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Auto insurance rates to rise by 2010
07:04 AM CDT on Wednesday, July 16, 2008
Associated Press
BATON ROUGE, La. -- A new law will raise auto insurance rates for more than one million Louisiana motorists in 2010 by increasing the minimum liability coverage required for drivers.
NOTE: LOUISIANA IS MADE AWARE OF THE CHANGES ON AUTO INSURANCE.
Governor Bobby Jindal didn't sign the bill, but he let it take effect without his signature.
Louisiana law currently requires car and truck owners to have at least "10-20-10" liability coverage. That's $10,000 coverage for damage of other people's property, $20,000 for injury or death to more than one person in an accident and $10,000 for injury or death to one person.
The new law will change the levels to "15-30-25" on January 1, 2010.
(Copyright 2008 by The Associated Press. All Rights Reserved.)
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STATES TARGET ' WAGERING ON DEATH '
Chicago Tribune
July 1, 2008
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States target 'wagering on death'
Lawmakers banning big-bucks insurance policies, which some contend prey on America's elderly
By Kirsten Scharnberg | Chicago Tribune correspondent
July 1, 2008
TOPEKA, Kan. — Lawmakers here recently passed legislation to outlaw a practice that critics say preys on America's elderly: an insurance transaction in which investors persuade seniors to purchase high-dollar life insurance policies and then transfer a significant portion of the death benefits to strangers.
Known as stranger-originated life insurance, or STOLI, the practice has become prevalent nationwide, particularly as Baby Boomers inch toward retirement and insurance options are aggressively marketed to an aging U.S. populace.
"It's becoming more and more of a problem," said Gary Sanders, senior counsel for the National Association of Insurance and Financial Advisors. "And it's ... being done for bigger and bigger dollar amounts."
NOTE: STOLI OR STRANGER-ORIGINATED LIFE INSURANCE IS BEING STUDIED WELL.
The essence of a STOLI transaction is this: An investor entices a consumer, almost always someone elderly, to take out a large life insurance policy, often in excess of $1 million. The investor frequently sweetens the deal by paying the premiums for the consumer. In exchange, the insured person agrees to sell the policy—making the investor the beneficiary—for an upfront, fast-cash cut of what will be the policy's eventual death payout.
"The entire transaction is not what life insurance is supposed to be about," said Sandy Praeger, the insurance commissioner for Kansas, who fought to get STOLI banned in her state.
"In a traditional life insurance policy, the hope is that you will live as long as possible and that your loved ones will eventually receive the payout from your policy. STOLI is the exact opposite—the hope is that you will die soon, and the beneficiaries will be total strangers," Praeger said.
NOTE: LIFE INSURANCE OFFERS DIFFERENT VARIETIES. A CLOSE STUDY OF ALL TYPES IS HIGHLY RECOMMENDED.
The insurance industry, one of the most powerful lobbying groups in the nation, has complained bitterly about STOLI, alleging it is blatant fraud for a consumer to buy a policy with the express goal of turning a profit by selling the policy to an outside investor.
State legislators have agreed in large numbers, saying that such "wagering on death," as the practice has become known, should be criminal.
Still legal in Illinois
Like Kansas, nearly two dozen states have either banned STOLI or are considering doing so. Iowa, Nebraska, Minnesota and Indiana began cracking down in the past year. Illinois is considering legislation that would restrict the practice.
Sanders said states with large elderly populations—Florida and Arizona, for example—have seen the majority of STOLI cases but that the practice is spreading.
Critics say STOLI not only violates the spirit of life insurance—financial protection for a consumer and his or her loved ones—but carries the potential for harm and abuse of the consumer.
CNN talk show host Larry King recently found himself in such a situation. He sued his insurance broker after selling off about $15 million in life insurance policies for cash payouts of about $1.4 million. King charged that he hadn't been informed of the tax ramifications or the fact that the move would reduce his ability to purchase more life insurance.
The selling off of life insurance policies is not new. An entire industry—known as the viatical or life-settlement industry—emerged in the late 1980s in response to the AIDS crisis, when thousands of people found themselves suddenly too sick to work and desperate for cash.
Because so many of those people were gay men without dependents, a market was born in which individuals could sell their death benefits to investors for immediate cash. For example, someone with a $200,000 life insurance policy might sell the policy to a life insurance settlement company for $150,000; the dying person got the money and the company profited $50,000 as soon as the insured died.
In contrast to STOLI, that kind of selling of policies largely has remained acceptable, and terminally ill consumers, as well as those who are in need of quick cash, keep that industry doing billions of dollars of business each year.
Even the life-settlement industry has been critical of STOLI. Doug Head, executive director of the Life Insurance Settlement Association, likened the practice to "a kid outside the 7-Eleven getting a bum to go in and buy booze for him."
Yet Head also cautioned against many of the legislative steps that some states are taking. He worries about blanket bans on selling life insurance policies for five years after they are purchased, a move he believes takes too much control away from consumers who might be selling their policies for valid reasons.
STOLI's upside
As much as the insurance industry has painted STOLI as a predatory practice, many consumers have enjoyed their windfall. Those who rake in big profits for doing next to nothing other than signing up for big insurance policies have frequently been happy with the deals they've cut, Head said.
Head questioned how prevalent STOLI has become, indicating that the insurance industry wants states to ban it because it cuts into profits by reducing the standard number of lapsed policies.
"The idea that people are jumping out of dark alleys and forcing old ladies into life insurance policies is ludicrous," he said.
kscharnberg@tribune.com
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July 1, 2008
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GET HOME DELIVERY GET HOME DELIVERY
Text size: increase text sizedecrease text size
States target 'wagering on death'
Lawmakers banning big-bucks insurance policies, which some contend prey on America's elderly
By Kirsten Scharnberg | Chicago Tribune correspondent
July 1, 2008
TOPEKA, Kan. — Lawmakers here recently passed legislation to outlaw a practice that critics say preys on America's elderly: an insurance transaction in which investors persuade seniors to purchase high-dollar life insurance policies and then transfer a significant portion of the death benefits to strangers.
Known as stranger-originated life insurance, or STOLI, the practice has become prevalent nationwide, particularly as Baby Boomers inch toward retirement and insurance options are aggressively marketed to an aging U.S. populace.
"It's becoming more and more of a problem," said Gary Sanders, senior counsel for the National Association of Insurance and Financial Advisors. "And it's ... being done for bigger and bigger dollar amounts."
NOTE: STOLI OR STRANGER-ORIGINATED LIFE INSURANCE IS BEING STUDIED WELL.
The essence of a STOLI transaction is this: An investor entices a consumer, almost always someone elderly, to take out a large life insurance policy, often in excess of $1 million. The investor frequently sweetens the deal by paying the premiums for the consumer. In exchange, the insured person agrees to sell the policy—making the investor the beneficiary—for an upfront, fast-cash cut of what will be the policy's eventual death payout.
"The entire transaction is not what life insurance is supposed to be about," said Sandy Praeger, the insurance commissioner for Kansas, who fought to get STOLI banned in her state.
"In a traditional life insurance policy, the hope is that you will live as long as possible and that your loved ones will eventually receive the payout from your policy. STOLI is the exact opposite—the hope is that you will die soon, and the beneficiaries will be total strangers," Praeger said.
NOTE: LIFE INSURANCE OFFERS DIFFERENT VARIETIES. A CLOSE STUDY OF ALL TYPES IS HIGHLY RECOMMENDED.
The insurance industry, one of the most powerful lobbying groups in the nation, has complained bitterly about STOLI, alleging it is blatant fraud for a consumer to buy a policy with the express goal of turning a profit by selling the policy to an outside investor.
State legislators have agreed in large numbers, saying that such "wagering on death," as the practice has become known, should be criminal.
Still legal in Illinois
Like Kansas, nearly two dozen states have either banned STOLI or are considering doing so. Iowa, Nebraska, Minnesota and Indiana began cracking down in the past year. Illinois is considering legislation that would restrict the practice.
Sanders said states with large elderly populations—Florida and Arizona, for example—have seen the majority of STOLI cases but that the practice is spreading.
Critics say STOLI not only violates the spirit of life insurance—financial protection for a consumer and his or her loved ones—but carries the potential for harm and abuse of the consumer.
CNN talk show host Larry King recently found himself in such a situation. He sued his insurance broker after selling off about $15 million in life insurance policies for cash payouts of about $1.4 million. King charged that he hadn't been informed of the tax ramifications or the fact that the move would reduce his ability to purchase more life insurance.
The selling off of life insurance policies is not new. An entire industry—known as the viatical or life-settlement industry—emerged in the late 1980s in response to the AIDS crisis, when thousands of people found themselves suddenly too sick to work and desperate for cash.
Because so many of those people were gay men without dependents, a market was born in which individuals could sell their death benefits to investors for immediate cash. For example, someone with a $200,000 life insurance policy might sell the policy to a life insurance settlement company for $150,000; the dying person got the money and the company profited $50,000 as soon as the insured died.
In contrast to STOLI, that kind of selling of policies largely has remained acceptable, and terminally ill consumers, as well as those who are in need of quick cash, keep that industry doing billions of dollars of business each year.
Even the life-settlement industry has been critical of STOLI. Doug Head, executive director of the Life Insurance Settlement Association, likened the practice to "a kid outside the 7-Eleven getting a bum to go in and buy booze for him."
Yet Head also cautioned against many of the legislative steps that some states are taking. He worries about blanket bans on selling life insurance policies for five years after they are purchased, a move he believes takes too much control away from consumers who might be selling their policies for valid reasons.
STOLI's upside
As much as the insurance industry has painted STOLI as a predatory practice, many consumers have enjoyed their windfall. Those who rake in big profits for doing next to nothing other than signing up for big insurance policies have frequently been happy with the deals they've cut, Head said.
Head questioned how prevalent STOLI has become, indicating that the insurance industry wants states to ban it because it cuts into profits by reducing the standard number of lapsed policies.
"The idea that people are jumping out of dark alleys and forcing old ladies into life insurance policies is ludicrous," he said.
kscharnberg@tribune.com
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Related topic galleries: Nebraska, Insurance, Sandy Praeger, Minnesota, Gays and Lesbians, Consumers, Minority Groups
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Saturday, July 5, 2008
HONESTY CAN COST IN AUTO POLICIES
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Honesty can cost in auto policies
By Jim Sanders - jsanders@sacbee.com
Published 12:00 am PDT Monday, June 30, 2008
Story appeared in MAIN NEWS section, Page A1
Print | E-Mail | Comments (2) | |
Will Californians lie to save money?
Apparently.
New legislation takes aim at an honor system, of sorts, perhaps one of the few remaining in which millions of dollars are at stake.
The measure targets a process in which state law requires car insurance premiums to be based partly on motorists' estimates of how far they will drive each year.
Honesty can hurt – financially.
"I think it's ingrained, given the structure of the current system, to lie," said Michael Gunning of the Personal Insurance Federation of California, whose members write about half the state's auto insurance policies.
Assemblyman Jared Huffman, D-San Rafael, proposed the new measure, Assembly Bill 2800, to permit insurance companies to offer discounts to drivers who volunteer to have mileage verified.
NOTE: HUFFMAN CREATED THE ASSEMBLY BILL 2800.
Huffman said it makes no sense to reward dishonesty or lowballing, while offering no incentive to drive less.
"Ask yourself, what would most people do, given the opportunity to have a lower insurance rate by estimating lower miles than they actually drive?" Huffman said.
Sacramentans interviewed randomly Friday agreed.
