الأربعاء، 1 يونيو 2011

'Disappearing deductible' car insurance: What's the catch?

By: Mark Chalon Smith

 
No one else may listen when you brag about your perfect driving record, but your car insurance company is all ears.
Many offer discounts that reward safe motorists who rack up year after year of crash-free driving. These provisions go under various names -- The Hartford's is called "disappearing deductible," while Nationwide has the even more magical-sounding "vanishing deductible" -- but they offer similar benefits.
"We think this is a great reward for anyone who has a good driving record,'' says Lisa Lobo, a vice president and consumer insurance expert at The Hartford. "I think people see the value in it. They like the idea."
Some insurers promote them with TV commercials like Nationwide's, which turns that boulder into a pebble. Beguiling imagery, but what are the facts behind the pitch? Here's what to expect using The Hartford and Nationwide as examples. (Check with your carrier; it probably has something comparable, with varying qualifications and benefits.)
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Lobo says The Hartford will knock $50 off the deductible if you've been accident-free for three years, either with The Hartford or, if you're a new customer, your previous insurance company. Also, you can't have any moving violations for three years. Once qualified, $50 will be trimmed from the deductible every year without a ding to your name.
"If you continue to have a clean record, you could go all the way down to zero and not have a deductible at all," notes Lobo.
Nationwide's "vanishing deductible" takes $100 off the top and $100 each year you go without an accident or moving violation, according to Elizabeth B. Stelzer, a spokesperson for Nationwide. The company puts a $500 limit on how much can ultimately be stripped from the deductible.
What's the catch?
The most obvious catch is that it costs more. Car insurers usually offer deductible discounts through their higher-dollar plans. The Hartford, for example, includes "disappearing deductible" with its "Advantage Plus" package, which adds about 5 percent or 6 percent to your bill but also includes accident forgiveness, according to Lobo.
Nationwide's plan is simpler. Stelzer says you can get it for $60 a year ($30 for each six-month term) for your first vehicle and $10 for each car you add. Nationwide, she says, decided on the flat fee to make its coverage "easier for consumers to understand" in an often confusing array of options offered by insurers. A "vanishing deductible" can be bought separately, meaning you don't have to opt for a package to get it, Selzer says.
What happens to the "disappearing deductible" if you're in an accident or get a moving violation?
Lobo says you go back to square one -- your original deductible is reinstated and you have to be clean for three years for it to be reduced again. Keep in mind that it doesn't make any difference who or what caused the mishap. You go back even if it's not your fault.
There's a small difference at Nationwide. Stelzer says policyholders revert back to the original $100 off the deductible if they have an accident or violation.
Do the math
Once you’ve driven five accident-free years with Nationwide, your deductible is reduced by $500, the maximum – but you’ve paid at least $300 for the privilege. If you drive 10 trouble-free years on the program, you’ll have paid $600. That’s more than the cut in your deductible.
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Why 2 families pay $15,000+ for car insurance

