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Switching Auto
Insurance Companies Relatively Painlessly
You may choose to terminate
your auto insurance policy for any number of reasons.
Maybe you're moving to another state, getting
rid of your car altogether, or maybe you're just
dissatisfied with your existing company's service.
Beware, however, that if you don't give your insurer
sufficient notice, it could end up costing you
money, or negatively affecting your credit history.
Standard practice for most
insurance companies is to allow you to cancel
your policy at any time during the policy term
by sending written notice stating the date of
cancellation. Your car insurance policy does not
necessarily terminate at the end of each policy
term, so it isn't safe to assume that you can
just cancel by failing to pay your next bill.
If you don't send notice of cancellation, your
insurance company will automatically bill you
in advance for the next term's premium payment.
If you don't pay it, they'll cancel your policy
and it will go on your credit report.
Don't expect this information
to be made explicit in your policy; while insurers
are quick to inform you that your coverage will
terminate at the end of the policy period if you
don't pay your next premium, they don't always
inform you of the repercussions you may face for
not giving formal notice of your policy termination.
Another thing to keep in
mind is that allowing your car insurance policy
to be canceled may hurt your chances of obtaining
auto coverage in the future. A cancellation in
your insurance history may cause other companies
to label you a high-risk applicant, thus giving
them an excuse to charge you a higher premium.
However, you can usually avoid this trap by officially
terminating your policy in a timely manner.
Here's what to do: Call
your insurer, let them know that you want to cancel
your policy and give them an effective date. They
will then send you a cancellation request form
- review this form carefully before you sign and
return it to your insurer.
If you're switching to
another insurer, and you plan on driving your
car throughout the process, you want to make sure
there is no lapse in your car insurance coverage.
Therefore, be sure to coordinate the effective
starting date of your new policy with the termination
date of your old policy. The last thing you want
is to get in an accident during an uninsured interim
- how stupid would you feel if that happened?
As long as you are considerate
about giving your insurance company plenty of
notice when you want to cancel your auto policy,
and then go through the official termination process,
you should avoid any negative repercussions.
Closing the Gap—With
Gap Insurance
Just when you thought you
knew everything about insurance — along
comes gap insurance.
Though it may sound trivial,
gap insurance is a must for leasing. And if you
made a small down payment when buying a car, a
gap policy can be lifesaver as well. But first,
let's look at why it exists.
As the name implies, gap
insurance covers what traditional auto insurance
doesn't. In other words, it closes the gap between
what your insurance company pays if your car is
stolen or totaled and what you owe the finance
company.
Let's take a test case.
Say you bought your car two months ago for $25,000.
You begin making payments at about $500 a month
based on a 6 percent interest rate. Then, disaster
strikes: a tree falls on your car and flattens
it.
You call the insurance
company and it looks into its crystal ball and
decides at the time of the accident your car was
worth only $20,000. The car may only be a couple
of months old, but it has already lost 20 percent
of its value. Unfortunately, the finance company
still wants the full amount you owe them. With
interest, tax and license fees, they figure that
to be $27,000.
Yikes! There's a gap of
$7,000 between the $20,000 that the insurance
company is willing to pay you and the $27,000
the finance company is demanding. Most folks are
going to be eating Spam dinners for the next two
years, but if you have gap insurance you can safely
order steak.
Apply the same scenario
to someone who bought their car. If they left
the dealer lot without putting several thousand
dollars down, they likely owe more than the insurance
company will pay if the vehicle gets totaled or
stolen in the first few years. Once again, gap
coverage can save the day.
And that's why gap insurance
is a must for many drivers. In fact, gap insurance
is usually mandated by lease contracts or included
within them. If a gap policy is required but not
included in your contract, you should shop around
for this coverage (insurance companies sell it).
If gap coverage is included in the lease, check
to see how much is offered and how much you're
going to be paying for it. (In some cases, lease
contracts may include what is known as a gap waiver,
which protects you from gap charges in the event
that the leased vehicle is declared a total loss
— eliminating the need for a gap policy.)
