivers are constantly challenging him to race. "These kids, they don't use their heads," he says. "They think they're back in the old Wild West."
Driving experts say most accidents in these cars happen when drivers take turns too fast for the road conditions or start turning prematurely and then snap off the accelerator to compensate. If the car's back end starts to fishtail, many inexperienced drivers will fail to steer in the direction of the sliding tail or will overcorrect by turning too severely in that direction. Both mistakes can cause a spin. "It's a symphony of inputs and adjustments to keep the car under control," says David Champion, senior director of Consumer Reports Auto Test Division.
For Anthony Almada, a 46-year-old nutritional biochemist and entrepreneur from Dana Point, Calif., the catalyst was a deceivingly slick road. While driving his $440,000 Porsche Carrera GT on a bend near his home at 80 miles per hour on a slightly wet road early last year, he says the car snapped into a spin. He followed the procedure he'd been taught in driving class and "put both feet in" -- pressing down on the brake and the clutch at the same time -- and hoped for the best. The car broadsided a brick wall and spun at least six times and caught fire. "It wasn't something I could have corrected," says Mr. Almada, who climbed out unhurt. "I was going too fast for the road conditions. It's that simple."
Another common mistake: failing to warm up the tires. Standing inside his garage last month at Classic Coach Repair in Elizabeth, N.J., owner Onofrio Triarsi points out two damaged Ferraris -- a red 360 that needs a new quarter panel and bumper and a blue 550 Maranello with similar damage. Both cars had been taken out on racetracks on cold mornings by drivers who had not given the tires enough time to heat up (and thus adhere better to the asphalt). When customers drive off now, Mr. Triarsi leaves them with the same advice: "Don't forget the tires."
In some cases, drivers say they got into trouble after shutting off the car's traction control system to get a more "authentic" sports-car experience. During a test for Car and Driver last spring in Italy, technical editor Aaron Robinson, 37, flicked off the electronic stability control in a 611-horsepower Ferrari 599 GTB Fiorano so he could get the vehicle's rear end to flare out around a curve for a photo. But after giving the car "too much throttle and not enough core steering," he says he wound up sideswiping a wall. "Any car with 600 horsepower is intimidating," Mr. Robinson says.
Many of these accidents are, of course, just examples of pure recklessness. The Bugatti Veyron owner who crashed in Surrey, England, this year was said to be traveling at least 100 mph on a country lane before colliding with a station wagon. He was cited by police for driving "without due care and attention." The 26-year-old who crashed his 2005 Lamborghini into five parked cars in Santa Monica, Calif., in March was reportedly racing at 75 mph around a 35 mph curve. He was charged with driving under the influence.
You don't have to buy one of these cars to trash one, either: New York's Gotham Dream Cars, one of a growing number of companies that allow people to rent supercar
High Speed, Low Clearance
Speed isn't always the culprit. Because of their odd dimensions and miniscule ground clearance, supercars have always been vulnerable to damage from curbs, speed bumps or even objects in the road. While driving his yellow Ferrari Enzo for only the third time, Ali Haas, a 51-year-old plastic surgeon from Florida, ran over a spool of wire on the road. In most cars this would have been a nonevent -- but in this case the low-slung Ferrari was knocked airborne, breaking its grip on the road and sending it skidding into a guardrail. "If I ran over that spool of wire in my Ford Expedition, probably nothing would have happened," Dr. Haas says.
Regardless of the cause, anyone who wrecks one of these cars has a more immediate problem than finding a mechanic: the possibility of public humiliation. After smashing his silver Ferrari 360 into a light pole in November in Palm Beach, Fla., David Riggs says none of the 50 or so onlookers who stopped to gawk asked him if he was OK. Instead, the 42-year-old says he heard comments like "wow, you are really having a bad day," "that is really a bummer," and "your toy is broke." "Nobody is really concerned if you are hurt," Mr. Riggs says.
Car companies say they do what they can to make sure their most powerful vehicles get into the hands of experienced drivers. Buyers of Ferrari limited-production cars like the Enzo "were chosen by the factory based on their history and loyalty to Ferrari," says the spokesman, Mr. Bennett.
Driving Academies
Manufacturers are also rolling out driver-education programs. Later this year, Bugatti plans to start offering buyers a "security driving course" at a test track near its factory in France. Ferrari has offered driver training in Italy since the early 1990s and just opened the first authorized school outside Italy last year in Mt. Tremblant, Canada. Lamborghini started offering winter and summer-driving academies last year, formalizing classes long offered by dealers.
Bentley offered its first driving class in the U.S. last year and Lotus is launching a driving school in the U.S. this month called the Lotus Performance Driving Experience outside Las Vegas that will include instruction in "the dynamics of skid control."
One recent driving-school graduate: Mr. Aboubakare, the private-equity company president who spun out his Ford GT. He hopes to be better equipped to drive the new Lamborghini Murcielago LP640 Roadster he is getting later this summer. "I think with training, I'm a little more equipped to drive the car," he says.
For auto makers, the horsepower binge is continuing to accelerate. Even in an era of high gas prices, some like Audi and Lexus are building or testing new supercar designs. The 2007 Chevrolet Corvette Z06 packs 505 horsepower and Ford recently introduced a $41,000 Mustang with 500 horsepower.
There's no sign people are less interested in speeding, either. Movies like "The Fast and the Furious" and "Redline" have glamourized the notion of driving fast on public roads while drivers have been using sites like YouTube to post videos of themselves making flamboyant maneuvers. Mix in the growing number of supercars, their soaring horsepower and the increasing number of states raising speed limits and "we have almost the perfect storm going on here," says Adrian Lund, president of the Insurance Institute for Highway Safety.
Standing in his garage on a Sunday morning last month, Mr. Almada pulls out what's left of his beloved Porsche Carrera GT: one severed headlight and one rear-wheel tire and brake assembly. Finally, from a shelf he built to hold surfboards, he pulls down his last keepsake, the car's badly scraped carbon-fiber wing. He stares at it for a few moments, then gently lays it down. "It's like the memento of a family member who passed away," he says.
Auto makers are turning out a new breed of supremely fast sports cars that sell for upwards of $250,000 and share many characteristics of purebred racecars. But as more of them hit the road, often in the hands of inexperienced drivers, a growing number are ending up wrapped around trees, smashed into guardrails or otherwise totaled in accidents.
In the past 18 months, drivers across the world have cracked up at least six rare $1 million Ferrari Enzos -- only 400 of which were built. In March, a California man rammed his $300,000 Lamborghini Murcielago into five parked cars; while in England, a 39-year-old driver caused an international stir among car enthusiasts by crashing a Bugatti Veyron -- an extremely rare $1.5 million turbocharged missile with a top speed of 253 miles per hour.
It's not just drunken celebrities doing the damage. On the way to an M.B.A. class near San Diego one recent morning, Nasar Aboubakare, a 40-year-old private-equity firm president, lost control of his new 550-horsepower Ford GT and wrenched it over a lane divider. "The car is like a wild animal," he says.
To compound matters, it's tough to be inconspicuous when you damage a $150,000 automobile. After Mr. Aboubakare's accident, several passing motorists snapped pictures while one leaned out the window of his pickup truck and shouted: "What an idiot!"
Police in wealthy enclaves across the country say these accidents are not unusual. A spokesman for the Beverly Hills Police Department says his officers "regularly" handle accidents involving exotic vehicles, while Sgt. Jeffrey Kelly from Boca Raton, Fla., says his department has logged two Ferrari crashes in the past two years. "We've had our fair share," he says.
According to the California Highway Patrol, the total number of accidents involving Aston Martins, Bentleys, Ferraris, Lamborghinis, Lotuses and Maseratis rose to 141 last year, an 81% increase from 2002, while overall crashes declined statewide during that period. Porsche, BMW and Mercedes-Benz, which sell a wider range of models, saw a 22% increase during that time frame.
