last updated april 11th 2009
12 Ways to Lower Your Homeowners Insurance Costs
Insurance Information Institute
The price you pay for your homeowners insurance can vary by hundreds of dollars, depending on the insurance company you buy your policy from. Here are some things to consider when buying homeowners insurance.
1. Shop Around
It'll take some time, but could save you a good sum of money. Ask your friends, check the Yellow Pages or contact your state insurance department. (Phone numbers and Web sites are listed here.) National Association of Insurance Commissioners (www.naic.org) has information to help you choose an insurer in your state, including complaints. States often make information available on typical rates charged by major insurers and many states provide the frequency of consumer complaints by company.
Also check consumer guides, insurance agents, companies and online insurance quote services. This will give you an idea of price ranges and tell you which companies have the lowest prices. But don't consider price alone. The insurer you select should offer a fair price and deliver the quality service you would expect if you needed assistance in filing a claim. So in assessing service quality, use the complaint information cited above and talk to a number of insurers to get a feeling for the type of service they give. Ask them what they would do to lower your costs.
Check the financial stability of the companies you are considering with rating companies such as A.M. Best (www.ambest.com) and Standard & Poor’s (www.standardandpoors.com) and consult consumer magazines. When you've narrowed the field to three insurers, get price quotes.
2. Raise Your Deductible
Deductibles are the amount of money you have to pay toward a loss before your insurance company starts to pay a claim, according to the terms of your policy. The higher your deductible, the more money you can save on your premiums. Nowadays, most insurance companies recommend a deductible of at least $500. If you can afford to raise your deductible to $1,000, you may save as much as 25 percent. Remember, if you live in a disaster-prone area, your insurance policy may have a separate deductible for certain kinds of damage. If you live near the coast in the East, you may have a separate windstorm deductible; if you live in a state vulnerable to hail storms, you may have a separate deductible for hail; and if you live in an earthquake-prone area, your earthquake policy has a deductible.
3. Don’t confuse what you paid for your house with rebuilding costs
The land under your house isn't at risk from theft, windstorm, fire and the other perils covered in your homeowners policy. So don't include its value in deciding how much homeowners insurance to buy. If you do, you will pay a higher premium than you should.
4. Buy your home and auto policies from the same insurer
Some companies that sell homeowners, auto and liability coverage will take 5 to 15 percent off your premium if you buy two or more policies from them. But make certain this combined price is lower than buying the different coverages from different companies.
5. Make your home more disaster resistant
Find out from your insurance agent or company representative what steps you can take to make your home more resistant to windstorms and other natural disasters. You may be able to save on your premiums by adding storm shutters, reinforcing your roof or buying stronger roofing materials. Older homes can be retrofitted to make them better able to withstand earthquakes. In addition, consider modernizing your heating, plumbing and electrical systems to reduce the risk of fire and water damage.
6. Improve your home security
You can usually get discounts of at least 5 percent for a smoke detector, burglar alarm or dead-bolt locks. Some companies offer to cut your premium by as much as 15 or 20 percent if you install a sophisticated sprinkler system and a fire and burglar alarm that rings at the police, fire or other monitoring stations. These systems aren't cheap and not every system qualifies for a discount. Before you buy such a system, find out what kind your insurer recommends, how much the device would cost and how much you'd save on premiums.
7. Seek out other discounts
Companies offer several types of discounts, but they don't all offer the same discount or the same amount of discount in all states. For example, since retired people stay at home more than working people they are less likely to be burglarized and may spot fires sooner, too. Retired people also have more time for maintaining their homes. If you're at least 55 years old and retired, you may qualify for a discount of up to 10 percent at some companies. Some employers and professional associations administer group insurance programs that may offer a better deal than you can get elsewhere.
8. Maintain a good credit record
Establishing a solid credit history can cut your insurance costs. Insurers are increasingly using credit information to price homeowners insurance policies. In most states, your insurer must advise you of any adverse action, such as a higher rate, at which time you should verify the accuracy of the information on which the insurer relied. To protect your credit standing, pay your bills on time, don't obtain more credit than you need and keep your credit balances as low as possible. Check your credit record on a regular basis and have any errors corrected promptly so that your record remains accurate.