"I think most people probably do skimp a little bit," said Derek Givens, 28.
"Hell, yeah, they do," said Jeremiah Collins, 25. "There's no way they wouldn't."
No current statistics exist, but a state study of 1998 mileage estimates found that 56 percent of motorists underestimated their travel – and nearly half of those lowballers erred by more than 6,000 miles.
AB 2800's voluntary program, though seemingly narrow in scope, teams environmental groups with insurance companies as part of a much broader, long-range strategy to cut miles driven and lower greenhouse gas emissions, a key state goal.
Ultimately, passage of AB 2800 could set the stage for battles over whether the state should allow insurers to require high-tech devices for tracking mileage and whether to encourage pay-as-you-go policies that charge drivers for each mile traveled.
Huffman said his bill does not address such issues and that state Insurance Commissioner Steve Poizner has wide-ranging latitude to represent consumer interests. But vehicles are pivotal in the state's fight against global warming, he said.
"We need to create incentives to drive less," Huffman said.
Californians own 26 million cars and trucks driven more than 330 billion miles a year, according to the state Air Resources Board.
"The threat that California faces from climate change is real, and a big part of that is transportation, which is something we all have control over in our day-to-day lives," said Lauren Navarro of the Environmental Defense Fund.
Opponents counter that the push for AB 2800 exaggerates insurers' woes and piggybacks onto environmental activism to achieve corporate gain.
"I think there's always sort of a credibility gap between the industry's claims and its actual performance," said Richard Holober of the Consumer Federation of California.
California regulations specifically ban insurers from requiring use of technological devices to record mileage. But firms have the right to require odometer readings when a policy is issued, and when it's renewed every six months or year, said Darrel Ng of the Department of Insurance.
Gunning disagreed that the regulations give firms clear authority.
"In fact, several times we asked for mileage verification tools, and the (insurance department) refused because it would be too 'burdensome' on the customer," Gunning's group said in a letter supporting AB 2800.
Besides confusion over legal limits, insurers say verification is not always practical because many policies are sold online, not every firm has ample staffing to handle a data crush, and stiff competition discourages imposition of cumbersome policies that might upset customers.
State Farm, AAA and Allstate insurance companies said they depend on policyholders, not odometers, when calculating mileage.
"We accept the customers' estimate," said Cynthia Harris of AAA. "So the bottom line is the customer has the final say."
AB 2800 would allow insurance companies to propose methods of verification for acceptance by Poizner, whose office has taken no position on the legislation but is studying the issue separately.
Huffman's bill awaits action in the Senate after passing the Assembly, 72-2. Gov. Arnold Schwarzenegger has taken no position.
Opponents contend the legislation is a thinly veiled push toward allowing insurance companies to require use of satellite technology – known as GPS – that can track not only how far you drive, but where and how aggressively.
"That's a huge invasion of privacy," Holober said. "It's nobody's business."
"I should not be required to give up my privacy in order to pay fair insurance rates," added Carmen Balber of Consumer Watchdog, an industry watchdog group.
NOTE: HUFFMAN IS A VERY RESPECTED PERSONALITY IN THE INSURANCE INDUSTRY.
Huffman called such claims a "phantom issue."
"The notion that this will require installation of 'spyware' on your car is nonsensical," he said, adding that AB 2800 proposes a voluntary program in which the state, not insurers, would determine verification methods.
"If I thought that this bill was somehow anti-consumer, there's no way I'd be carrying it," Huffman said.
About the writer:
* Call Jim Sanders, Bee Capitol Bureau, (916) 326-5538.
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Comments
There are 2 comments posted so far. Below is a sampling of the latest comments.
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PapaDoyle at 5:26 AM PST Monday, June 30, 2008 wrote:
If insurance companys are allowed to track every mile you drive then we should be able to track ever...more
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lpugh at 12:16 AM PST Monday, June 30, 2008 wrote:
Compares to pissing on a forest fire but paying to do so...more
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Honesty can cost in auto policies
By Jim Sanders - jsanders@sacbee.com
Published 12:00 am PDT Monday, June 30, 2008
Story appeared in MAIN NEWS section, Page A1
Print | E-Mail | Comments (2) | |
Will Californians lie to save money?
Apparently.
New legislation takes aim at an honor system, of sorts, perhaps one of the few remaining in which millions of dollars are at stake.
The measure targets a process in which state law requires car insurance premiums to be based partly on motorists' estimates of how far they will drive each year.
Honesty can hurt – financially.
"I think it's ingrained, given the structure of the current system, to lie," said Michael Gunning of the Personal Insurance Federation of California, whose members write about half the state's auto insurance policies.
Assemblyman Jared Huffman, D-San Rafael, proposed the new measure, Assembly Bill 2800, to permit insurance companies to offer discounts to drivers who volunteer to have mileage verified.
NOTE: HUFFMAN CREATED THE ASSEMBLY BILL 2800.
Huffman said it makes no sense to reward dishonesty or lowballing, while offering no incentive to drive less.
"Ask yourself, what would most people do, given the opportunity to have a lower insurance rate by estimating lower miles than they actually drive?" Huffman said.
Sacramentans interviewed randomly Friday agreed.
"I think most people probably do skimp a little bit," said Derek Givens, 28.
"Hell, yeah, they do," said Jeremiah Collins, 25. "There's no way they wouldn't."
No current statistics exist, but a state study of 1998 mileage estimates found that 56 percent of motorists underestimated their travel – and nearly half of those lowballers erred by more than 6,000 miles.
AB 2800's voluntary program, though seemingly narrow in scope, teams environmental groups with insurance companies as part of a much broader, long-range strategy to cut miles driven and lower greenhouse gas emissions, a key state goal.
Ultimately, passage of AB 2800 could set the stage for battles over whether the state should allow insurers to require high-tech devices for tracking mileage and whether to encourage pay-as-you-go policies that charge drivers for each mile traveled.
Huffman said his bill does not address such issues and that state Insurance Commissioner Steve Poizner has wide-ranging latitude to represent consumer interests. But vehicles are pivotal in the state's fight against global warming, he said.
"We need to create incentives to drive less," Huffman said.
Californians own 26 million cars and trucks driven more than 330 billion miles a year, according to the state Air Resources Board.
"The threat that California faces from climate change is real, and a big part of that is transportation, which is something we all have control over in our day-to-day lives," said Lauren Navarro of the Environmental Defense Fund.
Opponents counter that the push for AB 2800 exaggerates insurers' woes and piggybacks onto environmental activism to achieve corporate gain.
"I think there's always sort of a credibility gap between the industry's claims and its actual performance," said Richard Holober of the Consumer Federation of California.
California regulations specifically ban insurers from requiring use of technological devices to record mileage. But firms have the right to require odometer readings when a policy is issued, and when it's renewed every six months or year, said Darrel Ng of the Department of Insurance.
Gunning disagreed that the regulations give firms clear authority.
"In fact, several times we asked for mileage verification tools, and the (insurance department) refused because it would be too 'burdensome' on the customer," Gunning's group said in a letter supporting AB 2800.
Besides confusion over legal limits, insurers say verification is not always practical because many policies are sold online, not every firm has ample staffing to handle a data crush, and stiff competition discourages imposition of cumbersome policies that might upset customers.
State Farm, AAA and Allstate insurance companies said they depend on policyholders, not odometers, when calculating mileage.
"We accept the customers' estimate," said Cynthia Harris of AAA. "So the bottom line is the customer has the final say."
AB 2800 would allow insurance companies to propose methods of verification for acceptance by Poizner, whose office has taken no position on the legislation but is studying the issue separately.
Huffman's bill awaits action in the Senate after passing the Assembly, 72-2. Gov. Arnold Schwarzenegger has taken no position.
Opponents contend the legislation is a thinly veiled push toward allowing insurance companies to require use of satellite technology – known as GPS – that can track not only how far you drive, but where and how aggressively.
"That's a huge invasion of privacy," Holober said. "It's nobody's business."
"I should not be required to give up my privacy in order to pay fair insurance rates," added Carmen Balber of Consumer Watchdog, an industry watchdog group.
NOTE: HUFFMAN IS A VERY RESPECTED PERSONALITY IN THE INSURANCE INDUSTRY.
Huffman called such claims a "phantom issue."
"The notion that this will require installation of 'spyware' on your car is nonsensical," he said, adding that AB 2800 proposes a voluntary program in which the state, not insurers, would determine verification methods.
"If I thought that this bill was somehow anti-consumer, there's no way I'd be carrying it," Huffman said.
About the writer:
* Call Jim Sanders, Bee Capitol Bureau, (916) 326-5538.
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Comments
There are 2 comments posted so far. Below is a sampling of the latest comments.
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PapaDoyle at 5:26 AM PST Monday, June 30, 2008 wrote:
If insurance companys are allowed to track every mile you drive then we should be able to track ever...more
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lpugh at 12:16 AM PST Monday, June 30, 2008 wrote:
Compares to pissing on a forest fire but paying to do so...more
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Europe Insurers Shift Focus
Life Operations
Are Expanded in Bid
To Protect Profits
By GORAN MIJUK
June 30, 2008; Page C5
ZURICH -- With prices for property and casualty insurance expected to continue falling this year, some European insurers and reinsurers are boosting their life-insurance operations and could pursue takeovers to protect premium growth and profits.
Some life-insurance markets, especially in emerging Asian economies, promise double-digit growth rates because of rising demand for life savings products from increasing numbers of affluent people. As growth for other insurance business is expected to remain sluggish in mature markets like the U.S. and Europe, analysts also expect more takeovers and business tie-ups.
[Jacques Aigrain]
NOTE: LIFE INSURANCE IS INDEED A NEED MAY IT BE IN TIMES OF CRISIS.
World-wide nonlife premiums fell 0.3% last year, while life premiums rose 4.7%, according to data from Swiss Re, which said the trend is expected to stay in place. In Russia, life-premium volume jumped 30%.
Some industry executives and analysts warn that because of a mass move toward emerging markets, growth rates may be less pronounced than expected. Many also caution that large takeovers may be the wrong avenue to boost growth because of the high cost of capital.
"The efforts to increase the life-insurance portfolio by insurance and reinsurance companies are certainly positive," says Rene Locher, a Zurich-based insurance analyst for Sal. Oppenheim. "But the move toward life insurance alone won't be able to fully compensate the fall in prices in the nonlife sector."
NOTE: RENE LOCHER IS A RESPECTED PERSONALITY IN THE INSURANCE INDUSTRY.
Swiss Re, the world's largest reinsurer in terms of premiums, is shifting focus to life, saying that prices for other insurance, especially in mature markets, are falling. Reinsurance companies provide insurance to insurers, in exchange for a fee.
"We are allocating our capital efficiently to the lines of business with the best return, for example in the life sector," said Swiss Re Chief Executive Officer Jacques Aigrain. He noted that Swiss Re has substantially reduced its exposure to insuring business risk and is now allocating more capital to life-insurance businesses, including those focused on retirement planning.
Companies and analysts say that while life insurance premiums will increase, other insurance and reinsurance prices will weaken fast this year after rising for several years. Besides fierce competition, a weakening economy in the U.S. and in Europe is also expected to put pressure on premiums this year.
Still, emerging markets make up only about a tenth of all the insurance business in industrialized markets. General annual life and nonlife premiums in industrialized countries stood at around $3.6 trillion at the end of 2007, compared with $414 billion in emerging markets.