These accidents are happening so regularly that a Web site called WreckedExotics.com2 -- which contains photos of dream cars reduced to smoking heaps -- added as many as 700 new examples to its gallery last year and says it attracts about 650,000 visitors a month. Founder Gregg Fidan explains the attraction this way: "It's like seeing a supermodel fall off the runway."
More Cars, More Crashes
See some of the top-of-the-line supercars and prototypes that auto makers have unveiled recently.One reason for the increase is that there are simply more of these so-called "supercars" on the road. CNW Marketing Research, a firm that analyzes the auto market, says Americans bought about 8,400 "ultra-luxury" sports cars last year -- more than three times the number from 2003. While the number of supercars registered in California is up sharply, the rate at which they are getting into accidents is still small -- just over 1% -- and hasn't changed appreciably since the state began breaking data down by make in 2002. (The statewide accident rate for all vehicles was 3%.)
Stefan Winkelmann, president and chief executive officer of Lamborghini, a unit of Volkswagen's Audi Group, says he's aware of "four or five" incidents involving one of the company's new 640-horsepower Murcielagos -- a small fraction of the nearly 500 models the company sold last year. Toscan Bennett, a spokesman for Ferrari, a unit of Fiat Group, says the company does not track the number of accidents involving its cars, but adds that several high-profile incidents may have contributed to a false impression that these crashes are common.
Auto makers say the rising horsepower is being offset by safety advancements ranging from all-wheel drive to ceramic brakes, rear-view cameras, extra airbags and monocoque safety cages that direct impact forces away from passengers. "The cars give themselves up for the safety of the driver," says Porsche spokesman Tony Fouladpour. Many supercars come with traction and stability control systems that automatically vary the power delivered to the wheels to help prevent drivers from sliding and skidding.
Insurance companies say that while the majority of supercar accidents do not result in serious injuries, there has been an uptick in collision claims on these cars. In some cases, rates are rising. Based on the rising cost of claims, State Farm says the same driver would have paid 9% more last year to buy physical damage insurance for a new Lamborghini Murcielago than in 2003.
Expensive sports cars have always been intimidatingly fast, but experts say the latest models are not just more powerful, they're also lighter: Ferrari's new 599 GTB Fiorano produces about .164 horsepower per pound -- a 21% improvement over the model it replaced. The trouble begins when overconfident drivers start trying to push the cars to speeds that even experienced drivers may not be capable of handling. "Generally speaking, the cars are well over the heads of the drivers," says Glenn Roberts, the owner of an auto-body shop in Fountain Hills, Ariz., that repairs damaged exotic cars.
The people buying these cars are also changing. Unlike previous supercar collectors who often babied their machines, they tend to drive about 4,000 to 6,000 miles per year -- more than double the average from a decade ago. And they're not getting any more mature: the median age for ultra-luxury sports-car buyers dropped to 47 last year from an average of 56 just 10 years ago, according to CNW. And you don't have to be an actuary to know that younger people are more likely to drive aggressively. A spokeswoman for Leland-West Insurance Brokers says most of the supercar claims the company handles each year involve men aged 25 to 40 driving newer high-performance cars too fast and losing control.
'Controllable' Speed
Adnan K. Mehmood, a 32-year-old fabric importer and stock trader from Miami, counts himself among those who don't believe a high-performance car should be pampered. He says he has driven his 2006 Lamborghini Murcielago Roadster faster than 191 mph a number of times on freeways. Mr. Mehmood says it's the engineering that gives him the confidence to go that fast. "When you are in the car, it's so stable," he says. "It's such a controllable speed. In a normal car when you are going 80 or 90, it feels like you are going really, really fast. In the Lambo, you are going 120 or 140 and honestly, it feels like it's stopped on the freeway. It feels like it's not moving."
He is awaiting delivery of Lamborghini's new Murcielago LP640 Roadster, which has an extra 60 horsepower and a new suspension design that will help make it one of the fastest cars the company has ever built -- traveling up to 211 mph and from 0 to 60 in 3.7 seconds. "I want to go to 200 mph," Mr. Mehmood says.
Veteran sports-car connoisseur Michael Fux says he has a pretty good idea why all these crashes are happening. The 64-year-old mattress entrepreneur from Miami, whose collection includes a Bugatti Veyron, a Ferrari 599, an Enzo and five Lamborghinis, says younger drivers are constantly challenging him to race. "These kids, they don't use their heads," he says. "They think they're back in the old Wild West."
Driving experts say most accidents in these cars happen when drivers take turns too fast for the road conditions or start turning prematurely and then snap off the accelerator to compensate. If the car's back end starts to fishtail, many inexperienced drivers will fail to steer in the direction of the sliding tail or will overcorrect by turning too severely in that direction. Both mistakes can cause a spin. "It's a symphony of inputs and adjustments to keep the car under control," says David Champion, senior director of Consumer Reports Auto Test Division.
For Anthony Almada, a 46-year-old nutritional biochemist and entrepreneur from Dana Point, Calif., the catalyst was a deceivingly slick road. While driving his $440,000 Porsche Carrera GT on a bend near his home at 80 miles per hour on a slightly wet road early last year, he says the car snapped into a spin. He followed the procedure he'd been taught in driving class and "put both feet in" -- pressing down on the brake and the clutch at the same time -- and hoped for the best. The car broadsided a brick wall and spun at least six times and caught fire. "It wasn't something I could have corrected," says Mr. Almada, who climbed out unhurt. "I was going too fast for the road conditions. It's that simple."
Another common mistake: failing to warm up the tires. Standing inside his garage last month at Classic Coach Repair in Elizabeth, N.J., owner Onofrio Triarsi points out two damaged Ferraris -- a red 360 that needs a new quarter panel and bumper and a blue 550 Maranello with similar damage. Both cars had been taken out on racetracks on cold mornings by drivers who had not given the tires enough time to heat up (and thus adhere better to the asphalt). When customers drive off now, Mr. Triarsi leaves them with the same advice: "Don't forget the tires."
In some cases, drivers say they got into trouble after shutting off the car's traction control system to get a more "authentic" sports-car experience. During a test for Car and Driver last spring in Italy, technical editor Aaron Robinson, 37, flicked off the electronic stability control in a 611-horsepower Ferrari 599 GTB Fiorano so he could get the vehicle's rear end to flare out around a curve for a photo. But after giving the car "too much throttle and not enough core steering," he says he wound up sideswiping a wall. "Any car with 600 horsepower is intimidating," Mr. Robinson says.
Many of these accidents are, of course, just examples of pure recklessness. The Bugatti Veyron owner who crashed in Surrey, England, this year was said to be traveling at least 100 mph on a country lane before colliding with a station wagon. He was cited by police for driving "without due care and attention." The 26-year-old who crashed his 2005 Lamborghini into five parked cars in Santa Monica, Calif., in March was reportedly racing at 75 mph around a 35 mph curve. He was charged with driving under the influence.
You don't have to buy one of these cars to trash one, either: New York's Gotham Dream Cars, one of a growing number of companies that allow people to rent supercar
High Speed, Low Clearance
Speed isn't always the culprit. Because of their odd dimensions and miniscule ground clearance, supercars have always been vulnerable to damage from curbs, speed bumps or even objects in the road. While driving his yellow Ferrari Enzo for only the third time, Ali Haas, a 51-year-old plastic surgeon from Florida, ran over a spool of wire on the road. In most cars this would have been a nonevent -- but in this case the low-slung Ferrari was knocked airborne, breaking its grip on the road and sending it skidding into a guardrail. "If I ran over that spool of wire in my Ford Expedition, probably nothing would have happened," Dr. Haas says.
Regardless of the cause, anyone who wrecks one of these cars has a more immediate problem than finding a mechanic: the possibility of public humiliation. After smashing his silver Ferrari 360 into a light pole in November in Palm Beach, Fla., David Riggs says none of the 50 or so onlookers who stopped to gawk asked him if he was OK. Instead, the 42-year-old says he heard comments like "wow, you are really having a bad day," "that is really a bummer," and "your toy is broke." "Nobody is really concerned if you are hurt," Mr. Riggs says.