Is gap insurance necessary
for people who finance their cars? Well, it depends
on your coverage. If your regular insurance policy
is written to pay off the fully financed amount,
then you don't need gap insurance.
A few things to keep in
mind when buying gap insurance:
Although most people purchase it when a lease
is initiated, some insurance companies will sell
you a gap policy anytime during the lease term.
You must be in compliance with all terms of the
lease.
Your gap insurance policy may not be honored if
you don't have collision and comprehensive insurance
coverage. Further, lease contracts generally require
that you carry collision and comprehensive at
all times.
If your car is totaled, or stolen, carefully follow
all requirements made by your insurance company.
For example, some companies require you to continue
making loan payments on your totaled car until
the money from the gap insurance is paid out.
So when initiating a car
loan or lease, always remember to ask your insurance
agent or loan officer about gap insurance. If
you have an accident you'll be glad you planned
ahead.
OEM vs. Aftermarket: Decisions,
Decisions... You've been in an accident, you're
dealing with the nuisance of getting your car
repaired, finding someone to chauffeur you around
(unless your insurance covers the cost of a rental,
which is always nice), and you've probably had
to take some time off from work to recover and
take care of the whole mess. Life couldn't get
much more complicated, right?
Um...well, wrong.
Oh, did you think you could
just turn your car over to the body shop and trust
them to do the best job possible to make your
car like new again? 'Fraid not, dear friend. You
must decide whether or not to mandate that the
repair facility use OEM (original equipment manufacturer)
replacement parts, as opposed to aftermarket parts.
What difference does it make, you ask? The answer
is debatable.
According to non-OEM manufacturers
and many insurance companies, the difference between
OEM and aftermarket parts is negligible. And it's
not surprising that insurance companies are such
strong advocates of using aftermarket parts, seeing
as how they are considerably less expensive than
OEM parts. For that reason, many insurance companies
will not reimburse 100 percent of your repair
costs if OEM parts are used. Most insurers discourage
the use of OEM parts by making the policyholder
pay for the difference in cost between the non-OEM
parts specified in the estimate and the OEM parts
used. This can turn into a large sum of money,
as OEM parts may cost nearly twice as much as
aftermarket parts. For example, an OEM replacement
hood for a '96 Ford Contour can cost close to
$600, whereas an aftermarket hood can be had for
about 300 bones.
A few insurance companies,
such as Chubb Insurance Group, actually encourage
their policyholders to use OEM repair parts, while
not charging them a penalty. It should be noted
however, that Chubb is one of the more expensive
auto insurers.
The use of aftermarket
parts can be called into question for two reasons.
First of all, they decrease a vehicle's resale
value. This should certainly be taken into consideration
if you plan on reselling or trading in your car.
Many dealers check the repair history of vehicles
to see what kinds of parts were used. The trade-in
value of a BMW with non-BMW parts can certainly
be adversely affected. By the same token, using
non-OEM replacement parts to repair a leased car
could cost you all or part of your security deposit,
because technically you would not be returning
the vehicle in the same condition as when it was
leased.
The other concern with
aftermarket parts has to do with safety. Advocates
of OEM parts claim that non-OEM parts aren't subjected
to the same crash-testing procedures as OEM and
therefore are not as safe. The Insurance Institute
for Highway Safety (IIHS), however, contends that
making cosmetic repairs with non-OEM replacement
parts does not degrade the safety of a vehicle
in a crash.
In the end, it's up to
you to decide what type of replacement parts are
used in your vehicle's repair. If you opt to save
money and use non-OEM parts, you should make sure
that they are approved by the Certified Automotive
Parts Association (CAPA), which sets the standards
that must be met in the manufacturing of non-OEM
parts for collision repairs.