Hannover Re, which ranks third in premium income among the world's largest reinsurers, after Swiss Re and Munich Re, also hopes that its growing life reinsurance business will help it increase profit this year. CEO Wilhelm Zeller said in June that the company expects to see "double-digit growth" in premiums and net profit from its life and health businesses. The company hopes to boost its life business by 12% to 15% this year, offsetting weak premiums in other businesses, which are expected to shrink by around 5% compared with last year.
French reinsurance company Scor SA also sees strong growth, with less volatility, in the life insurance sector, CEO Denis Kessler said Thursday.
But as the natural growth of business is likely to be too slow, insurance analysts also expect companies to engage in some mergers and acquisitions, although risks will be high given current market volatility.
At Swiss Re, Mr. Aigrain said the company isn't planning any big takeovers but is looking at buying life insurance portfolios from other insurers.
Zurich Financial Services, whose profit depends predominantly on its nonlife business, is believed to be a frontrunner in bidding for Royal Bank of Scotland Group PLC's life and nonlife insurance business. Zurich Financial has repeatedly declined to comment on the market speculation.
The financial market hasn't reacted well to Zurich Financial's presumed interest in the RBS unit, though, fearing that it might pay too much and have to raise new capital. Since the beginning of May, when the Swiss insurer was mentioned for the first time as a possible bidder, its stock has fallen around 20%.
Still, Zurich Financial says it sees growth opportunities in all insurance sectors. "It's not a matter of pitting general insurance against life insurance, since we see attractive opportunities in both", said Zurich Financial Chief Financial Officer Dieter Wemmer Thursday.
Write to Goran Mijuk at goran.mijuk@dowjones.com
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Europe Insurers Shift Focus
Life Operations
Are Expanded in Bid
To Protect Profits
By GORAN MIJUK
June 30, 2008; Page C5
ZURICH -- With prices for property and casualty insurance expected to continue falling this year, some European insurers and reinsurers are boosting their life-insurance operations and could pursue takeovers to protect premium growth and profits.
Some life-insurance markets, especially in emerging Asian economies, promise double-digit growth rates because of rising demand for life savings products from increasing numbers of affluent people. As growth for other insurance business is expected to remain sluggish in mature markets like the U.S. and Europe, analysts also expect more takeovers and business tie-ups.
[Jacques Aigrain]
NOTE: LIFE INSURANCE IS INDEED A NEED MAY IT BE IN TIMES OF CRISIS.
World-wide nonlife premiums fell 0.3% last year, while life premiums rose 4.7%, according to data from Swiss Re, which said the trend is expected to stay in place. In Russia, life-premium volume jumped 30%.
Some industry executives and analysts warn that because of a mass move toward emerging markets, growth rates may be less pronounced than expected. Many also caution that large takeovers may be the wrong avenue to boost growth because of the high cost of capital.
"The efforts to increase the life-insurance portfolio by insurance and reinsurance companies are certainly positive," says Rene Locher, a Zurich-based insurance analyst for Sal. Oppenheim. "But the move toward life insurance alone won't be able to fully compensate the fall in prices in the nonlife sector."
NOTE: RENE LOCHER IS A RESPECTED PERSONALITY IN THE INSURANCE INDUSTRY.
Swiss Re, the world's largest reinsurer in terms of premiums, is shifting focus to life, saying that prices for other insurance, especially in mature markets, are falling. Reinsurance companies provide insurance to insurers, in exchange for a fee.
"We are allocating our capital efficiently to the lines of business with the best return, for example in the life sector," said Swiss Re Chief Executive Officer Jacques Aigrain. He noted that Swiss Re has substantially reduced its exposure to insuring business risk and is now allocating more capital to life-insurance businesses, including those focused on retirement planning.
Companies and analysts say that while life insurance premiums will increase, other insurance and reinsurance prices will weaken fast this year after rising for several years. Besides fierce competition, a weakening economy in the U.S. and in Europe is also expected to put pressure on premiums this year.
Still, emerging markets make up only about a tenth of all the insurance business in industrialized markets. General annual life and nonlife premiums in industrialized countries stood at around $3.6 trillion at the end of 2007, compared with $414 billion in emerging markets.
Hannover Re, which ranks third in premium income among the world's largest reinsurers, after Swiss Re and Munich Re, also hopes that its growing life reinsurance business will help it increase profit this year. CEO Wilhelm Zeller said in June that the company expects to see "double-digit growth" in premiums and net profit from its life and health businesses. The company hopes to boost its life business by 12% to 15% this year, offsetting weak premiums in other businesses, which are expected to shrink by around 5% compared with last year.
French reinsurance company Scor SA also sees strong growth, with less volatility, in the life insurance sector, CEO Denis Kessler said Thursday.
But as the natural growth of business is likely to be too slow, insurance analysts also expect companies to engage in some mergers and acquisitions, although risks will be high given current market volatility.
At Swiss Re, Mr. Aigrain said the company isn't planning any big takeovers but is looking at buying life insurance portfolios from other insurers.
Zurich Financial Services, whose profit depends predominantly on its nonlife business, is believed to be a frontrunner in bidding for Royal Bank of Scotland Group PLC's life and nonlife insurance business. Zurich Financial has repeatedly declined to comment on the market speculation.
The financial market hasn't reacted well to Zurich Financial's presumed interest in the RBS unit, though, fearing that it might pay too much and have to raise new capital. Since the beginning of May, when the Swiss insurer was mentioned for the first time as a possible bidder, its stock has fallen around 20%.
Still, Zurich Financial says it sees growth opportunities in all insurance sectors. "It's not a matter of pitting general insurance against life insurance, since we see attractive opportunities in both", said Zurich Financial Chief Financial Officer Dieter Wemmer Thursday.
Write to Goran Mijuk at goran.mijuk@dowjones.com
RELATED ARTICLES FROM ACROSS THE WEB
Related Content may require a subscription | Subscribe Now -- Get 2 Weeks FREE
Related Articles from WSJ.com
• How to Keep Health Insurance When You Lose Your Job Jun. 26, 2008
Related Web News
• Cost Of Living - Cheaper, Yes, but Only on the Price - NYTimes.com Jun. 28, 2008 nytimes.com
• Is Liability Insurance a Must to Go Global? Jun. 18, 2008 businessweek.com
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Friday, July 4, 2008
CAN YOU AFFORD LONG -TERM- CARE INSURANCE?
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Home > Money & Business > Planning to Retire > Can You Afford Long-Term-Care Insurance?
« 8 More Ways to Save in Retirement
Planning to Retire by Emily Brandon
Can You Afford Long-Term-Care Insurance?
June 30, 2008 01:09 PM ET | Emily Brandon | Permanent Link
Long-term care is likely to be most Americans' greatest expense of all in retirement. A private room in a nursing home costs $76,460 annually on average, or $209 a day, and Medicare typically won't cover it.
Long-term-care insurance can help protect you from some of these unpredictable costs. It can be used to pay for nursing home expenses, adult day care, and in-home help for seniors with chronic conditions or who need extra help recovering from an illness.
But this pricey insurance is prohibitively expensive for many people. AARP estimates that a 65-year-old in good health can expect to pay between $2,000 and $3,000 a year for a policy that covers nursing-home and home care. And Fidelity Investments estimates that a couple, both of whom are 65 in 2008, will need $85,000 to insure against a lifetime of long-term-care expenses.
NOTE: THINGS TO CONSIDER PRIOR TO GETTING A LIFE INSURANCE...
If you're going to buy long-term-care insurance, here are a few things to consider:
Premiums. Find out what the premium is now and what it will cost in the future. Ask if a pre-existing medical condition could influence premium prices. AARP says you may not want to buy a policy if the cost of premiums will lower your standard of living or force you to give up other things you need right now. The National Program on Women and Aging recommends that, as a rule of thumb, premiums should be less than 20 percent of your disposable income after all other essential bills are paid. So, this type of insurance is primarily appropriate for people with assets between $200,000 and $1.5 million, according to Consumer Reports. Both long-term-care expenses and insurance are so expensive that almost all middle- and low-income households rely on Medicaid for nursing home care after they spend down their assets to a level at which they qualify.
NOTE: AARP IS A WELL RESPECTED COMPANY IN THE INSURANCE INDUSTRY.
Coverage. You can choose to be covered for different varieties of home healthcare, nursing-home care, or both. Some providers offer lower premiums if you agree to a waiting period of up to 100 days before coverage begins, during which you pay all of your own expenses.
Be sure to ask about the duration of coverage. Long-term-care coverage doesn't always last that long. The average length of stay in a nursing home is 3.7 years for women and 2.7 years for men, according to Joan Bloom, a senior vice president for Fidelity Investments Life Insurance Co. You can choose a benefit period as short as two years or as long as the rest of your life. And you'll want to find out about maximum daily, monthly, or lifetime payouts and whether they are indexed for inflation. If your care costs more than the caps, you will have to pay for it out of your own pocket.
The company. Ask what happens if the insurance company should go out of business before you need long-term-care coverage. And check out its track record for paying out claims. You can examine ratings of companies online at A.M. Best, Moody's, and Standard & Poor's. Consumer Reports recommends that you buy only from insurers that are rated in the top two financial-strength categories by at least two of the ratings services. You can also check up on a company with your state insurance department.
The fine print. Read any contract you sign carefully, and ask questions. Find out how to cancel, what happens if you stop paying the premiums, how many times you can renew, and what needs to happen before you can begin using your benefits. A fee-only financial planner, whom you pay by the hour and who doesn't accept commissions for selling you financial products, can help you decipher the fine-print sales pitch.
Your state. Insurance laws and options vary by state. The nonprofit Family Caregiver Alliance has a Web tool to help consumers peruse long-term-care options in each state. And the National Association of Insurance Commissioners offers consumer tips for buying long-term-care insurance.
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Home > Money & Business > Planning to Retire > Can You Afford Long-Term-Care Insurance?
« 8 More Ways to Save in Retirement
Planning to Retire by Emily Brandon
Can You Afford Long-Term-Care Insurance?
June 30, 2008 01:09 PM ET | Emily Brandon | Permanent Link
Long-term care is likely to be most Americans' greatest expense of all in retirement. A private room in a nursing home costs $76,460 annually on average, or $209 a day, and Medicare typically won't cover it.
Long-term-care insurance can help protect you from some of these unpredictable costs. It can be used to pay for nursing home expenses, adult day care, and in-home help for seniors with chronic conditions or who need extra help recovering from an illness.
But this pricey insurance is prohibitively expensive for many people. AARP estimates that a 65-year-old in good health can expect to pay between $2,000 and $3,000 a year for a policy that covers nursing-home and home care. And Fidelity Investments estimates that a couple, both of whom are 65 in 2008, will need $85,000 to insure against a lifetime of long-term-care expenses.
NOTE: THINGS TO CONSIDER PRIOR TO GETTING A LIFE INSURANCE...
If you're going to buy long-term-care insurance, here are a few things to consider:
Premiums. Find out what the premium is now and what it will cost in the future. Ask if a pre-existing medical condition could influence premium prices. AARP says you may not want to buy a policy if the cost of premiums will lower your standard of living or force you to give up other things you need right now. The National Program on Women and Aging recommends that, as a rule of thumb, premiums should be less than 20 percent of your disposable income after all other essential bills are paid. So, this type of insurance is primarily appropriate for people with assets between $200,000 and $1.5 million, according to Consumer Reports. Both long-term-care expenses and insurance are so expensive that almost all middle- and low-income households rely on Medicaid for nursing home care after they spend down their assets to a level at which they qualify.