Car companies say they do what they can to make sure their most powerful vehicles get into the hands of experienced drivers. Buyers of Ferrari limited-production cars like the Enzo "were chosen by the factory based on their history and loyalty to Ferrari," says the spokesman, Mr. Bennett.
Driving Academies
Manufacturers are also rolling out driver-education programs. Later this year, Bugatti plans to start offering buyers a "security driving course" at a test track near its factory in France. Ferrari has offered driver training in Italy since the early 1990s and just opened the first authorized school outside Italy last year in Mt. Tremblant, Canada. Lamborghini started offering winter and summer-driving academies last year, formalizing classes long offered by dealers.
Bentley offered its first driving class in the U.S. last year and Lotus is launching a driving school in the U.S. this month called the Lotus Performance Driving Experience outside Las Vegas that will include instruction in "the dynamics of skid control."
One recent driving-school graduate: Mr. Aboubakare, the private-equity company president who spun out his Ford GT. He hopes to be better equipped to drive the new Lamborghini Murcielago LP640 Roadster he is getting later this summer. "I think with training, I'm a little more equipped to drive the car," he says.
For auto makers, the horsepower binge is continuing to accelerate. Even in an era of high gas prices, some like Audi and Lexus are building or testing new supercar designs. The 2007 Chevrolet Corvette Z06 packs 505 horsepower and Ford recently introduced a $41,000 Mustang with 500 horsepower.
There's no sign people are less interested in speeding, either. Movies like "The Fast and the Furious" and "Redline" have glamourized the notion of driving fast on public roads while drivers have been using sites like YouTube to post videos of themselves making flamboyant maneuvers. Mix in the growing number of supercars, their soaring horsepower and the increasing number of states raising speed limits and "we have almost the perfect storm going on here," says Adrian Lund, president of the Insurance Institute for Highway Safety.
Standing in his garage on a Sunday morning last month, Mr. Almada pulls out what's left of his beloved Porsche Carrera GT: one severed headlight and one rear-wheel tire and brake assembly. Finally, from a shelf he built to hold surfboards, he pulls down his last keepsake, the car's badly scraped carbon-fiber wing. He stares at it for a few moments, then gently lays it down. "It's like the memento of a family member who passed away," he says.
Saturday, June 23, 2007
Breed discrimination bites homeowners
Shushu, a 9-year-old spayed Dalmatian, is a favourite playmate for the children in her Randolph, Mass., neighbourhood and a regular blood donor at the Massachusetts Society for the Prevention of Cruelty to Animals.
"She's a lovable dog," said her owner, Barbara Mersal, an MSPCA employee. "I've never had a problem."
So, Mersal was shocked when she received a letter from her homeowners insurance company informing her she was being dropped because of Shushu. The dog, the company argued, was a breed that would no longer be covered. Mersal's decade-long relationship with the company would end because of a beloved dog.
Mersal is not alone. Many insurance companies are looking to cut costs by excluding owners of large breed dogs from home owners insurance plans. Breeds that have been targeted include pit bull-type dogs, Rottweilers, Doberman Pinschers, Chow Chows, Akitas, Siberian Huskies, and German Shepherd Dogs, and in some cases, even Dalmatians and Boxers.Insurance companies defend the breed-specific measures, saying that dog bite injuries account for more than one-third of all liability claims against homeowners insurance. These claims cost the industry $310 million in 2001, according to the Insurance Information Institute."It's not an anti dog policy. It's business," said Alejandra Soto, a spokesperson for the institute
Highly publicized cases like that that of two California lawyers whose Presa Canarios mauled a neighbour to death have further raised concerns among insurers about dog bite liability, according to the institute.Dog bites are recognized as a public health threat by the national Centers for Disease Control and Prevention, the AVMA, and physicians' associations. Each year, an estimated 4.7 million people are bitten. As many as 800,000 dog bite victims - most of them children - require medical attention. About a dozen people are killed each year by dogs, according to the CDC.
Though they agree that dog bite injuries are a serious problem, the AVMA, the American Kennel Club, and animal welfare organizations argue that breed discrimination is not an appropriate way of addressing the problem. Dr. Bonnie V. Beaver, a member of the AVMA Executive Board and a certified veterinary behaviourist, said that breed discrimination is not scientifically supported
"The data available (on dog bites) are not accurate and are very incomplete," she said.Dr. Beaver further explained that the majority of the dogs in the United States are "good canine citizens.""There are many good dogs out there being discriminated against," she said.According to official statements from the AVMA, all dogs - regardless of size or breed - can bite if provoked. The key to reducing dog bites is responsible pet ownership.
Understanding the policies
Insurance companies are taking a variety of steps to avoid dog bite injury claims. Some will not cover specific breeds of dogs, or individual dogs that have a history of biting. Others require dog owners to sign waivers and accept full responsibility for any dog bites. A few are evaluating dogs on a case-by-case basis and require letters from veterinarians, dog obedience certificates, or a home visit by an insurance agent.
To develop lists of dog breeds they won't cover, insurance companies are looking at previous dog bite injury claims they've had to pay. For example, if an insurance company previously had three claims in which a pit bull-type dog attacked a person and they had to pay $300,000 on each, they may chose not to cover pit bull-type dogs in the future. They are focusing on previous bites that caused serious damage, and in most cases, it's large breeds that are able to do the most damage, Soto said.
In an effort to prove that her dog was not a threat, Mersal offered to provide letters from neighbours, but the insurance company would not consider them.
"They wouldn't even listen to me," she said.
Few insurance companies are evaluating dogs on a case-by-case basis, because it's an expensive and time-consuming process, Soto said.
"It's very difficult to do, in terms of manpower," she said.The AVMA warns veterinarians to be careful about supplying behavioural evaluations of dogs for insurance purposes.
"It's risky for veterinarians," said Dr. Beaver, explaining that there are many situations in which a dog may behave aggressively, and temperament tests can't rule out the possibility of aggression. "You don't have temperament tests that can identify all possibilities."Dr. Beaver recommended that veterinarians talk to clients who are encountering breed discrimination about the AVMA's stance and recommend that they work with breed organizations to discourage insurance companies from basing their policies on breeds.
Seeking solutions
State veterinary associations, the AKC, who along with the Humane Society of the United States, the American Society for the Prevention of Cruelty to Animals, and other animal welfare organizations are actively lobbying state legislatures to pass laws against breed discrimination. At least two states have such laws.
The AKC offers the Canine Good Citizen programme, a dog training certification programme that emphasizes responsible ownership and basic good manners for dogs, as an option for owners who need to provide evidence to insurance companies that they are responsible owners.
"We've found some insurance agents who feel that owners that go through this programme are less likely to be a problem," said Mary Burch, PhD, the director of the AKC's Canine Good Citizen programme. Information about the programme is available at www.akc.org/love/cgc/index.cfm.
Seventeen states and communities across the country endorse the programme as a way to make communities safer and reduce dog bites. Dogs in the programme are introduced to a variety of situations and must behave appropriately around other dogs and humans to be certified. Dr. Burch recommends that veterinarians encourage their clients to seek training for their dogs through the Canine Good Citizen programme or similar training programmes.
"Veterinarians are really the first professionals to have contact with these animals," Dr. Burch said. She added that some veterinarians who have promoted Canine Good Citizen programmes or offered such programmes through their offices have noted an added bonus: dogs that have completed the programme behave better and are easier to work with in the clinic.
For owners, shopping around for policies and responsible ownership are keys to finding home insurance, according to the groups tracking the trend.
Soto said dog owners should keep up to date on their insurance companies' policies on dogs and update their coverage, and that prospective dog owners should check with their insurance company when they are selecting a dog.In Massachusetts, homeowners who are denied coverage can apply for coverage through the state's Fair Access to Insurance Requirements plan. Information is available at www.mpiua.org www.mpiua.org.