Obviously, you want to
know your options before you turn your car over
to a repair facility. If you are concerned with
the depreciation of your car, especially if it's
a high-end vehicle, you'll probably be wise to
go with OEM parts at repair time, even if you
have to foot part of the bill. But if your car's
resale value isn't of extreme importance to you,
and you'd rather not dig too deeply into your
own pocket, you should consider allowing the body
shop to use non-OEM parts.
Just make sure that you
specify one way or the other with your repair
facility - the last thing you want is to end up
paying for OEM parts that you weren't concerned
with using, or to get aftermarket parts put on
the super-rare ride that you intend to keep in
tip-top shape for the rest of your life. As long
as you play an active role in choosing your body
shop and then communicate clearly with both the
repair facility and your claims adjuster, you
shouldn't be caught off guard.
Deciphering Auto
Insurance Lingo Here's a glossary of commonly
used auto policy terms.
Actual Cash Value The cost
to replace property minus the amount it has depreciated
since the original purchase date.
Benefit The amount an insurance
company pays to you or your beneficiary when you
file a claim.
Bodily Injury Liability
This covers medical expenses for injuries the
policyholder causes to someone else.
Claim The policyholder's
request for the reimbursement of a loss covered
by their insurance policy.
Collision This covers damage
to the policyholder's car from any collision.
The collision could be with another car, a light
post, parking curb, garage wall, etc.
Comprehensive For damage
to the policyholder's car that doesn't involve
hitting another car. Covers damage resulting from
fire, theft, falling objects, missiles, explosion,
earthquake, flood, riot and civil commotion.
Deductible The portion
of losses that you agree to pay in the event of
an accident. Higher deductibles lower premiums
significantly, but will come back to haunt you
in the case of an accident, especially if you're
at fault.
Endorsements These are
changes to the original insurance contract, such
as a different deductible or an additional car
or driver.
Exclusions Situations that
are not covered by a given insurance policy; specific
exclusions are listed on your insurance policy.
Extraordinary Medical Coverage
Sometimes included in Personal Injury Protection,
this coverage protects you if you suffer accident-related
injuries that require serious and/or long-term
medical care and begins once you have exhausted
the limit on your standard medical benefitscoverage.
Full Coverage This indicates
that you have all the minimum coverage for your
state of residence; it does not necessarily mean
you will always be fully covered.
Income Loss Coverage Sometimes
a part of Personal Injury Protection, income loss
coverage takes care of you if you're unable to
work due to accident-related injuries.
Indemnity A predetermined
sum paid for a covered loss.
Limits The maximum amount
of money your insurance company will pay out for
your losses; many states have minimum required
limits.
Medical Payments or Personal
Injury Protection (PIP) Covers the treatment of
injuries to the driver and passengers of the policyholder's
vehicle. At its most extensive, PIP can cover
medical payments and the lost wages of those injured
in an accident. It may also extend to covering
the policyholder if he/she is injured while in
another vehicle or is hit by a car while on foot.
No-Fault Insurance A no-fault
policy usually will not require that someone be
assigned the blame in order for the policyholder
to receive his/her money. In no-fault states,
insurance companies are required to have this
type of policy.
Property Damage Liability
Pays for damage the policyholder causes to someone
else's property.
SR-22 A document that shows
proof of financial responsibility in the case
of a traffic violation.
Tort A legal term that
describes circumstances when someone is deemed
legally responsible for injuring another person
or damaging his/her property. Some states encourage
you to make a tort provision, thereby reducing
the cost of your premium by limiting your right
to sue for non-monetary damages.
Uninsured/Underinsured
Motorist Coverage This is to pay for treatment
and/or property damages of the policyholder in
the event that he/she is injured in a collision
with an uninsured driver. Underinsured motorist
coverage is another policy option; it kicks in
when an at-fault driver has auto liability insurance,
but the limit of insurance is insufficient to
pay for the victim's damages.