By: Des Toups
Who’s paying $15,000 a year for car insurance? It’s not some guy with three DUIs and a Maserati.
It’s tax-paying, home-owning, law-abiding Camry drivers.
As we did some digging in our own insurance quote database, wondering who wound up with the most expensive policies, two quotes really stuck out.
Meet the 52851233s
They are real people, but let’s call him Jeff. He’s 55. His wife, Mary, is 52 and has a recent speeding ticket. Son Bob, 20, and daughter Elizabeth, 17, live at home. They own their New Orleans home and have four cars. Their old luxury sedan, newer pickup and Honda Accord are paid for, and they are still making payments on the newest, a Toyota Camry. Jeff has a credit score of 735, just below the point where “good” becomes “excellent.”
They’ve got full coverage including comprehensive and collision, with $1,000 deductibles, on each of their cars. Pricey, but they have a lot to protect. And they’ve had a few dings over the years: a minor parking-lot scrape, an at-fault accident with injuries.
They’re probably not unlike your own family -- only they’re paying $15,280 a year. (And probably relieved to do so: Other quotes returned were as high as $27,844.)
Then there are our ultimate insurance machines, the 55315623s. Let’s call him Mark. He’s 48 and loves BMWs. He really, really, really loves BMWs.
He’s got a new, $48,000 5-Series for himself, a smaller sedan for his wife, Christine, 47, and an older one for his son, Carl, 21. They’ve even got a spare, a sport-utility, for weekends touring the beaches near their Miami home.
The 55315623s keep their cars immaculate, but their credit has a few dings. Their FICO score of 557 is below average.
And when they write checks, the one to the insurance company is a whopper: $15,652.
That’s gotta hurt
All we can go by are the facts, and the facts are killing our New Orleans drivers: An urban address in a city that sports the nation’s second-highest rates. Four cars, three fairly new, all with full coverage. Accidents. A speeding ticket. And two drivers under 25.
Ouch.
Time will be the biggest factor in improving the 52851233s’ situation, says CarInsurance.com expert Penny Gusner. Tickets will age; accidents will fall off; and two young drivers will leave the nest.
Until then, Gusner says, a family with four cars does not need rental coverage. And its 10-year-old luxury car costs more to insure with comprehensive and collision coverage than it would to replace. Louisiana offers a 5 percent discount on comprehensive premiums if a Vehicle Identification Number (VIN) is etched onto its glass – something an owner can do herself with a kit that costs about $25.
But the smartest thing to do, Gusner says, might be to cut their 20-year-old son loose and put that old land yacht in his name, with just liability coverage.
Ditch the Bimmers
Our Miami family has leased itself into a corner, Gusner points out.
While “leasing is simply not a rating factor at all,” she says, it does typically allow drivers to choose a more expensive car than if they had bought it outright; a BMW will be more expensive to insure than a Ford. Leased cars must be fully insured, like any financed car, but leasing companies can and do insist on low deductibles as well.
The family’s poor credit has jacked up the interest rate used to calculate their lease payments. Their insurance rates are affected, too.
The smart thing for the 55315623s to do would be to drive different cars, but leases are notoriously difficult to unwind. They can’t drop any coverage. They live in an expensive city for insurance, Miami, but with a big investment in a home, they’re unlikely to move anytime soon.
Many of us looking to save money on car insurance problems just like those of our insurance-strapped families: We qualify for small discounts and can make small adjustments that save a few dollars a month. But the big savings come only by making big changes in your policy, or by switching carriers altogether.
It’s not a math problem
Because your car insurer doesn’t know the real you, it has to make judgments based on the details it can verify. Each of those details represents some kind of perceived risk to an insurer, whose job is to attract as many customers as possible while paying out the fewest claims it can.
Every insurer decides on its own how much risk to take, and how much to charge for it. It’s a balancing act. To attract more customers, an insurer might decide to lower the rate it charges for drivers with a DUI conviction. It will write more policies, almost certainly, but will it pay less in future claims than it takes in from new premiums?