Shushu's owner, Mersal, was able to get home insurance through another company. But she advises other dog owners to be aware of their insurance company's policies and to refuse to do business with companies who discriminate against certain breeds.
"She's a lovable dog," said her owner, Barbara Mersal, an MSPCA employee. "I've never had a problem."
So, Mersal was shocked when she received a letter from her homeowners insurance company informing her she was being dropped because of Shushu. The dog, the company argued, was a breed that would no longer be covered. Mersal's decade-long relationship with the company would end because of a beloved dog.
Mersal is not alone. Many insurance companies are looking to cut costs by excluding owners of large breed dogs from home owners insurance plans. Breeds that have been targeted include pit bull-type dogs, Rottweilers, Doberman Pinschers, Chow Chows, Akitas, Siberian Huskies, and German Shepherd Dogs, and in some cases, even Dalmatians and Boxers.Insurance companies defend the breed-specific measures, saying that dog bite injuries account for more than one-third of all liability claims against homeowners insurance. These claims cost the industry $310 million in 2001, according to the Insurance Information Institute."It's not an anti dog policy. It's business," said Alejandra Soto, a spokesperson for the institute
Highly publicized cases like that that of two California lawyers whose Presa Canarios mauled a neighbour to death have further raised concerns among insurers about dog bite liability, according to the institute.Dog bites are recognized as a public health threat by the national Centers for Disease Control and Prevention, the AVMA, and physicians' associations. Each year, an estimated 4.7 million people are bitten. As many as 800,000 dog bite victims - most of them children - require medical attention. About a dozen people are killed each year by dogs, according to the CDC.
Though they agree that dog bite injuries are a serious problem, the AVMA, the American Kennel Club, and animal welfare organizations argue that breed discrimination is not an appropriate way of addressing the problem. Dr. Bonnie V. Beaver, a member of the AVMA Executive Board and a certified veterinary behaviourist, said that breed discrimination is not scientifically supported
"The data available (on dog bites) are not accurate and are very incomplete," she said.Dr. Beaver further explained that the majority of the dogs in the United States are "good canine citizens.""There are many good dogs out there being discriminated against," she said.According to official statements from the AVMA, all dogs - regardless of size or breed - can bite if provoked. The key to reducing dog bites is responsible pet ownership.
Understanding the policies
Insurance companies are taking a variety of steps to avoid dog bite injury claims. Some will not cover specific breeds of dogs, or individual dogs that have a history of biting. Others require dog owners to sign waivers and accept full responsibility for any dog bites. A few are evaluating dogs on a case-by-case basis and require letters from veterinarians, dog obedience certificates, or a home visit by an insurance agent.
To develop lists of dog breeds they won't cover, insurance companies are looking at previous dog bite injury claims they've had to pay. For example, if an insurance company previously had three claims in which a pit bull-type dog attacked a person and they had to pay $300,000 on each, they may chose not to cover pit bull-type dogs in the future. They are focusing on previous bites that caused serious damage, and in most cases, it's large breeds that are able to do the most damage, Soto said.
In an effort to prove that her dog was not a threat, Mersal offered to provide letters from neighbours, but the insurance company would not consider them.
"They wouldn't even listen to me," she said.
Few insurance companies are evaluating dogs on a case-by-case basis, because it's an expensive and time-consuming process, Soto said.
"It's very difficult to do, in terms of manpower," she said.The AVMA warns veterinarians to be careful about supplying behavioural evaluations of dogs for insurance purposes.
"It's risky for veterinarians," said Dr. Beaver, explaining that there are many situations in which a dog may behave aggressively, and temperament tests can't rule out the possibility of aggression. "You don't have temperament tests that can identify all possibilities."Dr. Beaver recommended that veterinarians talk to clients who are encountering breed discrimination about the AVMA's stance and recommend that they work with breed organizations to discourage insurance companies from basing their policies on breeds.
Seeking solutions
State veterinary associations, the AKC, who along with the Humane Society of the United States, the American Society for the Prevention of Cruelty to Animals, and other animal welfare organizations are actively lobbying state legislatures to pass laws against breed discrimination. At least two states have such laws.
The AKC offers the Canine Good Citizen programme, a dog training certification programme that emphasizes responsible ownership and basic good manners for dogs, as an option for owners who need to provide evidence to insurance companies that they are responsible owners.
"We've found some insurance agents who feel that owners that go through this programme are less likely to be a problem," said Mary Burch, PhD, the director of the AKC's Canine Good Citizen programme. Information about the programme is available at www.akc.org/love/cgc/index.cfm.
Seventeen states and communities across the country endorse the programme as a way to make communities safer and reduce dog bites. Dogs in the programme are introduced to a variety of situations and must behave appropriately around other dogs and humans to be certified. Dr. Burch recommends that veterinarians encourage their clients to seek training for their dogs through the Canine Good Citizen programme or similar training programmes.
"Veterinarians are really the first professionals to have contact with these animals," Dr. Burch said. She added that some veterinarians who have promoted Canine Good Citizen programmes or offered such programmes through their offices have noted an added bonus: dogs that have completed the programme behave better and are easier to work with in the clinic.
For owners, shopping around for policies and responsible ownership are keys to finding home insurance, according to the groups tracking the trend.
Soto said dog owners should keep up to date on their insurance companies' policies on dogs and update their coverage, and that prospective dog owners should check with their insurance company when they are selecting a dog.In Massachusetts, homeowners who are denied coverage can apply for coverage through the state's Fair Access to Insurance Requirements plan. Information is available at www.mpiua.org www.mpiua.org.
Shushu's owner, Mersal, was able to get home insurance through another company. But she advises other dog owners to be aware of their insurance company's policies and to refuse to do business with companies who discriminate against certain breeds.
On Suits and Prophylactics: Recurring Environmental Coverage Issues
Commercial general liability policies provide coverage for the insured’s liability for “damages” on account of bodily injury and property damage and require the insurer to provide a defense to “suits” seeking such damages. Since the beginning of the environmental liability coverage wars some twenty-five years ago, insurers have disputed whether their insureds’ environmental liabilities seek to impose “damages”, are on account of “property damage,” and are adjudicated in the context of “suit[s].” Recent cases have continued to address these recurring issues.
In Cinergy Corp. v. Associated Electric & Gas Insurance Services, Ltd. (Ind. May 1, 2007), the Indiana Supreme Court considered whether the insured’s liability in that case was in the nature of “damages.” The Indiana court granted the insured a somewhat pyrrhic victory in finding that the insurers in theory had obligations to defend, but holding that the liability for which the insured ostensibly was liable was not of the nature of a monetary obligations to which liability insurance applies. The court gave the insured some sympathy in dealing with the policy language: “Synthesizing the policies’ insuring agreements with their respective definitions of capitalized words and phrases is a daunting task, replete with often confusing, redundant, and sometimes circular concepts.” Slip op. at 7.
But the court held that the liability in the civil action in which the insured was involved was not of the nature and kind covered by liability policies. “There is essential agreement among the parties . . . that the primary thrust of the federal lawsuit is to require the [insured] to incur the costs of installing government-mandated equipment intended to reduce future emissions of pollutants and prevent future environmental harm.” Slip op. at 11. In assessing whether there was coverage, the court adopted the now-familiar distinction between (covered) “remedial” and (uncovered) “prophylactic” measures. The court ruled that the government’s action against the insured was “directed at preventing future public harm, not at obtaining control, mitigation, or compensation for past or existing environmentally hazardous emissions.” Slip op. at 14. Consequently, the court found that the liability of the insured was not as a result of “the happening of an accident, event, or exposure to conditions but rather [was directed at] the prevention of such an occurrence.” Slip op. at 15.
In effect, the court found that the liability involved was not as a result of any past or existing property damage, but rather was based only on complying with legal requirements to conduct its operations safely. (Alternatively, the court could be said to have found that there was no property damage yet for which the insured was being held liable.) Accordingly, “the costs of installing government mandated equipment intended to reduce future emissions of pollutants and to prevent resulting future environmental harm” does not constitute covered sums for which the insured is liable because of property damage. Slip op. at 16.