To delve even more deeply
into the wonderful world of car insurance and
find out your own minimum policy requirements,
see the state-by-state table in our feature "How
Much Auto Insurance Do You Really Need?"
#1) Raise your
deductible.
Your "deductible"
is the amount you pay when you make a claim before
your insurance company pays. The disadvantage
of raising your deductible is that when you do
make a claim, you’ll pay more. The advantage
is that your insurance costs yearly go down. Go
a number of years saving money without making
a claim and your ahead. This tip can be applied
to collision and comprehensive sections of your
insurance policy.
#2) Drop your collision and/or comprehensive
insurance on older autos.
Sometimes it’s just
not worth paying for these kinds of insurance-
if your car is not worth that much to begin with.
That’s because the amount you pay for the
deductible plus the amount you pay for the insurance
may not be more than the value of the car itself.
An auto dealer or certain automotive magazines
can help you determine the value of your auto.
#3) Buy a "lower
profile" vehicle.
Part of what determines
the coat of insurance is the kind of vehicle you
drive. Some are favorites for thieves. Some are
more expensive to repair. Generally these vehicles
will cost more to insure. It pays to do your research
before you buy.
#4) Take full advantage
of low mileage or distance discount rating—Some
insurance companies give discounts to people who
drive less than a pre-determined number of miles
each year or drive certain distances to and from
their place to work.
#5) When you move,
consider the cost of insurance
Yes, the cost of insurance
varies from place to place, even right here in
York Region. Some areas can be considerably higher.
Keep your broker informed and this may save you
money. The right territory!
#6) Make sure the
rating and use of your vehicle is correct.
Many manufacturers offer
similar model names for vehicles and insurance
costs can vary. Even 2 or 4 doors or the wrong
model can effect the cost .
#7) Have your broker
check other insurance company discounts
Insurance companies try
to reward good risks. That’s the kind of
driver they want. A lot of companies offer discounts
to drivers who also have other kinds of insurance
with them such as their homes. This is called
a multi-policy discount. Other discounts available
might be - multiple vehicles, anti-theft devices,
retirees, drivers education, abstainers from alcohol,
age, and distance to university/colleges for students.
To name a few. Check with your broker to all that
are available---- it will save you money!
Now That I Have
Saved Some Money What Should I Do?
After you have applied some of the information
from the "7 Money Saving Tips" now what
should you do?
Maybe have dinner out in
a restaurant or buy a gift or something of that
nature. But, perhaps an option more practical
would be to increase your present liability coverage.
For example - the minimum required by law in Ontario,
Canada is $200,000 and you could increase this
to $300,000, $500,000, $1,000,000 or perhaps $2,000,000
coverage if you don’t already have that
protection. Another option is to perhaps increase
your optional accident benefits coverage to reflect
your actual financial income or situation.
The bottom line is quite
simple .....and that is..... to review your policy
and coverage. Ask your broker questions and let
your broker know your financial circumstances,
income, and occupational information so that you
both can evaluate your situation and overall choices
to protect you and your family from hardships
resulting from an accident. Have you considered
Personal Umbrella Liability Insurance
Personal umbrella liability
is not just for the executive. It should form
an important part of your overall insurance program.
It is usually provided in combination with your
home insurance as an optional and separately purchased
type of insurance.
If you currently carry
liability insurance on your automobile, your house,
boat, etc. with limits of say $1,000,000 you may
not have sufficient coverage in the event of a
catastrophe. A personal umbrella liability policy
can increase your amount of liability insurance
at a reasonable cost and give you additional protection
and peace of mind.
Umbrella liability policies
can also provide coverage for areas not normally
covered by a liability policy.
Some examples are:
* Personal injury including
liable and slander
* False arrest
* Wrongful conviction
* Defamation of character
* Liability for volunteers
to non-profit organizations such as service clubs
or minor sports associations
* Liability for the use
of water craft that you don’t own
* Liability you have agreed
to accept under a contract or agreement
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