NOTE: AARP IS A WELL RESPECTED COMPANY IN THE INSURANCE INDUSTRY.
Coverage. You can choose to be covered for different varieties of home healthcare, nursing-home care, or both. Some providers offer lower premiums if you agree to a waiting period of up to 100 days before coverage begins, during which you pay all of your own expenses.
Be sure to ask about the duration of coverage. Long-term-care coverage doesn't always last that long. The average length of stay in a nursing home is 3.7 years for women and 2.7 years for men, according to Joan Bloom, a senior vice president for Fidelity Investments Life Insurance Co. You can choose a benefit period as short as two years or as long as the rest of your life. And you'll want to find out about maximum daily, monthly, or lifetime payouts and whether they are indexed for inflation. If your care costs more than the caps, you will have to pay for it out of your own pocket.
The company. Ask what happens if the insurance company should go out of business before you need long-term-care coverage. And check out its track record for paying out claims. You can examine ratings of companies online at A.M. Best, Moody's, and Standard & Poor's. Consumer Reports recommends that you buy only from insurers that are rated in the top two financial-strength categories by at least two of the ratings services. You can also check up on a company with your state insurance department.
The fine print. Read any contract you sign carefully, and ask questions. Find out how to cancel, what happens if you stop paying the premiums, how many times you can renew, and what needs to happen before you can begin using your benefits. A fee-only financial planner, whom you pay by the hour and who doesn't accept commissions for selling you financial products, can help you decipher the fine-print sales pitch.
Your state. Insurance laws and options vary by state. The nonprofit Family Caregiver Alliance has a Web tool to help consumers peruse long-term-care options in each state. And the National Association of Insurance Commissioners offers consumer tips for buying long-term-care insurance.
Tags: insurance | retirement
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TAGS
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OTHER ARTICLES FROM THE PLANNING TO RETIRE BLOG
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1. 8 More Ways to Save in Retirement
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4. Avoiding Bankruptcy in Old Age
5. Traditional Pensions Net Higher Stock Market Returns
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Not having the correct insurance for your property when a monsoon hits can be financially devastating.
Tom Paluda with Farmers Insurance Group says many are surprised they had no protection for certain losses under their policies. "Whether you're a business or a home owner or renter, take the time a sit down and know exactly what coverage you have and what coverage you don't have."
NOTE: PALUDA HAS A GREAT INFLUENCE IN THE INSURANCE INDUSTRY.
Paluda says it's vital to get informed about certain add on's. For example, a tree falls through your house. "Most insurance is going to pay to fix your house but what about removing the tree? A big tree costs hundreds of dollars to remove. Then what about replacing that tree?
Or what if your parked car is damaged during a monsoon? "The homeowners insurance will never pay for that car. Unless they have auto insurance on that car it's not going to get paid."
Paluda says many policy owners don't grasp the importance of cataloging valuable possessions. "The insurance company says ok, we're sitting here with a blank check. What did you have? Most people wouldn't know what to tell them."
He says homeowners can take precautionary measures to protect against unnecessary losses.
This includes:
-Having your agent inspect the house for potential problems.
-Keep trees that may damage property during extreme weather trimmed.
-Get a fireproof box to protect vital papers and jewelry in case of a fire or flood.
For more insurance information from our expert, click here.
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Tyler Wing Reports
Flood Insurance Help
Posted: June 29, 2008 06:10 PM
Flood Insurance Help
Not having the correct insurance for your property when a monsoon hits can be financially devastating.
Tom Paluda with Farmers Insurance Group says many are surprised they had no protection for certain losses under their policies. "Whether you're a business or a home owner or renter, take the time a sit down and know exactly what coverage you have and what coverage you don't have."
NOTE: PALUDA HAS A GREAT INFLUENCE IN THE INSURANCE INDUSTRY.
Paluda says it's vital to get informed about certain add on's. For example, a tree falls through your house. "Most insurance is going to pay to fix your house but what about removing the tree? A big tree costs hundreds of dollars to remove. Then what about replacing that tree?
Or what if your parked car is damaged during a monsoon? "The homeowners insurance will never pay for that car. Unless they have auto insurance on that car it's not going to get paid."
Paluda says many policy owners don't grasp the importance of cataloging valuable possessions. "The insurance company says ok, we're sitting here with a blank check. What did you have? Most people wouldn't know what to tell them."
He says homeowners can take precautionary measures to protect against unnecessary losses.
This includes:
-Having your agent inspect the house for potential problems.
-Keep trees that may damage property during extreme weather trimmed.
-Get a fireproof box to protect vital papers and jewelry in case of a fire or flood.
For more insurance information from our expert, click here.
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Thursday, July 3, 2008
AEGON RELIGARE LIFE INSURANCE GETS FINAL IRDA NOD
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AEGON Religare Life Insurance gets final IRDA nod
30 Jun, 2008, 1742 hrs IST, ECONOMICTIMES.COM
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MUMBAI: AEGON Religare Life Insurance Company has received the final approval from the Insurance Regulatory & Development Authority to operate in the life insurance space. The R3 license from the IRDA is the last of the three steps in the registration process.
"Our plans for the nationwide launch are now ready for execution. We will strive to delight our customers through a fresh approach, innovative solutions and seamless delivery," said Rajiv Jamkhedkar, CEO, AEGON Religare Life Insurance, which is a joint venture between AEGON and Religare.
NOTE: AEGON AND RELIGARE HAVE A VERY IMPORTANT ROLE IN THE INSURANCE INDUSTRY.
AEGON is one of the world's largest life insurance and pension companies with presence in more than 20 countries. It employs about 30,000 people, and services over 40 million customers across the world.
Religare is a leading integrated financial services institution. The company's retail network is spread in over 1,300 locations across more than 400 cities and towns in India. It has total employee strength of more than 10,000.
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AEGON Religare Life Insurance gets final IRDA nod
30 Jun, 2008, 1742 hrs IST, ECONOMICTIMES.COM
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MUMBAI: AEGON Religare Life Insurance Company has received the final approval from the Insurance Regulatory & Development Authority to operate in the life insurance space. The R3 license from the IRDA is the last of the three steps in the registration process.
"Our plans for the nationwide launch are now ready for execution. We will strive to delight our customers through a fresh approach, innovative solutions and seamless delivery," said Rajiv Jamkhedkar, CEO, AEGON Religare Life Insurance, which is a joint venture between AEGON and Religare.
NOTE: AEGON AND RELIGARE HAVE A VERY IMPORTANT ROLE IN THE INSURANCE INDUSTRY.
AEGON is one of the world's largest life insurance and pension companies with presence in more than 20 countries. It employs about 30,000 people, and services over 40 million customers across the world.
Religare is a leading integrated financial services institution. The company's retail network is spread in over 1,300 locations across more than 400 cities and towns in India. It has total employee strength of more than 10,000.
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VEHICLE INSURANCE
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Vehicle insurance
From Wikipedia, the free encyclopedia
(Redirected from Auto insurance)
Jump to: navigation, search
Vehicle insurance (also known as auto insurance, car insurance, or motor insurance) is insurance purchased for cars, trucks, and other vehicles. Its primary use is to provide protection against losses incurred as a result of traffic accidents and against liability that could be incurred in an accident.
NOTE: AUTO INSURANCE HAS BEEN A PREREQUISITE IN PURCHASING A VEHICLE.
Contents
[hide]
* 1 Public policy
o 1.1 Australia
o 1.2 Canada
o 1.3 South Africa
o 1.4 United Kingdom
o 1.5 United States
* 2 Coverage levels
* 3 Excess
o 3.1 Compulsory excess
o 3.2 Voluntary excess
* 4 Basis of premium charges
o 4.1 Gender
o 4.2 Age
o 4.3 Distance
+ 4.3.1 Reasonable estimation
+ 4.3.2 Odometer-based systems
+ 4.3.3 GPS-based system
+ 4.3.4 OBDII-based system
* 5 Auto insurance in the United States
o 5.1 Coverage available
+ 5.1.1 Liability
# 5.1.1.1 Combined single limit
# 5.1.1.2 Split limits
+ 5.1.2 Collision
+ 5.1.3 Comprehensive
+ 5.1.4 Uninsured/underinsured coverage
+ 5.1.5 Loss of use
+ 5.1.6 Loan/lease payoff
+ 5.1.7 Towing
* 6 See also
* 7 Notes
[edit] Public policy
In many jurisdictions it is compulsory to have vehicle insurance before using or keeping a motor vehicle on public roads. Most jurisdictions relate insurance to both the car and the driver, however the degree of each varies greatly.
A 1994 study by Jeremy Jackson and Roger Blackman[1] showed, consistent with the risk homeostasis theory, that increased accident costs caused large and significant reductions in accident frequencies.
[edit] Australia
In South Australia, Third Party Personal insurance from the State Government Insurance Corporation (SGIC) is included in the licence registration fee for people over 16.
In Victoria, Third Party Personal insurance from the Transport Accident Commission is similarly included, through a levy, in the vehicle registration fee .
[edit] Canada
Several Canadian provinces (British Columbia, Saskatchewan, Manitoba and Quebec) provide a public auto insurance system while in the rest of the country insurance is provided privately. Basic auto insurance is mandatory throughout Canada with each province's government determining which benefits are included as minimum required auto insurance coverage and which benefits are options available for those seeking additional coverage. Accident benefits coverage is mandatory everywhere except for Newfoundland and Labrador. All provinces in Canada have some form of no-fault insurance available to accident victims. The difference from province to province is the extent to which tort or no-fault is emphasized.[2] Typically, coverage against loss of or damage to the driver's own vehicle is optional - one notable exception to this is in Saskatchewan, where SGI provides collision coverage (less than a $700 deductible, such as a collision damage waiver) as part of its basic insurance policy. In Saskatchewan, residents have the option to have their auto insurance through a tort system but less than 0.5% of the population have taken this option.[2]
[edit] South Africa
South Africa allocates a percentage of the money from petrol into the Road Accidents Fund, which goes towards compensating third parties in accidents.[3]
[edit] United Kingdom
In 1930, the UK government introduced a law that required every person who used a vehicle on the road to have at least third party personal injury insurance.
Today UK law is defined by the The Road Traffic Act 1988, which was last modified in 1991. The act requires that some motorists either be insured, have a security, or have made a specified deposit (£500,000 as of 1991) with the Accountant General of the Supreme Court, against their liability for injuries to others (including passengers) and for damage to other persons' property resulting from use of a vehicle on a public road or in other public places.
Insurance which satisfies the requirement of the act, for those who require cover, is called third party insurance. It is an offence to drive your car, or allow others to drive it, without at least third party insurance whilst on the public highway (or public place Section 143(1)(a) RTA 1988 as amended 1991); however, no such legislation applies on private land.
Vehicles which are exempted by the act, from the requirement to be covered, include those owned by certain: councils and local authorities, national park authorities, education authorities, police authorities, fire authorities, heath service bodies and security services.
The insurance certificate or cover note issued by the insurance company constitutes legal evidence that the vehicle specified on the document is indeed insured. The law says that an authorised person, such as the police, may require a driver to produce an insurance certificate for inspection. If the driver cannot show the document immediately on request, then the driver will usually be issued a HORT/1 with seven days, as of midnight of the date of issue, to take a valid insurance certificate (and usually other driving documents as well) to a police station of the driver's choice. Failure to produce an insurance certificate is an offence.
Insurance is more expensive in Northern Ireland than in other parts of the UK.