The “remedial” versus “prophylactic” distinction in the environmental context is often elusive (and for that reason alone courts should be chary of denying coverage for bona fide liability). While it is true that insurance policies are not funding mechanisms for the costs of operating in compliance with the law, where property damage has occurred and an element of the damages on account thereof include measures to prevent the recurrence of damage, then the costs of those future-oriented remedies should be (and generally are) covered. When one is dealing with water contamination or air contamination, for example, it may be that the remedy includes measures to reduce the concentrations of the deleterious substance released by the insured; by limiting additional releases of that substance, the water system, for example, is able to dilute the contaminants through ordinary recharges of the system and reduce the concentration below the level of “damage.” In this way, stopping the on-going contribution of the deleterious substance can be thought of as a remedy for past damage (because this type of preventive remedy allows the damage to be mitigated). Were one to freeze-frame the issue, however, and look only at the remedy (and not the reason for the remedy), it might be argued that the measure is “prophylactic,’ that is, is meant to prevent the future release of contaminants.
For purposes of analyzing the availability of insurance-coverage, however, the question is why is the insured responsible for containing future releases. Where there has already been damage for existing releases of contaminants, “stop[ping] that ongoing release is not mere prophylaxis.” Watts Industries, Inc. v. Zurich American Ins. Co., 121 Cal. App. 4th 1029 (2004)
In legal proceedings where the insured faces liability for “damages,” primary CGL insurers will have a duty to defend. Where there is no possibility, however, that the action against the insured can eventuate in a judgment covered by the insurer’s duty to indemnify, then the insurer will not have an obligation to defend. Because in Cinergy the Indiana Supreme Court held that the costs at issue were purely prophylactic and not “damages because of property damage,” the court ruled that the insurers had no duty to defend (though rejecting the rationale of the court below that there was a duty to pay defense costs only as an incident to the obligation to indemnify and thus only after the underlying action was concluded). Cinergy, slip op. at 16.
Even if the insured faces bona fide damages, the duty to defend applies to “suits,” and naturally insurers and insureds have joined issue on whether various types of proceedings constitute “suits” to which the duty to defend extends. Most courts have recognized that enforcement proceedings that can eventuate in a “damages” award are in the nature of a “suit” against the insured, but some courts have equated the term “suit” with “lawsuit” and held that only actions in a court of law – as opposed to an administrative proceeding – can constitute a “suit.” That said, even these jurisdictions may allow a claim for the cost of defense of a non-traditional or non-court proceeding where “suit” is defined more broadly to encompass other forms of liability-seeking actions or where the insurer’s obligation to pay includes obligations to reimburse “expenses” incurred in the defense, without those expenses being tethered only to court-proceedings. The recent decision of the California Court of Appeal in Ameron Int’l v. Insurance Co. of State of PA (Cal. App. May 15, 2007) analyzes a number of different formulations of insuring obligations, cast against the backdrop of decisions holding that the undefined term “suit” is limited only to actions in a court of law. Ameron is a useful reminder to policyholder and insurer lawyers that we need to parse the language of the contract carefully in determining the obligations to provide coverage vel non.
In Cinergy Corp. v. Associated Electric & Gas Insurance Services, Ltd. (Ind. May 1, 2007), the Indiana Supreme Court considered whether the insured’s liability in that case was in the nature of “damages.” The Indiana court granted the insured a somewhat pyrrhic victory in finding that the insurers in theory had obligations to defend, but holding that the liability for which the insured ostensibly was liable was not of the nature of a monetary obligations to which liability insurance applies. The court gave the insured some sympathy in dealing with the policy language: “Synthesizing the policies’ insuring agreements with their respective definitions of capitalized words and phrases is a daunting task, replete with often confusing, redundant, and sometimes circular concepts.” Slip op. at 7.
But the court held that the liability in the civil action in which the insured was involved was not of the nature and kind covered by liability policies. “There is essential agreement among the parties . . . that the primary thrust of the federal lawsuit is to require the [insured] to incur the costs of installing government-mandated equipment intended to reduce future emissions of pollutants and prevent future environmental harm.” Slip op. at 11. In assessing whether there was coverage, the court adopted the now-familiar distinction between (covered) “remedial” and (uncovered) “prophylactic” measures. The court ruled that the government’s action against the insured was “directed at preventing future public harm, not at obtaining control, mitigation, or compensation for past or existing environmentally hazardous emissions.” Slip op. at 14. Consequently, the court found that the liability of the insured was not as a result of “the happening of an accident, event, or exposure to conditions but rather [was directed at] the prevention of such an occurrence.” Slip op. at 15.
In effect, the court found that the liability involved was not as a result of any past or existing property damage, but rather was based only on complying with legal requirements to conduct its operations safely. (Alternatively, the court could be said to have found that there was no property damage yet for which the insured was being held liable.) Accordingly, “the costs of installing government mandated equipment intended to reduce future emissions of pollutants and to prevent resulting future environmental harm” does not constitute covered sums for which the insured is liable because of property damage. Slip op. at 16.
The “remedial” versus “prophylactic” distinction in the environmental context is often elusive (and for that reason alone courts should be chary of denying coverage for bona fide liability). While it is true that insurance policies are not funding mechanisms for the costs of operating in compliance with the law, where property damage has occurred and an element of the damages on account thereof include measures to prevent the recurrence of damage, then the costs of those future-oriented remedies should be (and generally are) covered. When one is dealing with water contamination or air contamination, for example, it may be that the remedy includes measures to reduce the concentrations of the deleterious substance released by the insured; by limiting additional releases of that substance, the water system, for example, is able to dilute the contaminants through ordinary recharges of the system and reduce the concentration below the level of “damage.” In this way, stopping the on-going contribution of the deleterious substance can be thought of as a remedy for past damage (because this type of preventive remedy allows the damage to be mitigated). Were one to freeze-frame the issue, however, and look only at the remedy (and not the reason for the remedy), it might be argued that the measure is “prophylactic,’ that is, is meant to prevent the future release of contaminants.
For purposes of analyzing the availability of insurance-coverage, however, the question is why is the insured responsible for containing future releases. Where there has already been damage for existing releases of contaminants, “stop[ping] that ongoing release is not mere prophylaxis.” Watts Industries, Inc. v. Zurich American Ins. Co., 121 Cal. App. 4th 1029 (2004)
In legal proceedings where the insured faces liability for “damages,” primary CGL insurers will have a duty to defend. Where there is no possibility, however, that the action against the insured can eventuate in a judgment covered by the insurer’s duty to indemnify, then the insurer will not have an obligation to defend. Because in Cinergy the Indiana Supreme Court held that the costs at issue were purely prophylactic and not “damages because of property damage,” the court ruled that the insurers had no duty to defend (though rejecting the rationale of the court below that there was a duty to pay defense costs only as an incident to the obligation to indemnify and thus only after the underlying action was concluded). Cinergy, slip op. at 16.
Even if the insured faces bona fide damages, the duty to defend applies to “suits,” and naturally insurers and insureds have joined issue on whether various types of proceedings constitute “suits” to which the duty to defend extends. Most courts have recognized that enforcement proceedings that can eventuate in a “damages” award are in the nature of a “suit” against the insured, but some courts have equated the term “suit” with “lawsuit” and held that only actions in a court of law – as opposed to an administrative proceeding – can constitute a “suit.” That said, even these jurisdictions may allow a claim for the cost of defense of a non-traditional or non-court proceeding where “suit” is defined more broadly to encompass other forms of liability-seeking actions or where the insurer’s obligation to pay includes obligations to reimburse “expenses” incurred in the defense, without those expenses being tethered only to court-proceedings. The recent decision of the California Court of Appeal in Ameron Int’l v. Insurance Co. of State of PA (Cal. App. May 15, 2007) analyzes a number of different formulations of insuring obligations, cast against the backdrop of decisions holding that the undefined term “suit” is limited only to actions in a court of law. Ameron is a useful reminder to policyholder and insurer lawyers that we need to parse the language of the contract carefully in determining the obligations to provide coverage vel non.