9. Stay with the same insurer
If you've kept your coverage with a company for several years, you may receive a special discount for being a long-term policyholder. Some insurers will reduce their premiums by 5 percent if you stay with them for three to five years and by 10 percent if you remain a policyholder for six years or more. But make certain to periodically compare this price with that of other policies.
10. Review the limits in your policy and the value of your possessions at least once a year
You want your policy to cover any major purchases or additions to your home. But you don't want to spend money for coverage you don't need. If your five-year-old fur coat is no longer worth the $5,000 you paid for it, you'll want to reduce or cancel your floater (extra insurance for items whose full value is not covered by standard homeowners policies such as expensive jewelry, high-end computers and valuable art work) and pocket the difference.
11. Look for private insurance if you are in a government plan
If you live in a high-risk area -- say, one that is especially vulnerable to coastal storms, fires, or crime -- and have been buying your homeowners insurance through a government plan, you should check with an insurance agent or company representative or contact your state department of insurance for the names of companies that might be interested in your business. You may find that there are steps you can take that would allow you to buy insurance at a lower price in the private market.
12. When you’re buying a home, consider the cost of homeowners insurance
You may pay less for insurance if you buy a house close to a fire hydrant or in a community that has a professional rather than a volunteer fire department. It may also be cheaper if your home’s electrical, heating and plumbing systems are less than 10 years old. If you live in the East, consider a brick home because it's more wind resistant. If you live in an earthquake-prone area, look for a wooden frame house because it is more likely to withstand this type of disaster. Choosing wisely could cut your premiums by 5 to 15 percent.
Check the CLUE (Comprehensive Loss Underwriting Exchange) report of the home you are thinking of buying. These reports contain the insurance claim history of the property and can help you judge some of the problems the house may have.
Remember that flood insurance and earthquake damage are not covered by a standard homeowners policy. If you buy a house in a flood-prone area, you'll have to pay for a flood insurance policy that costs an average of $400 a year. The Federal Emergency Management Agency provides useful information on flood insurance on its Web site at FloodSmart.gov. A separate earthquake policy is available from most insurance companies. The cost of the coverage will depend on the likelihood of earthquakes in your area. In California the California Earthquake Authority (www.earthquakeauthority.com) provides this coverage.
If you have questions about insurance for any of your possessions, be sure to ask your agent or company representative when you're shopping around for a policy. For example, if you run a business out of your home, be sure to discuss coverage for that business. Most homeowners policies cover business equipment in the home, but only up to $2,500 and they offer no business liability insurance. Although you want to lower your homeowners insurance cost, you also want to make certain you have all the coverage you need.
INSURANCE INFORMATION INSTITUTE
110 William Street
New York, NY 10038
212-346-5500
www.iii.org
Reviewed by:
Consumer Federation of America
www.consumerfed.org
Federal Citizen Information Center
www.pueblo.gsa.gov
National Consumers League
www.nclnet.org
Cooperative State Research, Education, and Extension Service, USDA
www.reeusda.gov
Saturday, April 11, 2009
renters insurance basics
last updated April 12th 2009
Renters face the same risk as homeowners in cases of disasters striking their dwelling. Your landlord or condo association may have insurance, but this only protects the building, not your things in it. Renters insurance can protect your belongings in case of disaster.
What standard policies cover
There are several types of residential insurance policies. The HO-4 policy is designed for renters, while the HO-6 policy is for condo owners. Both HO-4 and HO-6 cover losses to your personal property from 16 types of perils:
Fire or lightning
Windstorm or hail
Explosion
Riot or civil commotion
Damage caused by aircraft
Damage caused by vehicles
Smoke
Vandalism or malicious mischief
Theft
Volcanic eruption
Falling objects
Weight of ice, snow, or sleet
Accidental discharge or overflow of water or steam from within a plumbing, heating, air conditioning, or automatic fire-protective sprinkler system, or from a household appliance
Sudden and accidental tearing apart, cracking, burning, or bulging of a steam or hot water heating system, an air conditioning or automatic fire-protective system
Freezing of a plumbing, heating, air conditioning or automatic, fire-protective sprinkler system, or of a household appliance
Sudden and accidental damage from artificially generated electrical current (does not include loss to a tube, transistor or similar electronic component)
Floods and earthquakes aren't on the list. If you live in an area prone to either, you'll need to buy a separate policy or a rider. In some coastal regions, where hurricanes might pose a threat, you might also need to buy a separate rider to cover wind damage.