Most motorists in the UK are required to prominently display a vehicle licence (tax disc) on their vehicle when it is kept or driven on public roads. This helps to ensure that most people have adequate insurance on their vehicles because you are required to produce an insurance certificate when you purchase the disc. However it is a known practice for some people to purchase insurance to gain the certificate and then to cancel the insurance and gain a full refund within the statutory 14 day cooling off period.
The Motor Insurers Bureau compensates the victims of road accidents caused by uninsured and untraced motorists. It also operates the Motor Insurance Database, which contains details of every insured vehicle in the country.
[edit] United States
In the United States, auto insurance is compulsory in most states, though enforcement of the requirement varies from state to state. The state of New Hampshire, for example, does not require motorists to carry liability insurance (the ballpark model), while in Virginia residents must pay the state a $500 annual fee per vehicle if they choose not to buy liability insurance.[4] Penalties for not purchasing auto insurance vary by state, but often involve a substantial fine, license and/or registration suspension or revocation, as well as possible jail time in some states. Usually, the minimum required by law is third party insurance to protect third parties against the financial consequences of loss, damage or injury caused by a vehicle.
Arizona Department of Transportation Research Project Manager John Semmens has recommended that car insurers issue license plates, and that they be held responsible for the full cost of injuries and property damages caused by their licensees under the Disneyland model. Plates would expire at the end of the insurance coverage period, and licensees would need to return their plates to their insurance office in order to receive a refund on their premiums. Vehicles driving without insurance would thus be easy to spot because they would not have license plates, or the plates would be past the marked expiration date.[5]
NOTE: IT IS VERY IMPORTANT TO KNOW THE COVERAGE OF YOUR INSURANCE.
[edit] Coverage levels
Vehicle insurance can cover some or all of the following items:
* The insured party
* The insured vehicle
* Third parties (car and people)
Different policies specify the circumstances under which each item is covered. For example, a vehicle can be insured against theft, fire damage, or accident damage independently.
[edit] Excess
An excess payment, also known as a deductible, is the fixed contribution you must pay each time your car is repaired through your car insurance policy. Normally the payment is made directly to the accident repair "garage" (The term "garage" refers to an establishment where vehicles are serviced and repaired) when you collect the car. If one's car is declared to be a "write off" ("write off" is commonly used in motor insurance to describe a vehicle the worth of which is less than the cost of repair), the insurance company will deduct the excess agreed on the policy from the settlement payment it makes to you.
If the accident was the other driver's fault, and this is accepted by the third party's insurer, you'll be able to reclaim your excess payment from the other person's insurance company. If the other driver is uninsured, a policy's minimum limits include coverage for the uninsured/underinsured motorist(s) at fault.
[edit] Compulsory excess
A compulsory excess is the minimum excess payment your insurer will accept on your insurance policy. Minimum excesses vary according to your personal details, driving record and insurance company.
[edit] Voluntary excess
In order to reduce your insurance premium, you may offer to pay a higher excess than the compulsory excess demanded by your insurance company. Your voluntary excess is the extra amount over and above the compulsory excess that you agree to pay in the event of a claim on the policy. As a bigger excess reduces the financial risk carried by your insurer, your insurer is able to offer you a significantly lower premium.
[edit] Basis of premium charges
Main article: auto insurance risk selection
Depending on the jurisdiction, the insurance premium can be either mandated by the government or determined by the insurance company in accordance to a framework of regulations set by the government. Often, the insurer will have more freedom to set the price on physical damage coverages than on mandatory liability coverages.
When the premium is not mandated by the government, it is usually derived from the calculations of an actuary based on statistical data. The premium can vary depending on many factors that are believed to have an impact on the expected cost of future claims.[6] Those factors can include the car characteristics, the coverage selected (deductible, limit, covered perils), the profile of the driver (age, gender, driving history) and the usage of the car (commute to work or not, predicted annual distance driven).[7][8]
[edit] Gender
Men average more miles driven per year than women do, and have a proportionally higher accident involvement at all ages. Insurance companies cite women's lower accident involvement in keeping the youth surcharge lower for young women drivers than for their male counterparts, but adult rates are generally unisex. Reference to the lower rate for young women as "the women's discount" has caused confusion that was evident in news reports on a recently defeated EC proposal to make it illegal to consider gender in assessing insurance premiums.[9] Ending the discount would have made no difference to most women's premiums.
[edit] Age
Teenage drivers who have no driving record will have higher car insurance premiums. However young drivers are often offered discounts if they undertake further driver training on recognised courses, such as the Pass Plus scheme in the UK. In the U.S. many insurers offer a good grade discount to students with a good academic record and resident student discounts to those who live away from home. Generally insurance premiums tend to become lower at the age of 25. Senior drivers are often eligible for retirement discounts reflecting lower average miles driven by this age group.
[edit] Distance
Some car insurance plans do not differentiate in regard to how much the car is used. However, methods of differentiation would include:
[edit] Reasonable estimation
Several car insurance plans rely on a reasonable estimation of the average annual distance expected to be driven which is provided by the insured. This discount benefits drivers who drive their cars infrequently but has no actuarial value since it is unverified.
[edit] Odometer-based systems
Cents Per Mile Now[10](1986) advocates classified odometer-mile rates. After the company's risk factors have been applied and the customer has accepted the per-mile rate offered, customers buy prepaid miles of insurance protection as needed, like buying gallons of gasoline. Insurance automatically ends when the odometer limit (recorded on the car's insurance ID card) is reached unless more miles are bought. Customers keep track of miles on their own odometer to know when to buy more. The company does no after-the-fact billing of the customer, and the customer doesn't have to estimate a "future annual mileage" figure for the company to obtain a discount. In the event of a traffic stop, an officer could easily verify that the insurance is current by comparing the figure on the insurance card to that on the odometer.
Critics point out the possibility of cheating the system by odometer tampering. Although the newer electronic odometers are difficult to roll back, they can still be defeated by disconnecting the odometer wires and reconnecting them later. However, as the Cents Per Mile Now website points out:
As a practical matter, resetting odometers requires equipment plus expertise that makes stealing insurance risky and uneconomical. For example, in order to steal 20,000 miles of continuous protection while paying for only the 2,000 miles from 35,000 miles to 37,000 miles on the odometer, the resetting would have to be done at least nine times to keep the odometer reading within the narrow 2,000-mile covered range. There are also powerful legal deterrents to this way of stealing insurance protection. Odometers have always served as the measuring device for resale value, rental and leasing charges, warranty limits, mechanical breakdown insurance, and cents-per-mile tax deductions or reimbursements for business or government travel. Odometer tampering—detected during claim processing—voids the insurance and, under decades-old state and federal law, is punishable by heavy fines and jail.
Under the cents-per-mile system, rewards for driving less are delivered automatically without need for administratively cumbersome and costly GPS technology. Uniform per-mile exposure measurement for the first time provides the basis for statistically valid rate classes. Insurer premium income automatically keeps pace with increases or decreases in driving activity, cutting back on resulting insurer demand for rate increases and preventing today's windfalls to insurers when decreased driving activity lowers costs but not premiums.
[edit] GPS-based system
In 1998, Progressive Insurance started a pilot program in Texas in which drivers received a discount for installing a GPS-based device that tracked their driving behavior and reported the results via cellular phone to the company.[11] Policyholders were reportedly more upset about having to pay for the expensive device than they were over privacy concerns.[12]
[edit] OBDII-based system
In 2004, Progressive launched another pilot program to allow policyholders to earn a discount on their premiums by consenting to use its TripSense device. TripSense connects to a car's OnBoard Diagnostic(OBD-II) port, which exists in all cars built after 1996. The discount is forfeited if the device is disconnected for a significant amount of time.[13]
[edit] Auto insurance in the United States
[edit] Coverage available
The consumer may be protected with different coverage types depending on what coverage the insured purchases. Some states require that motorists carry minimum levels of auto insurance coverage in order to ensure that its drivers can cover the cost of damages to people or property in the event of an automobile accident. Some states, such as Wisconsin, have more flexible "proof of financial responsibility" requirements.[14]
In the United States, liability insurance covers claims against the policy holder and generally, any other operator of the insured vehicles provided, do not live at the same address as the policy holder, and are not specifically excluded on the policy. In the case of those living at the same address, they must specifically be covered on the policy. Thus it is necessary for example, when a family member comes of driving age they must be added on to the policy. Liability insurance sometimes does not protect the policy holder if they operate any vehicles other than their own. When you drive a vehicle owned by another party, you are covered under that party's policy. Non-owners policies may be offered that would cover an insured on any vehicle they drive. This coverage is available only to those who do not own their own vehicle and is sometimes required by the government for drivers who have previously been found at fault in an accident.
Generally, liability coverage extends when you rent a car. Comprehensive policies ("full coverage") usually also apply to the rental vehicle, although this should be verified beforehand. Full coverage premiums are based on, among other factors, the value of the insured's vehicle. This coverage, however, cannot apply to rental cars because the insurance company does not want to assume responsibility for a claim greater than the value of the insured's vehicle, assuming that a rental car may be worth more than the insured's vehicle. Most rental car companies offer insurance to cover damage to the rental vehicle. These policies may be unnecessary for many customers as credit card companies, such as Visa and MasterCard, now provide supplemental collision damage coverage to rental cars if the transaction is processed using one of their cards. These benefits are restrictive in terms of the types of vehicles covered.[15]
NOTE: IT IS EQUALLY IMPORTANT TO KNOW YOUR LIABILITIES AND OPTIONS.
[edit] Liability
Liability coverage provides up to a fixed dollar amount of coverage for damages that an insured driver becomes legally liable to pay due to an accident or other negligence. For example, if an insured driver drives into a telephone pole and damages the pole, liability coverage pays for the damage to the pole. In this example, the drivers insured may also become liable for other expenses related to damaging the telephone pole, such as loss of service claims (by the telephone company).
Liability coverage is available either as a combined single limit policy, or as a split limit policy:
[edit] Combined single limit
A combined single limit combines property damage liability coverage and bodily injury coverage under one single combined limit. For example, an insured driver with a combine single liability limit strikes another vehicle and injures the driver and the passenger. Payments for the damages to the other driver's car, as well as payments for injury claims for the driver and passenger, would be paid out under this same coverage.
[edit] Split limits
A split limit liability coverage policy splits the coverages into property damage coverage and bodily injury coverage. In the example given above, payments for the other driver's vehicle would be paid out under property damage coverage, and payments for the injuries would be paid out under bodily injury coverage.
Bodily injury liability coverage is also usually split as well into a maximum payment per person and a maximum payment per accident.
[edit] Collision
Collision coverage provides coverage for an insured's vehicle that is involved in an accident, subject to a deductible. This coverage is designed to provide payments to repair the damaged vehicle, or payment of the cash value of the vehicle if it is not repairable. Collision coverage is optional. Collision Damage Waiver (CDW) is the term used by rental car companies for collision coverage.
[edit] Comprehensive
Comprehensive (a.k.a. - Other Than Collision) coverage provides coverage, subject to a deductible, for an insured's vehicle that is damaged by incidents that are not considered Collisions. For example, fire, theft (or attempted theft), vandalism, weather, or impacts with animals are types of Comprehensive losses.
[edit] Uninsured/underinsured coverage
Underinsured coverage, also known as UM/UIM, provides coverage if another at-fault party either does not have insurance, or does not have enough insurance. In effect, your insurance company pays as would the at fault party's insurance company for your damages, Then would subrogate from the at fault party.
In the United States, the definition of an uninsured/underinsured motorist, and corresponding coverages, are set by state laws.