The Science of a Fender Bender
Oh my goodness, I just hit that car!” “How much is this going to cost me, and what’s going to happen to my insurance?” In the heat of the moment, these are the instinctual thoughts of any driver who’s had the unpleasant experience of a fender bender. Even the smallest and most innocuous auto collision can have lasting financial repercussions — regardless of fault. What’s a driver to do?
There is an abundance of misinformation floating around the Internet that will convince you why you should pay out-of-pocket for small fender benders — especially if you have any previous accidents or moving violations on your driving record. At the scene of a collision, don’t be so quick to financially resolve the accident by writing a check or accepting the other driver’s available cash on hand.
There is a reason that your state requires a certain level of car insurance: car repairs always have unexpected costs and personal injuries sometimes take unforeseen turns towards chronic physical injury. If you choose to not report an accident to your insurance company, you are taking an uncalculated risk that you are probably not prepared for. If the other driver chooses to sue you months later, your failure to report the accident might cause your insurer to refuse to honor the policy. Imagine the financial and legal challenge of taking on an insurance company all by yourself.
Auto accidents are expensive and inconvenient; however, having the lowest possible deductible probably isn’t going to make a difference in the long-term costs of such an event. Instead, you should consider increasing your deductibles to lower the overall cost of your premiums. It’s one of the best ways to save on your car insurance. Yes, a collision will be a little more expensive, but you’re probably not going to experience enough accidents to justify the forgone savings. If you’re a safe and responsible driver, save on your overall premium, not on the out-of-pocket costs in an accident.
As with anything, preparation is the key to successfully navigating the administrative headaches of a fender bender. Always have a pen and paper readily available next to your proof of insurance. You’ll want to collect the names and addresses of all drivers, passengers, witnesses, and law enforcement officials involved; in addition to license plate numbers, the make and model of each car, driver’s license numbers, insurance information, and as much scenario detail as possible. There are two points of wisdom that strongly support any resolution that most people overlook: 1.) Never admit fault, and 2.) Have a disposable camera handy to take undisputable images of the scene. In any type of auto accident, everything happens in a flash and “hindsight is 20-20”.
If a fender bender has bruised your driving record and you are suffering from what seems to be unreasonable premiums, don’t be a prisoner to your insurance company. There are companies that specialize in insuring high risk drivers with reasonable rates. To find them you must shop around and compare multiple quotes from multiple companies. The same policy can vary by hundreds of dollars from company to company.
There is an abundance of misinformation floating around the Internet that will convince you why you should pay out-of-pocket for small fender benders — especially if you have any previous accidents or moving violations on your driving record. At the scene of a collision, don’t be so quick to financially resolve the accident by writing a check or accepting the other driver’s available cash on hand.
There is a reason that your state requires a certain level of car insurance: car repairs always have unexpected costs and personal injuries sometimes take unforeseen turns towards chronic physical injury. If you choose to not report an accident to your insurance company, you are taking an uncalculated risk that you are probably not prepared for. If the other driver chooses to sue you months later, your failure to report the accident might cause your insurer to refuse to honor the policy. Imagine the financial and legal challenge of taking on an insurance company all by yourself.
Auto accidents are expensive and inconvenient; however, having the lowest possible deductible probably isn’t going to make a difference in the long-term costs of such an event. Instead, you should consider increasing your deductibles to lower the overall cost of your premiums. It’s one of the best ways to save on your car insurance. Yes, a collision will be a little more expensive, but you’re probably not going to experience enough accidents to justify the forgone savings. If you’re a safe and responsible driver, save on your overall premium, not on the out-of-pocket costs in an accident.
As with anything, preparation is the key to successfully navigating the administrative headaches of a fender bender. Always have a pen and paper readily available next to your proof of insurance. You’ll want to collect the names and addresses of all drivers, passengers, witnesses, and law enforcement officials involved; in addition to license plate numbers, the make and model of each car, driver’s license numbers, insurance information, and as much scenario detail as possible. There are two points of wisdom that strongly support any resolution that most people overlook: 1.) Never admit fault, and 2.) Have a disposable camera handy to take undisputable images of the scene. In any type of auto accident, everything happens in a flash and “hindsight is 20-20”.
If a fender bender has bruised your driving record and you are suffering from what seems to be unreasonable premiums, don’t be a prisoner to your insurance company. There are companies that specialize in insuring high risk drivers with reasonable rates. To find them you must shop around and compare multiple quotes from multiple companies. The same policy can vary by hundreds of dollars from company to company.
4 Ways Most People Overpay for Car Insurance
Tax-Time: you’re either waiting for your gravy train tax refund, or you’re fearing the event of paying even more to Uncle Sam. Car insurance can take on a similar dichotomy, but the difference is that you don’t get a refund for overpaying for coverage — it just renews and overcharges you until you find a more affordable policy. Most people don’t see this, and miss out on hundreds of dollars in savings that could be used like a big fat tax refund.
Auto Insurance Quotes are Not Final: How to Make Them LowerWhen you shop and compare multiple auto insurance quotes, recognize that even if the quotes are about the same as your current policy, or lower for that matter, they can still be even lower. There may be too much coverage, or extra options tucked into the quote that you really don’t need.
Although higher limits provide you with greater protection against possible losses, you may be carrying limits that are not in line with the value of your total assets and your lifestyle. As you review your quote, consult with an insurance agent before making any final coverage decisions. Additionally, you may be a member of an auto club that provides towing and labor protection, therefore, paying for it in your auto policy could be unnecessary. The same may hold true for car rental coverage: do you really need it?
Trying to Make “Accidents” More AffordableMany drivers make the mistake of carrying the lowest deductibles in order to help offset the costs associated with filing a claim. The fact remains, the higher your deductible, the lower your premium. Indeed the cost of an accident will be that much more expensive; however, if the damage is minor, you could be spending the same out-of-pocket amount regardless. Save on your policy, not the accident; raise your deductibles if you can afford to.
Paying for the Policy in Monthly InstallmentsJust like any bill, it is common to pay for insurance in monthly installments, either by check or automatic bank withdrawal. Be aware that additional administrative fees are commonly applied to payments when you split your premium into installments (i.e. monthly, semi-annual, annual). A monthly fee of even $7 can add up to $84 over 12 months.
Overpaying for Tickets and Moving ViolationsPerhaps you deserve a higher rate for your driving record, but don’t let the insurance company unduly punish you. Although having moving violations on your driving record can limit your selection of insurance companies, don't believe that finding affordable car insurance is as intimidating as appearing in traffic court and paying fines. To the contrary, there are companies that specialize in insuring higher risk drivers at reasonable prices. The only way to identify such companies though, is to compare multiple quotes from multiple companies.
Don’t count on your tax refund to save money! Instead, you may be able to save hundreds by simply taking 10 minutes to analyze your auto insurance policy. Even if last year seemed uneventful, the chances are good that your individual circumstances have changed enough to qualify you for lower car insurance rates. And even if nothing changed on your end, many large insurance companies may have reduced their rates since you last shopped.
Auto Insurance Quotes are Not Final: How to Make Them LowerWhen you shop and compare multiple auto insurance quotes, recognize that even if the quotes are about the same as your current policy, or lower for that matter, they can still be even lower. There may be too much coverage, or extra options tucked into the quote that you really don’t need.
Although higher limits provide you with greater protection against possible losses, you may be carrying limits that are not in line with the value of your total assets and your lifestyle. As you review your quote, consult with an insurance agent before making any final coverage decisions. Additionally, you may be a member of an auto club that provides towing and labor protection, therefore, paying for it in your auto policy could be unnecessary. The same may hold true for car rental coverage: do you really need it?