Actual cash value vs. replacement cost
Make sure you let your agent know about any particularly valuable items you have.
One thing to look at is whether the insurance company will offer "actual cash value" (ACV) or "replacement cost coverage" for your belongings. As the name implies, ACV coverage will pay only for what your property was worth at the time it was damaged or stolen. So, if you bought a television five years ago for $500, it would be worth significantly less today. While you'd still need to spend about $500 for a new TV, your insurance company will pay only for what the old one was worth, minus your deductible.
Replacement cost coverage, on the other hand, will pay what it actually costs to replace the items you lost, again minus the deductible. In some regions, most insurers write ACV coverage. In others, they'll quote you replacement cost coverage by default. Replacement cost coverage will cost you more in premiums, but it will also pay out more if you ever need to file a claim. Let your agent know about any particularly valuable items you have. Jewelry, antiques and electronics might be covered only up to an amount that won't pay for their replacement.
If you have some items that are unusually expensive, such as a diamond ring, you'll probably want to purchase a separate rider. Without riders for expensive items you can't recover the full loss if it's beyond your policy limit.
Take inventory
Value of a typical single-person household
Furniture: $8,000
TV, VCR, stereo, tapes and CDs: $2,000
Home computer: $1,500
Microwave: $120
Other appliances: $240
Clothing: $3,000
Paintings, prints, photos: $800
Glassware, china, and silverware: $600
Sports equipment: $600
Cameras and photographer's equipment: $800
Books: $700
Jewelry: $1,000
Other property: $4,000
Total: $23,360
To ensure you are compensated for any belongings you lose from a fire, storm or other catastrophe, you should inventory all of your personal belongings. Your inventory should list each item, its value, and serial number. Photograph or videotape each room, including closets, open drawers, storage buildings, and your garage. Keep receipts for major items in a fireproof place. To make things easier, the Insurance Information Institute (III)has free inventory software that helps you create a room-by-room inventory of your personal possessions. For more information, go to KnowYourStuff.org.
When your home is unlivable
If your apartment or condominium becomes uninhabitable due to a fire, burst pipes or any other reason covered by your policy, your renters insurance will cover your "additional living expenses." Generally, that means paying for you to live somewhere else.
Additional benefits
Liability protection is also standard with most renters and condo policies. This means if someone in your unit slips and falls, you're covered for any costs, up to your liability limit. If this person sues you, you're covered for what they win in a court judgment as well as legal expenses, up to your policy's limit.
Keeping your premium low
Just like any other type of homeowners insurance policy, your renters insurance premium depends on a number of factors: where you live, your deductible, your insurance company and whether you need any additional coverage.
There are ways to reduce your renters or condo owners insurance bill. Increasing your deductible (the amount you pay before your coverage kicks in) is one strategy. Make sure you can afford whatever deductible you choose. If you're thinking about getting a dog, you might want to think twice. Some insurance companies are reluctant to write policies for owners of certain breeds.
Most insurers offer a discount for "protective devices" including smoke and fire detectors, burglar alarms and fire extinguishers.
Some insurers might offer discounts to policyholders who are over age 55 and retired. Others might offer a discount if you buy both an auto and renters policy (called a multi-line discount).
Renters face the same risk as homeowners in cases of disasters striking their dwelling. Your landlord or condo association may have insurance, but this only protects the building, not your things in it. Renters insurance can protect your belongings in case of disaster.
What standard policies cover
There are several types of residential insurance policies. The HO-4 policy is designed for renters, while the HO-6 policy is for condo owners. Both HO-4 and HO-6 cover losses to your personal property from 16 types of perils:
Fire or lightning
Windstorm or hail
Explosion
Riot or civil commotion
Damage caused by aircraft
Damage caused by vehicles
Smoke
Vandalism or malicious mischief
Theft
Volcanic eruption
Falling objects
Weight of ice, snow, or sleet
Accidental discharge or overflow of water or steam from within a plumbing, heating, air conditioning, or automatic fire-protective sprinkler system, or from a household appliance
Sudden and accidental tearing apart, cracking, burning, or bulging of a steam or hot water heating system, an air conditioning or automatic fire-protective system
Freezing of a plumbing, heating, air conditioning or automatic, fire-protective sprinkler system, or of a household appliance
Sudden and accidental damage from artificially generated electrical current (does not include loss to a tube, transistor or similar electronic component)
Floods and earthquakes aren't on the list. If you live in an area prone to either, you'll need to buy a separate policy or a rider. In some coastal regions, where hurricanes might pose a threat, you might also need to buy a separate rider to cover wind damage.