[edit] Loss of use
Loss of use coverage, also known as rental coverage, provides reimbursement for rental expenses associated with having an insured vehicle repaired due to a covered loss.
[edit] Loan/lease payoff
Loan/lease payoff coverage, also known as GAP coverage or GAP insurance,[16][17] was established in the early 1980s to provide protection to consumers based upon buying and market trends.
Due to the sharp decline in value immediately following purchase, there is generally a period in which the amount owed on the car loan exceeds the value of the vehicle, which is called "upside-down" or negative equity. Thus, if the vehicle is damaged beyond economical repair at this point, the owner will still owe potentially thousands of dollars on the loan. The escalating price of cars, longer-term auto loans, and the increasing popularity of leasing gave birth to GAP protection. GAP waivers provide protection for consumers when a "gap" exists between the actual value of their vehicle and the amount of money owed to the bank or leasing company. In many instances, this insurance will also pay the deductible on the primary insurance policy. These policies are often offered at the auto dealership as a comparatively low cost add on that can be put into the car loan which provides coverage for the duration of the loan.
Consumers should be aware that a few states, including New York, require lenders of leased cars to include GAP insurance within the cost of the lease itself. This means that the monthly price quoted by the dealer must include GAP insurance, whether it is delineated or not. Nevertheless, unscrupulous dealers sometimes prey on unsuspecting individuals by offering them GAP insurance at an additional price, on top of the monthly payment, without mentioning the State's requirements.
In addition, some vendors and insurance companies offer what is called "Total Loss Coverage." This is similar to ordinary GAP insurance but differs in that instead of paying off the negative equity on a vehicle that is a total loss, the policy provides a certain amount, usually up to $5000, toward the purchase or lease of a new vehicle. Thus, to some extent the distinction makes no difference, i.e., in either case the owner receives a certain sum of money. However, in choosing which type of policy to purchase, the owner should consider whether, in case of a total loss, it is more advantageous for him or her to have the policy pay off the negative equity or provide a down payment on a new vehicle.
For example, assuming a total loss of a vehicle valued at $15,000, but on which the owner owes $20,000, is the "gap" of $5000. If the owner has traditional GAP coverage, the "gap" will be wiped out and he or she may purchase or lease another vehicle or choose not to. If the owner has "Total Loss Coverage," he or she will have to personally cover the "gap" of $5000, and then receive $5000 toward the purchase or lease of a new vehicle, thereby either reducing monthly payments, in the case of financing or leasing, or the total purchase price in the case of outright purchasing. So the decision on which type of policy to purchase will, in most instances, be informed by whether the owner can pay off the negative equity in case of a total loss and/or whether he or she will definitively purchase a replacement vehicle.
[edit] Towing
Car towing coverage is also known as Roadside Assistance coverage. Traditionally, automobile insurance companies have agreed to only pay for the cost of a tow that is related to an accident that is covered under the automobile policy of insurance. This had left a gap in coverage for tows that are related to mechanical breakdowns, flat tires and gas outages. To fill that void, insurance companies started to offer the car towing coverage, which pays for non-accident related tows.
[edit] See also
* Alcohol exclusion laws
* Breakdown
* Extended coverage
* Insurance Information and Enforcement System
* No fault insurance
* Omnibus clause
* Public auto insurance
[edit] Notes
1. ^ Jackson JSH, Blackman R (1994). "A driving-simulator test of Wilde's risk homeostasis theory". Journal of Applied Psychology.
2. ^ a b Insurance Bureau of Canada
3. ^ Petrol Structure (HTML). Department of Minerals and Energy, South Africa. Retrieved on 2006-05-11.
4. ^ Virginia Insurance Requirements (HTML). Virginia Department of Motor Vehicles. Retrieved on 2007-11-15.
5. ^ Semmens, John. "Improving Road Safety by Privatizing Vehicle and Driver Testing and Licensing", Street Smart: Competition, Entrepreneurship and the Future of Roads.
6. ^ McClenahan, Charles. Ratemaking (PDF). Casualty Actuarial Society. Retrieved on 2006-05-11.
7. ^ What determines the price of my policy? (HTML). Insurance Information Institute. Retrieved on 2006-05-11.
8. ^ How Are Auto Insurance Rates Calculated? (HTML). Countrywide Insurance Services. Retrieved on 2006-05-11.
9. ^ "Women drivers' insurance threat" (HTML), BBC. Retrieved on 2006-09-05.
10. ^ Cents Per Mile Now (HTML). Retrieved on 2006-05-11.
11. ^ Progressive's "pay-as-you-drive" auto insurance poised for wide rollout (HTML). insure.com. Retrieved on 2006-05-11.
12. ^ Insurance program rewards drivers who drive less and slower (HTML). Aftermarket Business. Retrieved on 2006-05-11.
13. ^ New technology provides detailed info on driving habits (HTML). Minnesota Public Radio. Retrieved on 2006-05-11.
14. ^ Wisconsin Department of Transportation (2008-02-29). Chapter 344: Vehicles — Financial Responsibility (PDF). Wisconsin Statutes Database. Retrieved on 2008-04-04.
15. ^ Auto Rental Collision Damage Waiver Program Personal (HTML). Visa USA. Retrieved on 2006-05-11.
16. ^ Buying or Leasing a Car: What you should know (HTML). State of New York Banking Department. Retrieved on 2007-01-17.
17. ^ GAP Insurance (HTML). Washington State Office of the Insurance Commissioner. Retrieved on 2007-01-16.
Retrieved from "http://en.wikipedia.org/wiki/Vehicle_insurance"
Categories: Insurance | Types of insurance | Vehicle insurance
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Vehicle insurance
From Wikipedia, the free encyclopedia
(Redirected from Auto insurance)
Jump to: navigation, search
Vehicle insurance (also known as auto insurance, car insurance, or motor insurance) is insurance purchased for cars, trucks, and other vehicles. Its primary use is to provide protection against losses incurred as a result of traffic accidents and against liability that could be incurred in an accident.
NOTE: AUTO INSURANCE HAS BEEN A PREREQUISITE IN PURCHASING A VEHICLE.
Contents
[hide]
* 1 Public policy
o 1.1 Australia
o 1.2 Canada
o 1.3 South Africa
o 1.4 United Kingdom
o 1.5 United States
* 2 Coverage levels
* 3 Excess
o 3.1 Compulsory excess
o 3.2 Voluntary excess
* 4 Basis of premium charges
o 4.1 Gender
o 4.2 Age
o 4.3 Distance
+ 4.3.1 Reasonable estimation
+ 4.3.2 Odometer-based systems
+ 4.3.3 GPS-based system
+ 4.3.4 OBDII-based system
* 5 Auto insurance in the United States
o 5.1 Coverage available
+ 5.1.1 Liability
# 5.1.1.1 Combined single limit
# 5.1.1.2 Split limits
+ 5.1.2 Collision
+ 5.1.3 Comprehensive
+ 5.1.4 Uninsured/underinsured coverage
+ 5.1.5 Loss of use
+ 5.1.6 Loan/lease payoff
+ 5.1.7 Towing
* 6 See also
* 7 Notes
[edit] Public policy
In many jurisdictions it is compulsory to have vehicle insurance before using or keeping a motor vehicle on public roads. Most jurisdictions relate insurance to both the car and the driver, however the degree of each varies greatly.
A 1994 study by Jeremy Jackson and Roger Blackman[1] showed, consistent with the risk homeostasis theory, that increased accident costs caused large and significant reductions in accident frequencies.
[edit] Australia
In South Australia, Third Party Personal insurance from the State Government Insurance Corporation (SGIC) is included in the licence registration fee for people over 16.
In Victoria, Third Party Personal insurance from the Transport Accident Commission is similarly included, through a levy, in the vehicle registration fee .
[edit] Canada
Several Canadian provinces (British Columbia, Saskatchewan, Manitoba and Quebec) provide a public auto insurance system while in the rest of the country insurance is provided privately. Basic auto insurance is mandatory throughout Canada with each province's government determining which benefits are included as minimum required auto insurance coverage and which benefits are options available for those seeking additional coverage. Accident benefits coverage is mandatory everywhere except for Newfoundland and Labrador. All provinces in Canada have some form of no-fault insurance available to accident victims. The difference from province to province is the extent to which tort or no-fault is emphasized.[2] Typically, coverage against loss of or damage to the driver's own vehicle is optional - one notable exception to this is in Saskatchewan, where SGI provides collision coverage (less than a $700 deductible, such as a collision damage waiver) as part of its basic insurance policy. In Saskatchewan, residents have the option to have their auto insurance through a tort system but less than 0.5% of the population have taken this option.[2]
[edit] South Africa
South Africa allocates a percentage of the money from petrol into the Road Accidents Fund, which goes towards compensating third parties in accidents.[3]
[edit] United Kingdom
In 1930, the UK government introduced a law that required every person who used a vehicle on the road to have at least third party personal injury insurance.
Today UK law is defined by the The Road Traffic Act 1988, which was last modified in 1991. The act requires that some motorists either be insured, have a security, or have made a specified deposit (£500,000 as of 1991) with the Accountant General of the Supreme Court, against their liability for injuries to others (including passengers) and for damage to other persons' property resulting from use of a vehicle on a public road or in other public places.
Insurance which satisfies the requirement of the act, for those who require cover, is called third party insurance. It is an offence to drive your car, or allow others to drive it, without at least third party insurance whilst on the public highway (or public place Section 143(1)(a) RTA 1988 as amended 1991); however, no such legislation applies on private land.
Vehicles which are exempted by the act, from the requirement to be covered, include those owned by certain: councils and local authorities, national park authorities, education authorities, police authorities, fire authorities, heath service bodies and security services.
The insurance certificate or cover note issued by the insurance company constitutes legal evidence that the vehicle specified on the document is indeed insured. The law says that an authorised person, such as the police, may require a driver to produce an insurance certificate for inspection. If the driver cannot show the document immediately on request, then the driver will usually be issued a HORT/1 with seven days, as of midnight of the date of issue, to take a valid insurance certificate (and usually other driving documents as well) to a police station of the driver's choice. Failure to produce an insurance certificate is an offence.
Insurance is more expensive in Northern Ireland than in other parts of the UK.
Most motorists in the UK are required to prominently display a vehicle licence (tax disc) on their vehicle when it is kept or driven on public roads. This helps to ensure that most people have adequate insurance on their vehicles because you are required to produce an insurance certificate when you purchase the disc. However it is a known practice for some people to purchase insurance to gain the certificate and then to cancel the insurance and gain a full refund within the statutory 14 day cooling off period.
The Motor Insurers Bureau compensates the victims of road accidents caused by uninsured and untraced motorists. It also operates the Motor Insurance Database, which contains details of every insured vehicle in the country.
[edit] United States
In the United States, auto insurance is compulsory in most states, though enforcement of the requirement varies from state to state. The state of New Hampshire, for example, does not require motorists to carry liability insurance (the ballpark model), while in Virginia residents must pay the state a $500 annual fee per vehicle if they choose not to buy liability insurance.[4] Penalties for not purchasing auto insurance vary by state, but often involve a substantial fine, license and/or registration suspension or revocation, as well as possible jail time in some states. Usually, the minimum required by law is third party insurance to protect third parties against the financial consequences of loss, damage or injury caused by a vehicle.