Trying to Make “Accidents” More AffordableMany drivers make the mistake of carrying the lowest deductibles in order to help offset the costs associated with filing a claim. The fact remains, the higher your deductible, the lower your premium. Indeed the cost of an accident will be that much more expensive; however, if the damage is minor, you could be spending the same out-of-pocket amount regardless. Save on your policy, not the accident; raise your deductibles if you can afford to.
Paying for the Policy in Monthly InstallmentsJust like any bill, it is common to pay for insurance in monthly installments, either by check or automatic bank withdrawal. Be aware that additional administrative fees are commonly applied to payments when you split your premium into installments (i.e. monthly, semi-annual, annual). A monthly fee of even $7 can add up to $84 over 12 months.
Overpaying for Tickets and Moving ViolationsPerhaps you deserve a higher rate for your driving record, but don’t let the insurance company unduly punish you. Although having moving violations on your driving record can limit your selection of insurance companies, don't believe that finding affordable car insurance is as intimidating as appearing in traffic court and paying fines. To the contrary, there are companies that specialize in insuring higher risk drivers at reasonable prices. The only way to identify such companies though, is to compare multiple quotes from multiple companies.
Don’t count on your tax refund to save money! Instead, you may be able to save hundreds by simply taking 10 minutes to analyze your auto insurance policy. Even if last year seemed uneventful, the chances are good that your individual circumstances have changed enough to qualify you for lower car insurance rates. And even if nothing changed on your end, many large insurance companies may have reduced their rates since you last shopped.
Long Term Care Disability Insurance
As the American population ages, the insurance industry has enacted more policies for long term disability insurance.Consumers should be aware that insurance agents must provide an outline of the coverage in the policy, including a description of the benefits, and any limitations or excludions, terms under which the policy may be returned, the relationship of the cost of care and related benefits, and the terms under which the policy may be continued.Insurers are also under the obligation to use suitability standards to determine whether nor not the policy is appropriate for the purchaser. This includes the applican't ability to pay for the coverage, the applicant's goals in regards to long term disability care, and examining existing insurance to compare the value, benefits and costs to the proposed coverage.All insurers owe a policyholder a "duty of honesty and good faith" when selling a long term disability care insurance policy. If you feel your long term disability care policy has not been adequately represented to you, of if you have been denied long-term disability care benefits, you may wish to present your claim to an insurance lawyer.
ERISA and Long Term Disability
Register your Long Term Care Disability Insurance ComplaintIf you have had a long term disability insurance policy falsely represented to you, or been denied a long term care disability insurance claim, you may qualify for damages or remedies that may be awarded in a long term disability fraud insurance lawsuit. Please click the link below to submit your complaint to an insurance lawyer for a free evaluation.
ERISA and Long Term Disability
Register your Long Term Care Disability Insurance ComplaintIf you have had a long term disability insurance policy falsely represented to you, or been denied a long term care disability insurance claim, you may qualify for damages or remedies that may be awarded in a long term disability fraud insurance lawsuit. Please click the link below to submit your complaint to an insurance lawyer for a free evaluation.
Thursday, June 21, 2007
On Suits and Prophylactics: Recurring Environmental Coverage Issues
Commercial general liability policies provide coverage for the insured’s liability for “damages” on account of bodily injury and property damage and require the insurer to provide a defense to “suits” seeking such damages. Since the beginning of the environmental liability coverage wars some twenty-five years ago, insurers have disputed whether their insureds’ environmental liabilities seek to impose “damages”, are on account of “property damage,” and are adjudicated in the context of “suit[s].” Recent cases have continued to address these recurring issues.
In Cinergy Corp. v. Associated Electric & Gas Insurance Services, Ltd. (Ind. May 1, 2007), the Indiana Supreme Court considered whether the insured’s liability in that case was in the nature of “damages.” The Indiana court granted the insured a somewhat pyrrhic victory in finding that the insurers in theory had obligations to defend, but holding that the liability for which the insured ostensibly was liable was not of the nature of a monetary obligations to which liability insurance applies. The court gave the insured some sympathy in dealing with the policy language: “Synthesizing the policies’ insuring agreements with their respective definitions of capitalized words and phrases is a daunting task, replete with often confusing, redundant, and sometimes circular concepts.” Slip op. at 7.
But the court held that the liability in the civil action in which the insured was involved was not of the nature and kind covered by liability policies. “There is essential agreement among the parties . . . that the primary thrust of the federal lawsuit is to require the [insured] to incur the costs of installing government-mandated equipment intended to reduce future emissions of pollutants and prevent future environmental harm.” Slip op. at 11. In assessing whether there was coverage, the court adopted the now-familiar distinction between (covered) “remedial” and (uncovered) “prophylactic” measures. The court ruled that the government’s action against the insured was “directed at preventing future public harm, not at obtaining control, mitigation, or compensation for past or existing environmentally hazardous emissions.” Slip op. at 14. Consequently, the court found that the liability of the insured was not as a result of “the happening of an accident, event, or exposure to conditions but rather [was directed at] the prevention of such an occurrence.” Slip op. at 15.
In effect, the court found that the liability involved was not as a result of any past or existing property damage, but rather was based only on complying with legal requirements to conduct its operations safely. (Alternatively, the court could be said to have found that there was no property damage yet for which the insured was being held liable.) Accordingly, “the costs of installing government mandated equipment intended to reduce future emissions of pollutants and to prevent resulting future environmental harm” does not constitute covered sums for which the insured is liable because of property damage. Slip op. at 16.
The “remedial” versus “prophylactic” distinction in the environmental context is often elusive (and for that reason alone courts should be chary of denying coverage for bona fide liability). While it is true that insurance policies are not funding mechanisms for the costs of operating in compliance with the law, where property damage has occurred and an element of the damages on account thereof include measures to prevent the recurrence of damage, then the costs of those future-oriented remedies should be (and generally are) covered. When one is dealing with water contamination or air contamination, for example, it may be that the remedy includes measures to reduce the concentrations of the deleterious substance released by the insured; by limiting additional releases of that substance, the water system, for example, is able to dilute the contaminants through ordinary recharges of the system and reduce the concentration below the level of “damage.” In this way, stopping the on-going contribution of the deleterious substance can be thought of as a remedy for past damage (because this type of preventive remedy allows the damage to be mitigated). Were one to freeze-frame the issue, however, and look only at the remedy (and not the reason for the remedy), it might be argued that the measure is “prophylactic,’ that is, is meant to prevent the future release of contaminants.
For purposes of analyzing the availability of insurance-coverage, however, the question is why is the insured responsible for containing future releases. Where there has already been damage for existing releases of contaminants, “stop[ping] that ongoing release is not mere prophylaxis.” Watts Industries, Inc. v. Zurich American Ins. Co., 121 Cal. App. 4th 1029 (2004)
In legal proceedings where the insured faces liability for “damages,” primary CGL insurers will have a duty to defend. Where there is no possibility, however, that the action against the insured can eventuate in a judgment covered by the insurer’s duty to indemnify, then the insurer will not have an obligation to defend. Because in Cinergy the Indiana Supreme Court held that the costs at issue were purely prophylactic and not “damages because of property damage,” the court ruled that the insurers had no duty to defend (though rejecting the rationale of the court below that there was a duty to pay defense costs only as an incident to the obligation to indemnify and thus only after the underlying action was concluded). Cinergy, slip op. at 16.
Even if the insured faces bona fide damages, the duty to defend applies to “suits,” and naturally insurers and insureds have joined issue on whether various types of proceedings constitute “suits” to which the duty to defend extends. Most courts have recognized that enforcement proceedings that can eventuate in a “damages” award are in the nature of a “suit” against the insured, but some courts have equated the term “suit” with “lawsuit” and held that only actions in a court of law – as opposed to an administrative proceeding – can constitute a “suit.” That said, even these jurisdictions may allow a claim for the cost of defense of a non-traditional or non-court proceeding where “suit” is defined more broadly to encompass other forms of liability-seeking actions or where the insurer’s obligation to pay includes obligations to reimburse “expenses” incurred in the defense, without those expenses being tethered only to court-proceedings. The recent decision of the California Court of Appeal in Ameron Int’l v. Insurance Co. of State of PA (Cal. App. May 15, 2007) analyzes a number of different formulations of insuring obligations, cast against the backdrop of decisions holding that the undefined term “suit” is limited only to actions in a court of law. Ameron is a useful reminder to policyholder and insurer lawyers that we need to parse the language of the contract carefully in determining the obligations to provide coverage vel non.