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Why speed limits are rising

By: Karen Aho
Watch out for the old guy in the hat doing 50 mph in the left lane, because he’s the threat, not you.
At least that's the sentiment that appears to be gaining ground as states begin raising -- that's right, raising -- the speed limit on some highways.
The thinking goes like this: If most drivers are doing 80 mph anyway, why discourage the others from joining the flow of traffic, particularly given the number of flagrantly bad lane-changers out there?
Predictably, motorists are cheering and the auto insurance industry and safety experts are warning of increased hazards.
Go ahead, step on it
Kansas raised the speed limit on more than 1,000 miles of divided four-lane highways to 75 mph effective July 1. Louisiana reset portions of a rural interstate to 75 mph in April, after observing that 85 percent of drivers were going at or below that speed. The same month, Ohio upped the speed on its turnpike to 70 mph.
Late last year, Virginia raised the speed limit on its rural interstates to 70 mph. And the Texas House of Representatives recently passed legislation to boost limits to 85 mph on highways in west Texas.
If the Texas Senate goes along, these will be the first U.S. highways to break the 80 mph barrier (Texas and Utah have each tried 80 mph limits) since President Richard Nixon enacted a national speed limit of 55 mph in response to the 1973 oil crisis. The national limit was raised to 65 mph in 1987 and authority to set highway speeds reverted back to the states in 1995. Speeds have been rising slowly and sporadically ever since.
But it’s hardly open season on the open road. Speed limits are rising where the highways are emptiest, and the consequences of a traffic ticket on your car insurance premiums aren’t going to shrink.
Go with the flow
It's about time for higher limits, say proponents. For years, state transportation departments have set speed limits based, in part, on how fast traffic already moves. Rural multilane highways where motorists typically exceed the posted limits should do the same, say proponents of higher limits, as long as traffic engineering studies deem each increase to be safe.
"What you want is free-flowing traffic, where's there's no encumbrances to the traffic," says Gary Biller, executive director of the National Motorists Association. "So you're seeing traffic in its natural state."
Studies by the Michigan State Police have found that the safest speed limits are those that capture the most drivers. Less passing (and presumably less finger-waving) equals fewer incidents. The terms of this theory are these:
  • Prevailing speed: The speed at which most drivers feel comfortable traveling on a set stretch of road, regardless of the speed limit. In experiments by the Michigan researchers, prevailing speed did not appreciably change even when the posted speed limit did. In one case where the limit was raised from 55 mph to 70 mph, the prevailing speed actually dropped from 73 mph to 72 mph.
  • The 85th percentile: The speed that captures 85 percent of drivers, meaning that the bulk of drivers are going at or below this speed, regardless of the posted limit. The Michigan State Police has pegged this as the optimum target in order to reduce speed variance.
  • Lowest speed variance: The sweet spot where the difference between the fastest and slowest drivers is smallest. Studies show that the number of crashes drop as speed levels even out.
Not so fast
Citing contradictory speed studies, not all state lawmakers are ready to raise speed limits, however.
"The body of evidence clearly points to the connection between higher speed and deaths," says Russ Rader, a spokesman for the Insurance Institute of Highway Safety (IIHS). "I've heard the opponents say, 'We've had higher speeds and yet we've had the lowest death rates in the last few years.' But in recent years that's entirely due to more crash-worthy cars.
"You have to go to the areas where the speed limits have changed," Rader says. "When you look at the specific rural interstates where the speed limits have been raised, there are more deaths on those roads."
A 2009 study in the American Journal of Public Health looked at specific roadways, attributing 12,545 deaths between 1995 and 2005 to increased speed limits.

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Sitcom – or car insurance ad?