Actual cash value vs. replacement cost
Make sure you let your agent know about any particularly valuable items you have.
One thing to look at is whether the insurance company will offer "actual cash value" (ACV) or "replacement cost coverage" for your belongings. As the name implies, ACV coverage will pay only for what your property was worth at the time it was damaged or stolen. So, if you bought a television five years ago for $500, it would be worth significantly less today. While you'd still need to spend about $500 for a new TV, your insurance company will pay only for what the old one was worth, minus your deductible.
Replacement cost coverage, on the other hand, will pay what it actually costs to replace the items you lost, again minus the deductible. In some regions, most insurers write ACV coverage. In others, they'll quote you replacement cost coverage by default. Replacement cost coverage will cost you more in premiums, but it will also pay out more if you ever need to file a claim. Let your agent know about any particularly valuable items you have. Jewelry, antiques and electronics might be covered only up to an amount that won't pay for their replacement.
If you have some items that are unusually expensive, such as a diamond ring, you'll probably want to purchase a separate rider. Without riders for expensive items you can't recover the full loss if it's beyond your policy limit.
Take inventory
Value of a typical single-person household
Furniture: $8,000
TV, VCR, stereo, tapes and CDs: $2,000
Home computer: $1,500
Microwave: $120
Other appliances: $240
Clothing: $3,000
Paintings, prints, photos: $800
Glassware, china, and silverware: $600
Sports equipment: $600
Cameras and photographer's equipment: $800
Books: $700
Jewelry: $1,000
Other property: $4,000
Total: $23,360
To ensure you are compensated for any belongings you lose from a fire, storm or other catastrophe, you should inventory all of your personal belongings. Your inventory should list each item, its value, and serial number. Photograph or videotape each room, including closets, open drawers, storage buildings, and your garage. Keep receipts for major items in a fireproof place. To make things easier, the Insurance Information Institute (III)has free inventory software that helps you create a room-by-room inventory of your personal possessions. For more information, go to KnowYourStuff.org.
When your home is unlivable
If your apartment or condominium becomes uninhabitable due to a fire, burst pipes or any other reason covered by your policy, your renters insurance will cover your "additional living expenses." Generally, that means paying for you to live somewhere else.
Additional benefits
Liability protection is also standard with most renters and condo policies. This means if someone in your unit slips and falls, you're covered for any costs, up to your liability limit. If this person sues you, you're covered for what they win in a court judgment as well as legal expenses, up to your policy's limit.
Keeping your premium low
Just like any other type of homeowners insurance policy, your renters insurance premium depends on a number of factors: where you live, your deductible, your insurance company and whether you need any additional coverage.
There are ways to reduce your renters or condo owners insurance bill. Increasing your deductible (the amount you pay before your coverage kicks in) is one strategy. Make sure you can afford whatever deductible you choose. If you're thinking about getting a dog, you might want to think twice. Some insurance companies are reluctant to write policies for owners of certain breeds.
Most insurers offer a discount for "protective devices" including smoke and fire detectors, burglar alarms and fire extinguishers.
Some insurers might offer discounts to policyholders who are over age 55 and retired. Others might offer a discount if you buy both an auto and renters policy (called a multi-line discount).
california health insurance
Anthem Blue Cross »
Aetna »
Health Net »
Kaiser »
California Supplemental Medigap Insurance »
Anthem Blue Cross »
Blue Shield of California »
California Health Insurance - Affordable Health Insurance Quotes in California
State Sponsored or Administered Health Coverage
The state of California offers specialty programs and/or assistance programs to those who do not qualify for health insurance due to preexisting conditions or income restrictions, and for small employers of 2 to 50 workers. Contact information for each of the programs is available in the resources section of this brochure.