In Cinergy Corp. v. Associated Electric & Gas Insurance Services, Ltd. (Ind. May 1, 2007), the Indiana Supreme Court considered whether the insured’s liability in that case was in the nature of “damages.” The Indiana court granted the insured a somewhat pyrrhic victory in finding that the insurers in theory had obligations to defend, but holding that the liability for which the insured ostensibly was liable was not of the nature of a monetary obligations to which liability insurance applies. The court gave the insured some sympathy in dealing with the policy language: “Synthesizing the policies’ insuring agreements with their respective definitions of capitalized words and phrases is a daunting task, replete with often confusing, redundant, and sometimes circular concepts.” Slip op. at 7.
But the court held that the liability in the civil action in which the insured was involved was not of the nature and kind covered by liability policies. “There is essential agreement among the parties . . . that the primary thrust of the federal lawsuit is to require the [insured] to incur the costs of installing government-mandated equipment intended to reduce future emissions of pollutants and prevent future environmental harm.” Slip op. at 11. In assessing whether there was coverage, the court adopted the now-familiar distinction between (covered) “remedial” and (uncovered) “prophylactic” measures. The court ruled that the government’s action against the insured was “directed at preventing future public harm, not at obtaining control, mitigation, or compensation for past or existing environmentally hazardous emissions.” Slip op. at 14. Consequently, the court found that the liability of the insured was not as a result of “the happening of an accident, event, or exposure to conditions but rather [was directed at] the prevention of such an occurrence.” Slip op. at 15.
In effect, the court found that the liability involved was not as a result of any past or existing property damage, but rather was based only on complying with legal requirements to conduct its operations safely. (Alternatively, the court could be said to have found that there was no property damage yet for which the insured was being held liable.) Accordingly, “the costs of installing government mandated equipment intended to reduce future emissions of pollutants and to prevent resulting future environmental harm” does not constitute covered sums for which the insured is liable because of property damage. Slip op. at 16.
The “remedial” versus “prophylactic” distinction in the environmental context is often elusive (and for that reason alone courts should be chary of denying coverage for bona fide liability). While it is true that insurance policies are not funding mechanisms for the costs of operating in compliance with the law, where property damage has occurred and an element of the damages on account thereof include measures to prevent the recurrence of damage, then the costs of those future-oriented remedies should be (and generally are) covered. When one is dealing with water contamination or air contamination, for example, it may be that the remedy includes measures to reduce the concentrations of the deleterious substance released by the insured; by limiting additional releases of that substance, the water system, for example, is able to dilute the contaminants through ordinary recharges of the system and reduce the concentration below the level of “damage.” In this way, stopping the on-going contribution of the deleterious substance can be thought of as a remedy for past damage (because this type of preventive remedy allows the damage to be mitigated). Were one to freeze-frame the issue, however, and look only at the remedy (and not the reason for the remedy), it might be argued that the measure is “prophylactic,’ that is, is meant to prevent the future release of contaminants.
For purposes of analyzing the availability of insurance-coverage, however, the question is why is the insured responsible for containing future releases. Where there has already been damage for existing releases of contaminants, “stop[ping] that ongoing release is not mere prophylaxis.” Watts Industries, Inc. v. Zurich American Ins. Co., 121 Cal. App. 4th 1029 (2004)
In legal proceedings where the insured faces liability for “damages,” primary CGL insurers will have a duty to defend. Where there is no possibility, however, that the action against the insured can eventuate in a judgment covered by the insurer’s duty to indemnify, then the insurer will not have an obligation to defend. Because in Cinergy the Indiana Supreme Court held that the costs at issue were purely prophylactic and not “damages because of property damage,” the court ruled that the insurers had no duty to defend (though rejecting the rationale of the court below that there was a duty to pay defense costs only as an incident to the obligation to indemnify and thus only after the underlying action was concluded). Cinergy, slip op. at 16.
Even if the insured faces bona fide damages, the duty to defend applies to “suits,” and naturally insurers and insureds have joined issue on whether various types of proceedings constitute “suits” to which the duty to defend extends. Most courts have recognized that enforcement proceedings that can eventuate in a “damages” award are in the nature of a “suit” against the insured, but some courts have equated the term “suit” with “lawsuit” and held that only actions in a court of law – as opposed to an administrative proceeding – can constitute a “suit.” That said, even these jurisdictions may allow a claim for the cost of defense of a non-traditional or non-court proceeding where “suit” is defined more broadly to encompass other forms of liability-seeking actions or where the insurer’s obligation to pay includes obligations to reimburse “expenses” incurred in the defense, without those expenses being tethered only to court-proceedings. The recent decision of the California Court of Appeal in Ameron Int’l v. Insurance Co. of State of PA (Cal. App. May 15, 2007) analyzes a number of different formulations of insuring obligations, cast against the backdrop of decisions holding that the undefined term “suit” is limited only to actions in a court of law. Ameron is a useful reminder to policyholder and insurer lawyers that we need to parse the language of the contract carefully in determining the obligations to provide coverage vel non.
Insurance coverage "heaven" and "hell", or "hell" and then "heaven"
On a dark, and starless night back in 2001, I was driving my Saturn eclipse back home after a very long, as well as very tiring business trip. I'm a lower level executive assistant for a popular retail company, and I am often required to go along with my bosses to their meetings.
Unfortunately, this one was out of state. My immediate supervisor told me that there simply was not enough company travel funds in the yearly budget available to afford to give me a plane ticket along with all of the executives that were given plane tickets. They decided to upgrade to first class from business class at the last minute. This left me on the losing end, and I was forced to have to drive 200 miles round trip.
Anyway, on the way back I was hit by a careless drunk driver. My car was utterly destroyed, so to speak. I filed an insurance claim, after the police gave me his insurance information.
The drunk driver was sent to alchohol rehab, and hopefully he will be able to stay sober after he gets out. I submitted the insurance claim to my car insurance company. They tried to say that I don't have coverage for getting hit by another car. I pleaded with them that it was his fault, and that his insurance should be held liable. They persisted in their denial of my claim.
decided to challenge the denial in court. I luckily have a cousin who is a lawyer. We took the insurance company to court, and the judge found them liable for having to see to it that the drunk driver's insurance company bought me a new car. My old car had 60,000 miles on it, albeit I just bought it new three years ago.I was actually bought an even better car model than the one that I originally had, as well.
My experience should prove that the "little guy or person" can fight big insurance companies in court that deny legitimate claims, and win.
Unfortunately, this one was out of state. My immediate supervisor told me that there simply was not enough company travel funds in the yearly budget available to afford to give me a plane ticket along with all of the executives that were given plane tickets. They decided to upgrade to first class from business class at the last minute. This left me on the losing end, and I was forced to have to drive 200 miles round trip.
Anyway, on the way back I was hit by a careless drunk driver. My car was utterly destroyed, so to speak. I filed an insurance claim, after the police gave me his insurance information.
The drunk driver was sent to alchohol rehab, and hopefully he will be able to stay sober after he gets out. I submitted the insurance claim to my car insurance company. They tried to say that I don't have coverage for getting hit by another car. I pleaded with them that it was his fault, and that his insurance should be held liable. They persisted in their denial of my claim.
decided to challenge the denial in court. I luckily have a cousin who is a lawyer. We took the insurance company to court, and the judge found them liable for having to see to it that the drunk driver's insurance company bought me a new car. My old car had 60,000 miles on it, albeit I just bought it new three years ago.I was actually bought an even better car model than the one that I originally had, as well.
My experience should prove that the "little guy or person" can fight big insurance companies in court that deny legitimate claims, and win.
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