By: Mark Chalon Smith



It used to take only a fatherly voice and a reassuring slogan to sell you car insurance.
Now, it's more often a cranky Neanderthal or a funky shopgirl. Even Allstate -- the Good Hands People -- has gone to the dark (and funny) side with "Mayhem," using black comedy to nail down its message: Get an auto insurance quote now or face certain disaster.
These spokespeople have quirks. And they have fan clubs. But do they sell insurance?
Yes. GEICO, most in the advertising industry believe, has morphed its image from an old-school carrier known mostly to the military and more careful drivers to a fresher company with wider name recognition across every demographic.
"Before the 'Caveman' and that little green lizard, there were ads that talked about 'a piece of the rock' or 'a good neighbor,' more traditional approaches with death and destruction overtones and protecting yourself from them,'' says Ted Ward, the vice president of GEICO marketing and credited as a force behind the company's "Caveman" and "Gecko" characters.
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The strategy has been so successful that the fusty world of insurance advertising hasn’t been the same since “Caveman” whined his first lines in 2004. (See “Who’s your favorite insurance spokesperson?”)
"We are the fastest-growing company [in the sector] the past three years,'' Ward says."We are now third, only behind Allstate and State Farm, and we attribute it to these campaigns."
(According to the Insurance Information Institute, GEICO has 8.2% of the market share, with State Farm at 18.6% and Allstate with 10.5%. Progressive is fourth, at 7.5%, followed by Farmers with 6.4% and Nationwide at 4.5 %.)
"Early on, before the others, we decided to carve out a niche, to use humor to get away from the stodgy and, more important, differentiate ourselves from the others. Well, we did that. It's been a success." (Here are a few Caveman commercials and Gecko TV spots.)
The insurance mascot hall of fame
Although GEICO was the first out of the gate, it soon faced “Flo.”
Progressive's tilted salesgirl with "Austin Powers" hair is at least as well-known as the Caveman or Gecko. She has policy-pushing help at Progressive with a more recent creation, referred to only as "The Messenger," a '70s leftover who calmly advises wary strangers to save money with the company.
Jeff Charney, Progressive's chief marketing officer, says Flo's popularity has steadily grown since she appeared in 2008. Much of the reason, he explains, is because of her Web quotient; More than 2.5 million people have visited Flo's Facebook site the past three years, according to Charney. (Here are a few Flo ads.)
"This is the new digital generation," Charney says. "They play online, they engage online and, when you have a relevant brand like ours, they also show tremendous brand loyalty online. [Flo's success] demonstrates just how strong the power of a social network like Progressive's can be."
Then there's Nationwide's "The World's Greatest Spokesperson in the World," a shill who supposedly amuses through smarminess. As played by actor Bob Wiltfong, this mascot all but leans over and massages Nationwide's clients as he coos about great coverage.
But the most intriguing and eccentric of all has to be Allstate's "Mayhem." The ads play with viewers’ perceptions by placing Mayhem (actor Dean Winters, radiating pain) in situations both familiar and bizarre. Among other incarnations, he's been 16-year old girl who crashes while texting; a faulty satellite dish that falls on a car; and a pretty jogger who distracts a driver and causes an accident. (Check out some Mayhem spots.)
All are objects of affection (and more than a little ridicule) online, with forums and chat rooms dedicated to analyzing the commercials and the icons' many quirks. Although most of the mascots first appeared on television, they seem to live eternally on the Internet.
It’s an Internet world, after all
We are witnessing an epic spending battle between insurers, sure, topping $1.5 billion last year. But it’s also a battle for the soul of the industry, if you believe it has one.
Companies like Progressive and GEICO encourage customers to get auto insurance quotes and policies at their websites, circumventing traditional agents in most cases. In 2010, J.D. Power & Associates points out, about 48% of Gen Y shoppers looked for insurance quotes online, compared with 28% of baby boomers.

The bigger players have a more traditional agent model, which is why “Mayhem” always reminds his viewers that their “cut rate insurance” might not cover the kind of havoc he’s wreaking.
If you need a reminder of the stakes, consider this: Spending on auto insurance TV advertising rose nearly a third in 2010. Try to remember the last hour of television you watched when you didn’t see at least one of these high-concept commercials.
Are you a consumer, or a fan?
Mayhem's ads routinely generate many thousands of viewers on YouTube and provoke wide dialogue, from saluting Allstate for innovation to just riffing on the character. One poster asks: "Who do you think would win a cage match. Chuck Norris or Mayhem????" Another adds: "These commercials are great. I laugh every time…and that is very rare for commercials and television in general now-a-days. I applaud you Allstate."
An impressive following, but Flo (played by veteran comic Stephanie Courtney) is the Internet queen. Besides her Facebook fans that comment on everything from her goofy 'do to her peculiar body language, the commercials inspire both purrs and scratches on YouTube.
Of course, Internet infatuation is fleeting. For every fan -- "I wish Flo was my wife," pants one poster – another is ready for the next big thing: "I've had enough of Flo's pasty white face, creepy red lips, 60's hairdo and corny jokes. Please stop doing her annoying commercials during my favorite sporting events."
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Will a bikini raise your car insurance rates?


