Posts

Coming of Age – Transitioning Off of Your Parents’ Insurance

There are many reasons why kids want to stay on their parents’ insurance plan for as long as possible: Parents tend to have better credit, live in a more favorable zip code and have a better insurance score; and all of these factors contribute to lower rates. However, the good times don’t always last.

Once you’ve reached a certain age, you can no longer receive the benefit of your parents’ coverage. This is most notable with health insurance under the Affordable Care Act where children can stay on a parent’s health insurance plan up until the age of 26. With other insurances, such as auto insurance where the length of coverage under a parent account is more vague, companies have a way of getting you off your parents’ plan eventually. For example, in the event that a claim is filed on account of the child or if there is a loss, the insurance company will make an underwriting request to properly represent the policy/household. This will often come down to writing the child out of the policy and on to their own.

Alas, the time will come where you can no longer be covered under your parents’ insurance plan and you’ll have to buy your own. *Dramatic Sigh* Now, how do you prepare for this feat of adulthood?

Things to Consider…

Let’s say you’re going out to buy a TV for the first time. You’ve worked, you’ve saved, and you’re ready to start watching Netflix on a screen that isn’t your laptop. Are you going to just buy the first TV you see at the lowest price, or are you going to do some research to make sure you’re getting the most bang for your buck? Unless you want to go back to the store in six months to replace your TV, you’re probably going to want to do some research and make sure that you’re getting the best deal and quality that you can.

The same should go for your insurance. You don’t want to grab the lowest price policy and get out of there; you should shop around and make sure that you are getting the right amount of coverage. If you just jump to the lowest price, you’re poorly representing yourself to insurance companies. This will keep you paying more for insurance for the rest of your life and will put you at a greater financial risk if you have to file a claim.

Sure, stepping out on your own will be a bit of shock. Being cushioned by your parents’ good credit score and insurance history kept your prices low. But, let’s face it, a young, single adult driver will inevitably look like more of a risk than a 50 year old, financially stable, suburban dwelling parent, leading to higher premiums.

Just because you don’t want to pay more, doesn’t mean you should settle for less coverage though. It is recommended to at least match the coverage your parents’ policy provided, assuming that they were at an adequate liability limit of at least 100/300. Don’t risk the financial independence that you’ve worked so hard to achieve by having insufficient insurance. Upping your coverage from a minimum limit to a more sufficient one will only cost you a few extra dollars per month. A small price to pay for greater protection.

Remember…

When transitioning off of your parents’ insurance plan, remember to do your research and not settle for low limits because they look cheap and you don’t plan on filing a claim any time soon. What looks cheap now, can be incredibly expensive down the line when you unexpectedly have to file a claim and your parents aren’t there to bail you out. By getting an adequate policy now, you will help protect yourself and your family’s future.

Getting new coverage is one thing, understanding what you’re getting and why you’re getting it is another. Take the time to learn about different plans and contact an insurance professional to make sure your transition toward insurance independence is a smooth one.

The Limit Does Exist – The Importance and Minimal Cost of High Liability Limits

Nobody expects to be an at-fault driver, but with over 4 million licensed drivers in Minnesota, and the average driver getting into an accident every 17.9 years, having to pay off a liability claim has a realistic probability.

Let’s start with liability insurance. What is it? In the chance that you’re at fault in an auto accident, liability insurance helps cover you for the bodily injuries and property damage that the other person sustained. The liability limit is the maximum amount of money that the insurance company will pay to cover these expenses. The higher the limit, the more coverage you receive in a claim, lowering the risk of your personal assets being seized.

Why go for a higher limit?

Along with the auto insurance policy you choose, Minnesota law requires a minimum amount of liability coverage for all licensed vehicles.  These minimums cover 30,000 dollars per injured person with up to 60,000 dollars per accident, along with 10,000 dollars for property damage (30/60/10). This may seem like a lot of money, but many times this only covers a small fraction of the total cost. According to data gathered by Thomson Reuters, in 2012, the average vehicle liability award was 298,731 dollars.

By purchasing a higher limit, you protect your assets from potentially being seized if the claim exceeds your limit. It is recommended to get a liability insurance policy that covers at the very least 100,000 dollars per person and 300,000 dollars per accident, along with 35,000 dollars to cover property damage (100/300/35). These are more valuable as your minimum limits and should only go up from there.

This property damage number has been established to cover the average price of a car (around 35,000 dollars); and therefore, the property damage limit will cover the average car on the road. Makes sense. However, not every car on the road is the “average car.” There are Mercedes and Bentleys roaming around too, valuing over 100,000 dollars. Not only that, but there is the possibility of a multi-car crash, which could add up to the price of these luxury cars, if not surpass it very quickly. That 35,000 dollars in property damage isn’t going to cut it.

To account for these realistic and expensive scenarios, a more adequate liability limit would be 250,000 dollars per person and 500,000 dollars per accident, along with 250,000 dollars in property damage (250/500/250). Often times a car accident isn’t as simple as hitting one low-value car. In 2014, there were 78,396 reported traffic accidents in Minnesota, involving around 190,700 people. Crashes can easily become multi-vehicle and multi-person.