Major Risk Medical Insurance Program (MRMIP)
The Major Risk Medical Insurance Program (MRMIP) offers limited health insurance benefits to California residents who are unable to purchase health insurance due to a preexisting medical condition. If you have a preexisting condition and are not eligible for COBRA, Cal-COBRA, or HIPAA, then you can apply to MRMIP as a last resort to obtain health coverage. This program provides health care coverage through contracted health insurance companies and health plans. MRMIP is partially subsidized; however, qualifying participants must pay a portion of the premium, which can be costly. MRMIP is under the jurisdiction of the Managed Risk Medical Insurance Board (MRMIB).
As a result of California legislation there is a 36-month limit for participation in MRMIP. At the end of this period, MRMIP enrollees are given a one-time opportunity to purchase guaranteed issue health coverage through any indemnity policy, PPO, or HMO currently offering individual health coverage in California. Eligible MRMIP participants who are "disenrolling" after the 36-month period have 63 days to apply for individual health coverage. Ninety days prior to the disenrollment, MRMIP participants receive a notice of disenrollment and 45 days prior to disenrollment, participants are mailed a Certificate of Program Completion that enables them to obtain individual health coverage.
All indemnity insurance companies, PPOs, and HMOs who offer comprehensive individual medical coverage in California are required to offer a Standard Benefit Plan that is substantially the same as the health coverage offered while on MRMIP . These Standard Benefit Plans are the only health coverage required to be offered on a guaranteed issue basis and are separate from other individual health coverage that is available in the marketplace. If you have questions on the Standard Benefit Plans that are being offered, contact the CDI or the DMHC depending upon the type of individual coverage you want to elect (indemnity or HMO).
Healthy Families Program
Originally designed to protect children of low income parents, the Healthy Families Program provides low cost health, dental, and vision coverage to children whose parents earn too much to qualify for public assistance, but do not earn enough to purchase comprehensive major medical coverage for their children. The Healthy Families Program is administered by MRMIP . There is a current proposal to expand the Healthy Families Program to include the parents of eligible children through special federal funding.
Access for Infants and Mothers Program (AIM)
In an effort to expand prenatal and preventive care for pregnant women, California established the Access for Infants and Mothers Program (AIM). AIM is administered by a five-person board that has established a comprehensive benefits package that includes both inpatient and outpatient care for program enrollees. Pregnant women of low to moderate income are eligible for the program and participate in the cost of health care services by paying a reduced premium. The state of California subsidizes AIM to make up for the full cost of the program benefits
» California Department of Insurance
Aetna »
Health Net »
Kaiser »
California Supplemental Medigap Insurance »
Anthem Blue Cross »
Blue Shield of California »
California Health Insurance - Affordable Health Insurance Quotes in California
State Sponsored or Administered Health Coverage
The state of California offers specialty programs and/or assistance programs to those who do not qualify for health insurance due to preexisting conditions or income restrictions, and for small employers of 2 to 50 workers. Contact information for each of the programs is available in the resources section of this brochure.
Major Risk Medical Insurance Program (MRMIP)
The Major Risk Medical Insurance Program (MRMIP) offers limited health insurance benefits to California residents who are unable to purchase health insurance due to a preexisting medical condition. If you have a preexisting condition and are not eligible for COBRA, Cal-COBRA, or HIPAA, then you can apply to MRMIP as a last resort to obtain health coverage. This program provides health care coverage through contracted health insurance companies and health plans. MRMIP is partially subsidized; however, qualifying participants must pay a portion of the premium, which can be costly. MRMIP is under the jurisdiction of the Managed Risk Medical Insurance Board (MRMIB).
As a result of California legislation there is a 36-month limit for participation in MRMIP. At the end of this period, MRMIP enrollees are given a one-time opportunity to purchase guaranteed issue health coverage through any indemnity policy, PPO, or HMO currently offering individual health coverage in California. Eligible MRMIP participants who are "disenrolling" after the 36-month period have 63 days to apply for individual health coverage. Ninety days prior to the disenrollment, MRMIP participants receive a notice of disenrollment and 45 days prior to disenrollment, participants are mailed a Certificate of Program Completion that enables them to obtain individual health coverage.