By: Mark Chalon Smith

With summer coming on, let's add another distraction for drivers already juggling Big Macs and cell phones: skin.
Mark McCullough, a 19-year veteran with the San Diego Police Department and spokesman for its busy traffic division, says fender-benders and other non-fatal collisions rise by about 25 percent during beach season, which starts in May and continues through the end of summer at the popular beach city. Officer McCullough says most are caused by men watching women.
"We get an influx of college kids and tourists to the beach areas during these times, and the accidents climb,'' he says."It's often young guys who, after we talk to them and prod a little, will admit they were eyeing an attractive brunette or good-looking blonde in a little bikini."
A study by Sheilas' Wheels, a British auto insurance company geared to women, supports that. Its survey found that 29 percent of men confess they've been distracted while driving by women in swimsuits or revealing clothing during hotter months. Only 3 percent of women admit they were diverted by men in summer clothes.
"How can you not check out what's going on out there?" asks Mark Singleton, watching the scenery at a pier in Huntingdon Beach, Calif. "I mean, you may not be [consciously searching] for great-looking women, but there are so many out there that you can't really avoid them."
The 38-year-old restaurant manager says he’s never rear-ended another car, but he’s come close. "No, no crashes,'' he says, then glances at his wife, Cynthia, and grins."That would be really hard to explain.”
The price of distracted driving
Tracking a thong has repercussions beyond angering your mate.
Even a minor accident will probably raise your car insurance rates. In general, you can expect as much as a 10 percent jump for a fender-bender; and someone with a consistently poor driving record could face a 40 percent hike, according to Consumer Reports. With the national average for a policy about $1,400 a year, that could mean paying anywhere from $140 to $560 more.
“Accident forgiveness” provisions in your policy – promising no penalty for fender-benders like these -- typically come at a premium price.
Distractions or inattention are responsible for about one out of every four accidents, says the National Highway Traffic Safety Administration. That means more than 1.5 million collisions a year and 4,300 crashes daily, according to the most recent figures.
The most frequent distractions are texting, eating, fiddling with the radio or music player, swiveling to talk with passengers and, yes, watching someone or something outside the car. Motorists are also distracted by using PDAs, laptops and navigation devices, according to the NHTSA.
Beauty and the beach
Anyone who's enjoyed the shore during peak months knows the visions that pull us away from the road and other vehicles. The glistening waves, the shimmering sunsets, the golden women in bikinis.
The Okaloosa County Sheriff’s Office patrols busy U.S. 98 along the beach in Destin, Fla., and says the calls ramp up once spring break starts. “It is heavier more towards the later afternoon,” Sgt. Shannon Tait tells the Northwest Florida Daily News. “We’re thrilled people are here, though. We’ll gladly take the slight traffic headaches if we get visitors.”
It’s not only attractive women that cause warm-weather driving lapses and crashes. Tourists eager for the full San Diego experience are sometimes overwhelmed by all they see at the sea, McCullough says.
"First off, you have to realize that our beach views are spectacular--some tourists can actually be dumbfounded'' by them, McCullough says. "It especially happens during sunsets. Drivers have become so overwhelmed [that they] run the car right off the road, close to going over a cliff and into the ocean. That doesn't happen, but they do crash ... they're pretty embarrassed by it all."
Cynthia Singleton concedes she watches the scenery … and the surfers.
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What if I can’t pay my deductible?