By paying just an extra three to five dollars per month to get from a 100/300 plan to a 250/500 plan, you could be saving yourself hundreds of thousands of dollars in liability claims. The five dollar latte that you buy every morning isn’t worth 500,000 dollars of out of pocket cost. By putting those five dollars towards your auto insurance policy, you can help kick that caffeine addiction and contribute to your financial stability.

What is at risk?

When considering the limit you want as part of your auto insurance policy, think about how much your assets are worth. In the instance that you cause an accident, the insurance company will only pay up to your limit in a claim; the rest is your responsibility. Even if you feel as though you have nothing to lose, liability claims can take more than just your current assets. You could be affected in your future income as well.

Future Wages: Your ability to work is one of your strongest assets. A court can take 25 percent of your future earnings for as long as it takes to pay off a judgment. Saving up for a vacation? Trying to pay off your student loans? Well, those plans could be put on hold if your limit isn’t high enough.

Liquid Assets: Cash, checking account, savings account, stocks, certificates of deposit. These are all vulnerable in a liability case. Luckily, your 401(k) and Roth IRA are usually exempt. Nonetheless, your life savings could be gone in the blink of an eye.

Personal Property: Anything that belongs to the at-fault driver, from furniture to appliances, that have a cumulative value that exceeds 10,350 dollars are at risk. Additionally, wedding rings and any other symbols of marriage in your possession that value around 2,817 dollars can be taken. Not only will you probably be sleeping on the couch, but you may not even have a couch to sleep on afterward.

Real Estate Property: Your home has value. If it is worth more than 390,000 dollars and is less than 160 acres of land, your property is at risk of being seized to pay off the claim. Real estate is a good investment and by getting a higher liability limit, you help secure that investment.

Auto: If you’re trying to get from point A to point B, an auto accident can make sure you’re taking public transportation to get to point B in the future. If your car is worth over 4,600 dollars, it can be taken to contribute to the claim.

By increasing your liability limits, you are also adding to the protection you have over your current and future assets. Increasing the liability limit in your policy from state mandated minimums to a comprehensive high limit liability of 250/500 can be between 10 and 20 extra dollars per month. This small adjustment can help save you thousands of dollars down the line and maintain your financial future.

6 Tricks You Can Use (Today!) To Lower Your Auto Insurance Rate

Cash In Hand

Everyone wants to save money on his/her car insurance of course, but here are 6 easy tricks that you can do TODAY to lower your rate immediately or in the future.

 

~Combine Your Policy With Your Roommate / Significant Other In The Same Household

I know that “going insurance steady” is a terrifying concept if you live with your boyfriend/girlfriend and nobody really knows what the relationship is or where it’s going.  But let me assure you, if you’re already living with the person, splitting all of your physical stuff and finding another place to live is going to be much more of a pain than simply calling your insurance agent and saying you want to have your own policy again.  Earning a multi-car discount can save both people in excess of 15-20% on their monthly rate.

~Bundle Your Home or Add A Renter’s Policy

Everyone’s heard this trick.  “Bundling” is all over the national marketing campaigns now.  But I still see a ton of households not taking advantage of the Auto/Home discount by having their policies with the same company.  This is probably the best discount you can earn – it can be as much as 20%!  If you’re a renter and paying too much for car insurance, adding this policy to protect your property can sometimes be nearly free because of how cheap the renter’s policy is coupled with how significant the added discount is.

~Keep An Eye On Your Credit Report and Score

A huge determiner of your car insurance rate is your credit score and credit report.  Fixing your credit is certainly not an overnight process, but keeping tabs on it and making sure you don’t have silly collections out on you for $25 can really go a long ways in repairing your insurance score.  Paying that $25 outstanding cable bill from two years ago could not only bump your credit but also lower your next car insurance renewal.

~Pay In Full

If you have the extra cash on hand, paying your entire 6 month premium up front can often save you 6-8% over the course of your 6 month term.  It may seem meager, but if you’re trying to trim down that budget without sacrificing coverage, it can equate to $5-10 a month in savings.  This option is also available if you’re in the middle of your term and want to just pay it off.  You are probably saving yourself a couple dollars a month in processing fees by going this route.  There are companies that charge $5 a month just for using a credit/debit card.

~Check For Occupational and College Degree Based Discounts

It’s becoming better advertised that some companies offer discounts for certain professions like policemen and registered nurses, but did you know that by simply having certain college degrees you can qualify for a discount?  Engineering, Biology and Chemistry are all degrees that I’ve seen companies offer discounts for.  It doesn’t cost you anything to ask and it doesn’t always require you to have a job in the field to benefit from the discount.

~Increase Your Liability Limits

This seems a little bit counter intuitive, since raising your liability limits will marginally increase your monthly rates for the short term.  BUT!  If you’re carrying limits that are 50/100 or lower, the insurance companies are already rating you for having such low limits.  Carrying 6 consecutive months of limits that are 100/300 or higher will award you with significantly better rates than if you carry 50/100 or lower.  The difference can be upwards of $200 per term, depending upon the insured.  Think of it as rehabbing your insurance score so the companies see you as a more favorable risk!

 

That’s it!  Which of these sound like something you could take action on today?  Get out there and save some money the smart way.  Oh, and don’t forget the obvious ones:  avoid at-fault accidents and don’t let your policy lapse for any reason!

To better spending!

 

DL