All indemnity insurance companies, PPOs, and HMOs who offer comprehensive individual medical coverage in California are required to offer a Standard Benefit Plan that is substantially the same as the health coverage offered while on MRMIP . These Standard Benefit Plans are the only health coverage required to be offered on a guaranteed issue basis and are separate from other individual health coverage that is available in the marketplace. If you have questions on the Standard Benefit Plans that are being offered, contact the CDI or the DMHC depending upon the type of individual coverage you want to elect (indemnity or HMO).
Healthy Families Program
Originally designed to protect children of low income parents, the Healthy Families Program provides low cost health, dental, and vision coverage to children whose parents earn too much to qualify for public assistance, but do not earn enough to purchase comprehensive major medical coverage for their children. The Healthy Families Program is administered by MRMIP . There is a current proposal to expand the Healthy Families Program to include the parents of eligible children through special federal funding.
Access for Infants and Mothers Program (AIM)
In an effort to expand prenatal and preventive care for pregnant women, California established the Access for Infants and Mothers Program (AIM). AIM is administered by a five-person board that has established a comprehensive benefits package that includes both inpatient and outpatient care for program enrollees. Pregnant women of low to moderate income are eligible for the program and participate in the cost of health care services by paying a reduced premium. The state of California subsidizes AIM to make up for the full cost of the program benefits
» California Department of Insurance
cheap state sponsored auto insurance for california
get auto insurance for $30.00 per month with the california state sponsored auto insurance program
State Auto Insurance Becoming Available
Low-income drivers on both coasts can now get discount auto insurance with low auto insurance rates directly from the insurance department of the state they live in—as long as that state is New Jersey or California.
Affordable, state-sponsored discount auto insurance could be good news for low-income drivers in the 45 states with stringent mandatory insurance rules. A federal program for making just such assistance available—the Auto Choice Reform Act—has been discussed since 1998. At the time these discussions began, the National Association of Independent Insurers (NAII) initiated a study to determine the impact of state-sponsored, discount auto insurance on the lives of low-income citizens.
The study found that, in 1991, U.S. households spent 2 percent of their overall annual income on car insurance. However low-income residents in Maricopa County, Arizona, spent up to 30 percent of their annual income on auto insurance. They had to have reliable private transportation to their jobs—as do most Americans—and often paid for car insurance while jeopardizing other necessary purchases. This study found that 44.1 percent of respondents could not buy food at least once because that money had to be spent on car insurance.
In response to this information, California legislators made extension of the state’s mandatory insurance law contingent on developing a state-sponsored, affordable insurance program. Naturally, legislators expected it would be wildly popular, but for a number of reasons, experience has shown that only 4,000 drivers had taken advantage of it by 2003.
Among those reasons are:
A tough financial eligibility rule which must be met
Cost which was still too high—at approximately a dollar a day
Lack of medical coverage as incentive for the policyholder (as in California, where only passengers are covered)
Eligibility requirements and price were adjusted in 2003 so that more drivers would qualify. The program now requires a policyholder’s annual income to be no more than 250 percent of the federal poverty level, or about $38,000 for a family of three. (The standard had originally been 150 percent.)
Liability coverage, at $10,000 for bodily injury per person, is lower than the state’s minimum liability limits for private coverage; however, insurance industry data show 90 percent of bodily injury claims are for less than $10,000.
The New Jersey plan, which was available for the first time in 2003, is slightly more extensive, paying up to $15,000 of most medical expenses due to an accident, and providing coverage for catastrophic injuries, such as severe brain damage, up to $250,000. Eligibility is based on standards for Medicaid.
Acceptance of these policies by low-income drivers could be good news for all drivers in the states which offer them. These policies eliminate the hassle that occurs in accidents with uninsured motorists. This should make them attractive to the insurance industry as well as drivers. They would also relieve an enormous amount of stress on low-income working families with high auto insurance rates—and any stress-reduction in U.S. society, particularly on the roads, is a good thing.
Is there a downside for the insurance industry or for individual drivers?
Not really, although the California program was begun partially in response to lobbying by insurance companies that wanted to impose a surcharge on drivers for temporarily dropping coverage or having been previously uninsured. California’s legislators found that idea punitive and counterproductive. But some states, Maryland for example, continue with very costly automatic uninsured driver coverage, and without an elective plan to cover those who have trouble paying market-priced insurance bills. (Maryland’s coverage kicks in the second a driver’s insurance lapses, regardless of the reason for the non-payment—forgetfulness, bank error, and/or poverty are equally penalized under the law.)
