Sunday, September 25, 2011

Should you rely on cheap car insurance?

Do you remember the Blues Brothers? They were unstoppable. They were "on a mission from God". Seems like almost everyone standing behind the counter in the rental agency is a Blues Brother when you come into collect the vehicle. They always want to sell you something, usually additional insurance. The most common special offer is loss damage waiver (LDW). It sounds such a good idea to have complete cover against any loss caused to the vehicle while under your control. The magic word is "waiver". You are excluded from liability even if you drive the vehicle off the end of a pier and it sinks without trace (hopefully without you still inside it). The only problem is this good idea can seriously damage your bank balance when the final bill comes in. That hourly or daily rate just got heavy. So when should you add LDW? The answer is deceptively simple. If you do not own another vehicle and have no insurance cover in place, it may be a good buy. But most insurance policies on your own vehicle cover you while driving a rental. So it all comes down to the extent of that cover on your own vehicle.

To get the maximum discount in these hard economic times, most people have been pushing up the deductibles. In many cases, the potential losses can be managed to keep to the low end. It's your vehicle. You can talk to the repair shop and get all the work you want done at the best price. But when it's a rental vehicle, everything is out of your hands. The rental company has no interest in protecting your bank balance. It pays top dollar to get the vehicle repaired and sends you the bill. No searching around to find the cheapest replacement parts and lowest price body shops. Everything is top of the range and then comes the kicker. It's called the "loss of use" charge. You are expected to cover their estimated loss of profit while the vehicle is off the road. And guess what. If you are paying their loss of profit, they have no incentive to rush the repairs. They can take their own sweet time and, in most cases, you pay - most private policies do not cover loss of use charges. Some credit card companies offer limited cover, but read the small print before relying on it. Limited cover means very little actual money will ever be paid out.

If you are only renting for a few days, it's probably worth paying for LDW. It may not be cheap car insurance, but it protects you. But if the end bill is going to be too high, trust to luck and your own insurance policy. Hopefully, your own cheap car insurance policy will give you enough of a buffer against claims Remembering, of course, that only the best private policies cover you against the dreaded loss of use charges. If nothing else, all this bad news should give you the incentive to drive like your wheels are passing over egg shells. Drive as safely and carefully as possible. If you are going to break some eggs, make sure the damage is minor and the losses are small.

Auto insurance requirements imposed by the states

Sometimes, people forget that the USA is a federation of sovereign states. So, although there’s always a role for the federal government when it comes to obvious national interests like defense, most of the day-to-day law-making and regulation gets done by your local state’s capital. In this, auto insurance is exactly the same as most other products and services offered for sale. The local state decided what degree of consumer protection is appropriate and the level of enforcement required.
Every state has a Commissioner who’s responsible for regulating insurance within state borders. From this you will understand that each insurance company is licensed to sell policies state by state. No company can sell policies across state lines. This leaves the Commissioner with whatever power has been allowed by the state government. Some states have highly regulated markets with the Commissioner deciding the range of policies that can be sold and setting limits on the power of companies to limit or exclude risks. Most Commissioners also actively police the insurers, responding to consumer complaints. A few have the power to refuse an insurer’s request to increase premium rates.
You should do a google search to find the website of your local state’s Commissioner. There’s always a wealth of information about the local insurance market. The most important step is establishing exactly what your state’s mandatory requirements are. You will also find useful information about how to complain if you feel you have been the victim of misselling or an insurer is wrongly refusing a claim.
Although some aspects of the laws affecting coverage are expressed as mandatory, you also need to look carefully at your state’s policy on enforcement. In some states, there’s little will to enforce them vigorously. The politics seem to be that, in many cases, the mandatory nature of the laws makes the premiums look like a tax on the poor. At a time when there’s high unemployment, elected representatives feel under pressure to reassure voters. With budget deficits high, there’s little money available to police forces to catch more of the uninsured. This means there’s a rising percentage of uninsured drivers on the roads. In some states, it’s approaching 20% of the vehicles on the road. The risk of being in a collision with an uninsured or underinsured driver is therefore high. You may therefore think it good value to get auto insurance quotes for uninsured driver coverage depending on where you