Arizona Department of Transportation Research Project Manager John Semmens has recommended that car insurers issue license plates, and that they be held responsible for the full cost of injuries and property damages caused by their licensees under the Disneyland model. Plates would expire at the end of the insurance coverage period, and licensees would need to return their plates to their insurance office in order to receive a refund on their premiums. Vehicles driving without insurance would thus be easy to spot because they would not have license plates, or the plates would be past the marked expiration date.[5]
NOTE: IT IS VERY IMPORTANT TO KNOW THE COVERAGE OF YOUR INSURANCE.
[edit] Coverage levels
Vehicle insurance can cover some or all of the following items:
* The insured party
* The insured vehicle
* Third parties (car and people)
Different policies specify the circumstances under which each item is covered. For example, a vehicle can be insured against theft, fire damage, or accident damage independently.
[edit] Excess
An excess payment, also known as a deductible, is the fixed contribution you must pay each time your car is repaired through your car insurance policy. Normally the payment is made directly to the accident repair "garage" (The term "garage" refers to an establishment where vehicles are serviced and repaired) when you collect the car. If one's car is declared to be a "write off" ("write off" is commonly used in motor insurance to describe a vehicle the worth of which is less than the cost of repair), the insurance company will deduct the excess agreed on the policy from the settlement payment it makes to you.
If the accident was the other driver's fault, and this is accepted by the third party's insurer, you'll be able to reclaim your excess payment from the other person's insurance company. If the other driver is uninsured, a policy's minimum limits include coverage for the uninsured/underinsured motorist(s) at fault.
[edit] Compulsory excess
A compulsory excess is the minimum excess payment your insurer will accept on your insurance policy. Minimum excesses vary according to your personal details, driving record and insurance company.
[edit] Voluntary excess
In order to reduce your insurance premium, you may offer to pay a higher excess than the compulsory excess demanded by your insurance company. Your voluntary excess is the extra amount over and above the compulsory excess that you agree to pay in the event of a claim on the policy. As a bigger excess reduces the financial risk carried by your insurer, your insurer is able to offer you a significantly lower premium.
[edit] Basis of premium charges
Main article: auto insurance risk selection
Depending on the jurisdiction, the insurance premium can be either mandated by the government or determined by the insurance company in accordance to a framework of regulations set by the government. Often, the insurer will have more freedom to set the price on physical damage coverages than on mandatory liability coverages.
When the premium is not mandated by the government, it is usually derived from the calculations of an actuary based on statistical data. The premium can vary depending on many factors that are believed to have an impact on the expected cost of future claims.[6] Those factors can include the car characteristics, the coverage selected (deductible, limit, covered perils), the profile of the driver (age, gender, driving history) and the usage of the car (commute to work or not, predicted annual distance driven).[7][8]
[edit] Gender
Men average more miles driven per year than women do, and have a proportionally higher accident involvement at all ages. Insurance companies cite women's lower accident involvement in keeping the youth surcharge lower for young women drivers than for their male counterparts, but adult rates are generally unisex. Reference to the lower rate for young women as "the women's discount" has caused confusion that was evident in news reports on a recently defeated EC proposal to make it illegal to consider gender in assessing insurance premiums.[9] Ending the discount would have made no difference to most women's premiums.
[edit] Age
Teenage drivers who have no driving record will have higher car insurance premiums. However young drivers are often offered discounts if they undertake further driver training on recognised courses, such as the Pass Plus scheme in the UK. In the U.S. many insurers offer a good grade discount to students with a good academic record and resident student discounts to those who live away from home. Generally insurance premiums tend to become lower at the age of 25. Senior drivers are often eligible for retirement discounts reflecting lower average miles driven by this age group.
[edit] Distance
Some car insurance plans do not differentiate in regard to how much the car is used. However, methods of differentiation would include:
[edit] Reasonable estimation
Several car insurance plans rely on a reasonable estimation of the average annual distance expected to be driven which is provided by the insured. This discount benefits drivers who drive their cars infrequently but has no actuarial value since it is unverified.
[edit] Odometer-based systems
Cents Per Mile Now[10](1986) advocates classified odometer-mile rates. After the company's risk factors have been applied and the customer has accepted the per-mile rate offered, customers buy prepaid miles of insurance protection as needed, like buying gallons of gasoline. Insurance automatically ends when the odometer limit (recorded on the car's insurance ID card) is reached unless more miles are bought. Customers keep track of miles on their own odometer to know when to buy more. The company does no after-the-fact billing of the customer, and the customer doesn't have to estimate a "future annual mileage" figure for the company to obtain a discount. In the event of a traffic stop, an officer could easily verify that the insurance is current by comparing the figure on the insurance card to that on the odometer.
Critics point out the possibility of cheating the system by odometer tampering. Although the newer electronic odometers are difficult to roll back, they can still be defeated by disconnecting the odometer wires and reconnecting them later. However, as the Cents Per Mile Now website points out:
As a practical matter, resetting odometers requires equipment plus expertise that makes stealing insurance risky and uneconomical. For example, in order to steal 20,000 miles of continuous protection while paying for only the 2,000 miles from 35,000 miles to 37,000 miles on the odometer, the resetting would have to be done at least nine times to keep the odometer reading within the narrow 2,000-mile covered range. There are also powerful legal deterrents to this way of stealing insurance protection. Odometers have always served as the measuring device for resale value, rental and leasing charges, warranty limits, mechanical breakdown insurance, and cents-per-mile tax deductions or reimbursements for business or government travel. Odometer tampering—detected during claim processing—voids the insurance and, under decades-old state and federal law, is punishable by heavy fines and jail.
Under the cents-per-mile system, rewards for driving less are delivered automatically without need for administratively cumbersome and costly GPS technology. Uniform per-mile exposure measurement for the first time provides the basis for statistically valid rate classes. Insurer premium income automatically keeps pace with increases or decreases in driving activity, cutting back on resulting insurer demand for rate increases and preventing today's windfalls to insurers when decreased driving activity lowers costs but not premiums.
[edit] GPS-based system
In 1998, Progressive Insurance started a pilot program in Texas in which drivers received a discount for installing a GPS-based device that tracked their driving behavior and reported the results via cellular phone to the company.[11] Policyholders were reportedly more upset about having to pay for the expensive device than they were over privacy concerns.[12]
[edit] OBDII-based system
In 2004, Progressive launched another pilot program to allow policyholders to earn a discount on their premiums by consenting to use its TripSense device. TripSense connects to a car's OnBoard Diagnostic(OBD-II) port, which exists in all cars built after 1996. The discount is forfeited if the device is disconnected for a significant amount of time.[13]
[edit] Auto insurance in the United States
[edit] Coverage available
The consumer may be protected with different coverage types depending on what coverage the insured purchases. Some states require that motorists carry minimum levels of auto insurance coverage in order to ensure that its drivers can cover the cost of damages to people or property in the event of an automobile accident. Some states, such as Wisconsin, have more flexible "proof of financial responsibility" requirements.[14]
In the United States, liability insurance covers claims against the policy holder and generally, any other operator of the insured vehicles provided, do not live at the same address as the policy holder, and are not specifically excluded on the policy. In the case of those living at the same address, they must specifically be covered on the policy. Thus it is necessary for example, when a family member comes of driving age they must be added on to the policy. Liability insurance sometimes does not protect the policy holder if they operate any vehicles other than their own. When you drive a vehicle owned by another party, you are covered under that party's policy. Non-owners policies may be offered that would cover an insured on any vehicle they drive. This coverage is available only to those who do not own their own vehicle and is sometimes required by the government for drivers who have previously been found at fault in an accident.
Generally, liability coverage extends when you rent a car. Comprehensive policies ("full coverage") usually also apply to the rental vehicle, although this should be verified beforehand. Full coverage premiums are based on, among other factors, the value of the insured's vehicle. This coverage, however, cannot apply to rental cars because the insurance company does not want to assume responsibility for a claim greater than the value of the insured's vehicle, assuming that a rental car may be worth more than the insured's vehicle. Most rental car companies offer insurance to cover damage to the rental vehicle. These policies may be unnecessary for many customers as credit card companies, such as Visa and MasterCard, now provide supplemental collision damage coverage to rental cars if the transaction is processed using one of their cards. These benefits are restrictive in terms of the types of vehicles covered.[15]
NOTE: IT IS EQUALLY IMPORTANT TO KNOW YOUR LIABILITIES AND OPTIONS.
[edit] Liability
Liability coverage provides up to a fixed dollar amount of coverage for damages that an insured driver becomes legally liable to pay due to an accident or other negligence. For example, if an insured driver drives into a telephone pole and damages the pole, liability coverage pays for the damage to the pole. In this example, the drivers insured may also become liable for other expenses related to damaging the telephone pole, such as loss of service claims (by the telephone company).
Liability coverage is available either as a combined single limit policy, or as a split limit policy:
[edit] Combined single limit
A combined single limit combines property damage liability coverage and bodily injury coverage under one single combined limit. For example, an insured driver with a combine single liability limit strikes another vehicle and injures the driver and the passenger. Payments for the damages to the other driver's car, as well as payments for injury claims for the driver and passenger, would be paid out under this same coverage.
[edit] Split limits
A split limit liability coverage policy splits the coverages into property damage coverage and bodily injury coverage. In the example given above, payments for the other driver's vehicle would be paid out under property damage coverage, and payments for the injuries would be paid out under bodily injury coverage.
Bodily injury liability coverage is also usually split as well into a maximum payment per person and a maximum payment per accident.
[edit] Collision
Collision coverage provides coverage for an insured's vehicle that is involved in an accident, subject to a deductible. This coverage is designed to provide payments to repair the damaged vehicle, or payment of the cash value of the vehicle if it is not repairable. Collision coverage is optional. Collision Damage Waiver (CDW) is the term used by rental car companies for collision coverage.
[edit] Comprehensive
Comprehensive (a.k.a. - Other Than Collision) coverage provides coverage, subject to a deductible, for an insured's vehicle that is damaged by incidents that are not considered Collisions. For example, fire, theft (or attempted theft), vandalism, weather, or impacts with animals are types of Comprehensive losses.
[edit] Uninsured/underinsured coverage
Underinsured coverage, also known as UM/UIM, provides coverage if another at-fault party either does not have insurance, or does not have enough insurance. In effect, your insurance company pays as would the at fault party's insurance company for your damages, Then would subrogate from the at fault party.
In the United States, the definition of an uninsured/underinsured motorist, and corresponding coverages, are set by state laws.
[edit] Loss of use
Loss of use coverage, also known as rental coverage, provides reimbursement for rental expenses associated with having an insured vehicle repaired due to a covered loss.
[edit] Loan/lease payoff
Loan/lease payoff coverage, also known as GAP coverage or GAP insurance,[16][17] was established in the early 1980s to provide protection to consumers based upon buying and market trends.
Due to the sharp decline in value immediately following purchase, there is generally a period in which the amount owed on the car loan exceeds the value of the vehicle, which is called "upside-down" or negative equity. Thus, if the vehicle is damaged beyond economical repair at this point, the owner will still owe potentially thousands of dollars on the loan. The escalating price of cars, longer-term auto loans, and the increasing popularity of leasing gave birth to GAP protection. GAP waivers provide protection for consumers when a "gap" exists between the actual value of their vehicle and the amount of money owed to the bank or leasing company. In many instances, this insurance will also pay the deductible on the primary insurance policy. These policies are often offered at the auto dealership as a comparatively low cost add on that can be put into the car loan which provides coverage for the duration of the loan.