A survey for the California Department of Insurance said the poor want to comply with mandatory auto insurance laws. It suggests developing a product that clearly and directly benefits the poor and is “affordable, such as an under-$300 policy that provides medical benefits and lost wage coverage.”
That’s a small step for California…but a huge leap for states like Maryland and 42 more that have yet to consider organizing discount auto insurance assistance for low-income drivers.
Auto Insurance Info.
Cheap Car Insurance Protection You Deserve
Health Insurance Info.
Home Insurance Info.
Life Insurance Info.
Long-Term Care Insurance
General Insurance Info.
State Auto Insurance Becoming Available
Low-income drivers on both coasts can now get discount auto insurance with low auto insurance rates directly from the insurance department of the state they live in—as long as that state is New Jersey or California.
Affordable, state-sponsored discount auto insurance could be good news for low-income drivers in the 45 states with stringent mandatory insurance rules. A federal program for making just such assistance available—the Auto Choice Reform Act—has been discussed since 1998. At the time these discussions began, the National Association of Independent Insurers (NAII) initiated a study to determine the impact of state-sponsored, discount auto insurance on the lives of low-income citizens.
The study found that, in 1991, U.S. households spent 2 percent of their overall annual income on car insurance. However low-income residents in Maricopa County, Arizona, spent up to 30 percent of their annual income on auto insurance. They had to have reliable private transportation to their jobs—as do most Americans—and often paid for car insurance while jeopardizing other necessary purchases. This study found that 44.1 percent of respondents could not buy food at least once because that money had to be spent on car insurance.
In response to this information, California legislators made extension of the state’s mandatory insurance law contingent on developing a state-sponsored, affordable insurance program. Naturally, legislators expected it would be wildly popular, but for a number of reasons, experience has shown that only 4,000 drivers had taken advantage of it by 2003.
Among those reasons are:
A tough financial eligibility rule which must be met
Cost which was still too high—at approximately a dollar a day
Lack of medical coverage as incentive for the policyholder (as in California, where only passengers are covered)
Eligibility requirements and price were adjusted in 2003 so that more drivers would qualify. The program now requires a policyholder’s annual income to be no more than 250 percent of the federal poverty level, or about $38,000 for a family of three. (The standard had originally been 150 percent.)
Liability coverage, at $10,000 for bodily injury per person, is lower than the state’s minimum liability limits for private coverage; however, insurance industry data show 90 percent of bodily injury claims are for less than $10,000.
The New Jersey plan, which was available for the first time in 2003, is slightly more extensive, paying up to $15,000 of most medical expenses due to an accident, and providing coverage for catastrophic injuries, such as severe brain damage, up to $250,000. Eligibility is based on standards for Medicaid.
Acceptance of these policies by low-income drivers could be good news for all drivers in the states which offer them. These policies eliminate the hassle that occurs in accidents with uninsured motorists. This should make them attractive to the insurance industry as well as drivers. They would also relieve an enormous amount of stress on low-income working families with high auto insurance rates—and any stress-reduction in U.S. society, particularly on the roads, is a good thing.
Is there a downside for the insurance industry or for individual drivers?
Not really, although the California program was begun partially in response to lobbying by insurance companies that wanted to impose a surcharge on drivers for temporarily dropping coverage or having been previously uninsured. California’s legislators found that idea punitive and counterproductive. But some states, Maryland for example, continue with very costly automatic uninsured driver coverage, and without an elective plan to cover those who have trouble paying market-priced insurance bills. (Maryland’s coverage kicks in the second a driver’s insurance lapses, regardless of the reason for the non-payment—forgetfulness, bank error, and/or poverty are equally penalized under the law.)
A survey for the California Department of Insurance said the poor want to comply with mandatory auto insurance laws. It suggests developing a product that clearly and directly benefits the poor and is “affordable, such as an under-$300 policy that provides medical benefits and lost wage coverage.”
That’s a small step for California…but a huge leap for states like Maryland and 42 more that have yet to consider organizing discount auto insurance assistance for low-income drivers.
Auto Insurance Info.
Cheap Car Insurance Protection You Deserve
Health Insurance Info.
Home Insurance Info.
Life Insurance Info.
Long-Term Care Insurance
General Insurance Info.
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