By: Louise Witt
Owners of repair shops say they’re seeing more customers unable to pay.
Since the Great Recession began, drivers have been cutting back on their car insurance coverage to save money. That’s put a few more dollars in their pockets each month but left many unable to handle their repair bills.
Manuel Escobar, owner of Channel City Auto Body in Santa Barbara, Calif., says many drivers without collision and comprehensive coverage are astounded to find out how much they must to pay to fix their vehicles.
"The average consumer doesn't have a clue of the expense to repair collision damage until you put the estimate in front of them," says Escobar, who has been in business for more than 30 years. "A lot of them have sticker shock."
Their choices are few: They can ask the shop to cut some corners. They can borrow money from elsewhere. Or they can leave the car with the shop and hope it isn’t sold before they can come up with the cash.
When insurance is a luxury
A recent study by Quality Planning, a San Francisco-based insurance research firm, found that the number of consumers who chose not to buy collision and comprehensive insurance rose each year from 2006 through 2010. During that same time period, owners of vehicles were 10 years old or older were more likely to drop collision and comprehensive coverage.
Bob U' Ren, Quality Planning's senior vice president, says the study's findings were not unexpected.
Considering that collision and comprehensive insurance are optional, he says, budget-conscious consumers weigh their value against other household expenses. "Insurance is usually a pretty big chunk, and it's one of the things that gets trimmed a bit," he says.
Those who did buy collision and comprehensive coverage chose higher deductibles to lower their premiums. From 2006 to 2009, the percentage of vehicles with deductibles up to $250 fell at an annual rate of 9 percent. At the same time, deductibles between $251 and $500 increased an average of 1.6 percent a year and those between $501 and $1,000 increased an average 4.9 percent a year. With higher deductibles, policyholders will pay lower premiums, but they will pay more out of their own pockets if they are involved in an accident.
And some drivers are simply pocketing their claims checks.
U' Ren says that this practice has been going on for years. The insurer is legally obligated to provide a certain amount to the policyholder for repairs. "The insured can decide how they want to spend the money," U' Ren says. "They can put into a bank account or go shopping with it."
Where your premium dollar goes
According to the National Association Insurance Commissioners' latest figures, the average auto insurance premium was about $900 in 2008.
Most states require drivers to purchase a minimum amount of property and bodily injury liability insurance to protect passengers, the other driver and the other driver's vehicle in the event of an accident. Collision and comprehensive policies, on the other hand, are optional: Collision coverage pays for damage to the policyholder's vehicle if it is damaged in an accident, even if he is responsible, and comprehensive insurance covers theft, cracked windshields and all other damage to the vehicle, including damage caused by fire, fallen trees, vandalism, hail, windstorms, floods and more.
In a typical auto insurance policy, a little more than 50 percent of the cost is for liability coverage, says Mike Barry, a spokesman with the Insurance Information Institute. About 33 percent is for collision and 15 percent for comprehensive coverage --relatively inexpensive, Barry says, considering that it covers theft and damage from most any other incident except a collision with another vehicle.
If you can’t pay your deductible
Repair shops owed money for repairs can retain possession legally, using what’s known as a mechanic’s lien, though that’s hardly their first choice.
If the customer has to pay all the repairs or even a sizeable portion of the bill, he typically will ask about lower cost options. In those instances, Escobar will tell his customers that they may opt to repair the most damaged parts, forgo blending paint to get a perfect match, or substitute used or after-market parts for new manufacturer parts.
"They are put in a position of paying huge out-of-pocket expenses or scaling back what they have to do," Escobar says. In some cases, if the customer is unable to afford to the repairs and the vehicle can no longer be driven, he will offer to sell it to a junkyard or even to Escobar. "On occasion, I buy it back and resell it," he says.
With less insurance coverage, U' Ren says he's not surprised to hear more drivers negotiate lower prices with auto body shops and skip optional or expensive repairs. "With less money in household budgets, the last thing you want to do is throw money at your car," he says.
Even so, U' Ren says he thinks consumers will decide to cut back on their collision and comprehensive coverage. "As long as we have an economic recession and people are going through tough times, I think this trend will continue."
Drop coverage or keep it?
Higher deductibles are tempting, especially for drivers with little cash to spare. A savings of, say, $20 per month may seem worth the gamble. But if you raise your deductible, having adequate cash in savings, or on a credit line, becomes critical. Otherwise your car is at risk. (You can compare auto insurance quotes using different deductible amounts at most online insurance sites.)
Before changing deductibles, try comparison shopping for car insurance policies. Insurers calculate your rates independently; the same coverage can vary in cost by hundreds of dollars. (See “Pocket $1,102 just by shopping around.”) Younger drivers pay by far the most for insurance, and they stand to save the most.
The temptation to drop everything but liability coverage is strong if your car is a paid for. Ask yourself:
  • If you had to replace your car tomorrow, could you? Consult the Kelley Blue Book, Edmunds or Craigslist to get an idea of what you might have to spend. Then subtract your deductible. That’s what you’re on the hook for if you decide to go with a liability-only policy. Some experts recommend that you divide that exposure number by 10; if the collision and comprehensive premiums spelled out on your last bill total more than that, you might consider a liability-only policy.
  • How solid are your finances? An extra $20 a month is cheap insurance if you’re skating on the edge of financial ruin. A wrecked car means no way to get to school or work.
  • How risk-averse are you? If you’ve got cash in the bank but hate the idea of exposing your savings, consider raising your deductible as high as you can.
  • Do you rent cars frequently? Your current full coverage may extend to the vehicles you rent. Check your policy. Collision damage rental car waivers at $7.95 a day add up quickly.
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