Consumers should be aware that a few states, including New York, require lenders of leased cars to include GAP insurance within the cost of the lease itself. This means that the monthly price quoted by the dealer must include GAP insurance, whether it is delineated or not. Nevertheless, unscrupulous dealers sometimes prey on unsuspecting individuals by offering them GAP insurance at an additional price, on top of the monthly payment, without mentioning the State's requirements.
In addition, some vendors and insurance companies offer what is called "Total Loss Coverage." This is similar to ordinary GAP insurance but differs in that instead of paying off the negative equity on a vehicle that is a total loss, the policy provides a certain amount, usually up to $5000, toward the purchase or lease of a new vehicle. Thus, to some extent the distinction makes no difference, i.e., in either case the owner receives a certain sum of money. However, in choosing which type of policy to purchase, the owner should consider whether, in case of a total loss, it is more advantageous for him or her to have the policy pay off the negative equity or provide a down payment on a new vehicle.
For example, assuming a total loss of a vehicle valued at $15,000, but on which the owner owes $20,000, is the "gap" of $5000. If the owner has traditional GAP coverage, the "gap" will be wiped out and he or she may purchase or lease another vehicle or choose not to. If the owner has "Total Loss Coverage," he or she will have to personally cover the "gap" of $5000, and then receive $5000 toward the purchase or lease of a new vehicle, thereby either reducing monthly payments, in the case of financing or leasing, or the total purchase price in the case of outright purchasing. So the decision on which type of policy to purchase will, in most instances, be informed by whether the owner can pay off the negative equity in case of a total loss and/or whether he or she will definitively purchase a replacement vehicle.
[edit] Towing
Car towing coverage is also known as Roadside Assistance coverage. Traditionally, automobile insurance companies have agreed to only pay for the cost of a tow that is related to an accident that is covered under the automobile policy of insurance. This had left a gap in coverage for tows that are related to mechanical breakdowns, flat tires and gas outages. To fill that void, insurance companies started to offer the car towing coverage, which pays for non-accident related tows.
[edit] See also
* Alcohol exclusion laws
* Breakdown
* Extended coverage
* Insurance Information and Enforcement System
* No fault insurance
* Omnibus clause
* Public auto insurance
[edit] Notes
1. ^ Jackson JSH, Blackman R (1994). "A driving-simulator test of Wilde's risk homeostasis theory". Journal of Applied Psychology.
2. ^ a b Insurance Bureau of Canada
3. ^ Petrol Structure (HTML). Department of Minerals and Energy, South Africa. Retrieved on 2006-05-11.
4. ^ Virginia Insurance Requirements (HTML). Virginia Department of Motor Vehicles. Retrieved on 2007-11-15.
5. ^ Semmens, John. "Improving Road Safety by Privatizing Vehicle and Driver Testing and Licensing", Street Smart: Competition, Entrepreneurship and the Future of Roads.
6. ^ McClenahan, Charles. Ratemaking (PDF). Casualty Actuarial Society. Retrieved on 2006-05-11.
7. ^ What determines the price of my policy? (HTML). Insurance Information Institute. Retrieved on 2006-05-11.
8. ^ How Are Auto Insurance Rates Calculated? (HTML). Countrywide Insurance Services. Retrieved on 2006-05-11.
9. ^ "Women drivers' insurance threat" (HTML), BBC. Retrieved on 2006-09-05.
10. ^ Cents Per Mile Now (HTML). Retrieved on 2006-05-11.
11. ^ Progressive's "pay-as-you-drive" auto insurance poised for wide rollout (HTML). insure.com. Retrieved on 2006-05-11.
12. ^ Insurance program rewards drivers who drive less and slower (HTML). Aftermarket Business. Retrieved on 2006-05-11.
13. ^ New technology provides detailed info on driving habits (HTML). Minnesota Public Radio. Retrieved on 2006-05-11.
14. ^ Wisconsin Department of Transportation (2008-02-29). Chapter 344: Vehicles — Financial Responsibility (PDF). Wisconsin Statutes Database. Retrieved on 2008-04-04.
15. ^ Auto Rental Collision Damage Waiver Program Personal (HTML). Visa USA. Retrieved on 2006-05-11.
16. ^ Buying or Leasing a Car: What you should know (HTML). State of New York Banking Department. Retrieved on 2007-01-17.
17. ^ GAP Insurance (HTML). Washington State Office of the Insurance Commissioner. Retrieved on 2007-01-16.
Retrieved from "http://en.wikipedia.org/wiki/Vehicle_insurance"
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Wednesday, July 2, 2008
NAMIBIA: LIFE INSURANCE, RIP-OFF OR PAY-OFF?
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Namibia: Life Insurance, Rip-Off Or Pay-Off?
The Namibian (Windhoek)
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The Namibian (Windhoek)
COLUMN
30 June 2008
Posted to the web 30 June 2008
Windhoek
Seeing the value in life insurance is often, as is the case with many intangible goods, somewhat difficult at first glance.
For example, life insurance that pays out when the insured life dies. Many people believe they will never get anything back in return for their premiums. A closer look, however, quickly shows that this is not true.
NOTE: STUDY OF LIFE INSURANCE IS HIGHLY RECOMMENDED.
In qualifying this statement, it is important to take into account that life cover generally takes on one of two forms - the one form is term insurance which will only pay out the contracted life cover should the person whose life is insured die within the agreed time period for which the cover is taken out.
The other form is whole life insurance which pays out the contracted life cover at whatever point in time the life insured dies.
It is thus clear that if a whole life policy is maintained, at some future time there will be a payoff.
The premium payable for term cover is less than for whole life cover, all other things being equal.
Whether you select a term insurance option or a whole life insurance option should be determined by the need you are attempting to address - if life cover is only needed for a very specific period of time (e.g. for bond cover where it is known in what period the bond will be repaid and there is no additional need for life cover after repayment of the bond) term cover might suffice, but as a general rule it is better and wiser to take out whole life cover.
NOTE: IT IS ALSO IMPORTANT TO LISTEN TO STORIES OF THOSE WHO GOT INSURANCE.
A short example to illustrate the value of taking out whole life insurance is outlined below: Joe is a 35 year old male accountant with a wife and two children.
Joe's financial adviser has done a capital needs analysis for him, from which it is evident that Joe's dependants would require N$1 million capital to replace the loss of income his family would suffer should he die today.
A quotation for N$1 million whole life cover on Joe's life with a level premium shows that Joe would have to pay N$ 261,00 per month for the required cover.
Joe is interested in knowing if, should he decide not to take out the life cover and instead invest the premium he would have paid towards the life cover, what returns he would need to get on his investment to be in the same position.
This situation is outlined in the following table: Monthly Return needed Dies at Age Premium to equal Paid life cover 40 (5 years on) 261,00 123,62% 45 (10 years on) 261,00 51,8% 55 (20 years on) 261,00 21,26% 65 (30 years on) 261,00 12,37% 75 (40 years on) 261,00 8,3% It is therefore clear that even if the life cover is looked at as an investment that will last for Joe's expected lifetime, it still delivers a competitive return. Whilst the return generated by life insurance is one important aspect when considering the value for money of life insurance, there is also another very important aspect to consider - the fact that nobody is exactly sure when he/she is going to die.
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This is where life cover really offers a cost effective solution to create the capital needed by the life insured's dependants. If, in our example, Joe should die in a car accident three months after having taken out his life insurance, he would receive N$1 million in return for total premiums paid of N$783,00 - a very sound investment indeed! A different way of looking at this is to say that Old Mutual in return for N$261,00 per month carries the risk of Joe dying prematurely, instead of Joe's family having to carry that risk.
NOTE: LIFE INSURANCE IS INDEED A WISE INVESTMENT SPECIALLY THOSE WITH DEPENDENTS.
From what we have highlighted above it is obvious that to extract maximum value from your insurance portfolio, your portfolio needs to be based on a proper analysis of your needs.
These needs must be reviewed regularly. For further information and advice tailored to suit your unique needs, please call your Old Mutual Namibia financial adviser or broker -This article was contributed by Mathys du Preez (Manager: Retail Advice) Centre - Old Mutual Namibia
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Namibia: Life Insurance, Rip-Off Or Pay-Off?
The Namibian (Windhoek)
Email This Page
Print This Page
Comment on this article
The Namibian (Windhoek)
COLUMN
30 June 2008
Posted to the web 30 June 2008
Windhoek
Seeing the value in life insurance is often, as is the case with many intangible goods, somewhat difficult at first glance.
For example, life insurance that pays out when the insured life dies. Many people believe they will never get anything back in return for their premiums. A closer look, however, quickly shows that this is not true.
NOTE: STUDY OF LIFE INSURANCE IS HIGHLY RECOMMENDED.
In qualifying this statement, it is important to take into account that life cover generally takes on one of two forms - the one form is term insurance which will only pay out the contracted life cover should the person whose life is insured die within the agreed time period for which the cover is taken out.
The other form is whole life insurance which pays out the contracted life cover at whatever point in time the life insured dies.
It is thus clear that if a whole life policy is maintained, at some future time there will be a payoff.
The premium payable for term cover is less than for whole life cover, all other things being equal.
Whether you select a term insurance option or a whole life insurance option should be determined by the need you are attempting to address - if life cover is only needed for a very specific period of time (e.g. for bond cover where it is known in what period the bond will be repaid and there is no additional need for life cover after repayment of the bond) term cover might suffice, but as a general rule it is better and wiser to take out whole life cover.
NOTE: IT IS ALSO IMPORTANT TO LISTEN TO STORIES OF THOSE WHO GOT INSURANCE.
A short example to illustrate the value of taking out whole life insurance is outlined below: Joe is a 35 year old male accountant with a wife and two children.
Joe's financial adviser has done a capital needs analysis for him, from which it is evident that Joe's dependants would require N$1 million capital to replace the loss of income his family would suffer should he die today.
A quotation for N$1 million whole life cover on Joe's life with a level premium shows that Joe would have to pay N$ 261,00 per month for the required cover.
Joe is interested in knowing if, should he decide not to take out the life cover and instead invest the premium he would have paid towards the life cover, what returns he would need to get on his investment to be in the same position.
This situation is outlined in the following table: Monthly Return needed Dies at Age Premium to equal Paid life cover 40 (5 years on) 261,00 123,62% 45 (10 years on) 261,00 51,8% 55 (20 years on) 261,00 21,26% 65 (30 years on) 261,00 12,37% 75 (40 years on) 261,00 8,3% It is therefore clear that even if the life cover is looked at as an investment that will last for Joe's expected lifetime, it still delivers a competitive return. Whilst the return generated by life insurance is one important aspect when considering the value for money of life insurance, there is also another very important aspect to consider - the fact that nobody is exactly sure when he/she is going to die.
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This is where life cover really offers a cost effective solution to create the capital needed by the life insured's dependants. If, in our example, Joe should die in a car accident three months after having taken out his life insurance, he would receive N$1 million in return for total premiums paid of N$783,00 - a very sound investment indeed! A different way of looking at this is to say that Old Mutual in return for N$261,00 per month carries the risk of Joe dying prematurely, instead of Joe's family having to carry that risk.
NOTE: LIFE INSURANCE IS INDEED A WISE INVESTMENT SPECIALLY THOSE WITH DEPENDENTS.
From what we have highlighted above it is obvious that to extract maximum value from your insurance portfolio, your portfolio needs to be based on a proper analysis of your needs.
These needs must be reviewed regularly. For further information and advice tailored to suit your unique needs, please call your Old Mutual Namibia financial adviser or broker -This article was contributed by Mathys du Preez (Manager: Retail Advice) Centre - Old Mutual Namibia
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