Frees Advice: Uncategorized

Rental Cars: Buy the Insurance?

It’s that time of year again… As people begin to travel again and plan their spring break trips, we always get the question about insurance for rental cars. This is one of our most common inquiries, but like with most questions in insurance, there is no simple answer. Renting a car on vacation can be one of the most confusing issues because of the exposures, rental contracts, and driving “territories.” The simplest answer is to buy the coverage. Not satisfied with that? Read on.

Let’s start with the easiest question first. Do I need to buy coverage if I travel outside the United States or Canada? The answer is ALWAYS yes. Automobile insurance policies in the United States have a territorial limitation that provides coverage ONLY in the US and Canada. Going to Australia? Buy the coverage. Going to Zambia? Buy the coverage. (Get it? A to Z. Who says insurance isn’t funny.)

Now, you may be asking, what do I mean by coverage? There are two types of coverage that you should always consider. The first is liability. This protects other people if you injure them and property if you damage it. Your car insurance MAY extend this coverage, but you may not want to use your car insurance, especially if you are traveling with another family or other people. Do you want to expose your car insurance to your friend’s accident? Probably not.

In addition to liability, there is the question of coverage for the rental car itself. Your car insurance MAY extend coverage to a rental, but ONLY if you have collision and other than collision coverage on your policy. These protect the car if it is damaged and you are responsible, or if you are involved in a hit and run. It would also pay if you broke a windshield or hit a deer.   If your rental gets backed into in a parking lot and the tail lense is broken and it costs $450 and you have a $500 deductible, you are paying for the loss and your deductible would apply to the rental. The coverage that the rental car agency will sell you is call Loss Damage Waiver, LDW, or Collision Damage Waiver, CDW.

I mentioned the car rental contract. Typically, this contract is between YOU and the Rental Car Company. Some contracts state that they will not deal with your car insurance since the contract is between you and them. They may place a hold on your credit card for a deductible if you do not purchase their coverage. You would be required to pay them directly and then sort it out with your insurance company in order to be reimbursed. Why should you buy the LCD/CDW? Like with the liability coverage, do you want to expose your coverage for something your friend did while driving? A better way to look at this is to think of buying this coverage as “Trip Insurance.” After you are done buying airline tickets, paying for a hotel or condo rental, why would you want to spend your time on the phone with the insurance company sorting out a claim instead of laying by the pool, or on the beach? Buying the coverage on the car allows you to return the car to them, NO questions asked.

If that isn’t reason enough to consider buying the coverage, there are two other exposures that your car insurance will NEVER cover. The first is Loss of Use. If you have rented a convertible Mustang in Florida and are paying $50.00 a day for the experience, the rental car company will not be pleased if the car gets damaged and requires 20 days to be repaired. They are going to ask that YOU pay them the $1,000 they lost for NOT being able to rent that car.

The other issue is a relatively new concept, and it is rather complex, but there is NO coverage for “Diminished Value.” When rental car companies buy cars, they know that they will be able to sell them for a certain amount when they are done with them. If that car is in an accident, they cannot sell it for as much, so they can assess you for the diminished value of the car. There are only a limited number of states where this exists, but is is an exposure for which your car insurance will not respond.

So, in the end, what do I recommend? Buy the coverage. If not, be prepared to deal with a potential mess.

Still have questions? Call us.

Speed Kills

2020 was memorable for all sorts of reasons. In a move I have never seen in my 34 years in the insurance business, automobile insurance companies refunded premiums because people were driving less. (They refunded the money without being asked.) So while we all drove less, about 430 billion fewer miles, the number of fatalities increased by about 7% from roughly 36,000 to an estimated 38,680. How could this happen?

Increased speed. Impaired driving. Distracted driving and not wearing seatbelts.
Let’s wear our seatbelts, stop texting, and pay attention.

How to Obtain Flood Insurance

After Hurricane Ida, local residents now have a better idea of how Noah must have felt. Upwards of eight inches or rain fell in about four hours. That created quite a mess with street, home, and yard flooding. What makes this situation even worse is that most of the people involved did not have flood insurance.

Typically, people think of a flood as the overflow of a creek, river, bay, or ocean. By the insurance definition, it can also include the accumulation of water that affects you and an adjacent property. 30% of all flood losses fall outside what is normally considered a flood zone.

Home and Business property insurance policies all exclude any surface water so if you want coverage, you need to buy a flood insurance policy. Even if you do not live along a creek, river, bay, or ocean, you can buy coverage that would help to pay to repair damage from the unexpected.

In the past, you were only able to secure flood insurance from the National Flood Insurance Program, NFIP. Now, private insurance companies are selling coverage directly to customers. One site we found to be helpful is an insurance agency called Private Market Flood. Interested in getting an estimate on the cost of coverage? Check this out for yourself. Questions about coverage? Call your insurance professional. Don’t have an insurance professional? Call us at 610-933-4950

Insuring Aging Cars – Pt. II

Last post, we wrote about the cost of insuring old cars when it comes to the factors that go into repairing an old car if it is damaged. But the collision and other than collision coverage are just part of the premium you pay. The other parts of the policy included liability and uninsured, UM, and underinsured motorist, UIM protection.

Liability pays others if you damage their property or injure them. The reason the cost of insuring old cars for liability doesn’t decrease is because you can injure someone just as easily with a 1978 Chevy Impala as you can with a 2021 Toyota Camry. 

The UM/UIM coverage is really the opposite of liability. Where liability pays others if you injure them, UM/UIM protects you if you are injured by someone without any coverage, uninsured, or someone with insufficient coverage, underinsured. Again, driving an old car puts you at just as much risk as driving a new car when you are struck by someone else.

Insuring Aging Cars

One of the most common questions we get is why doesn’t the cost of insuring my aging car ever go down? In order to answer that, we should first make sure everyone understands when a policy pays and how the age of the car impacts the cost of the coverage. In this particular post, we will deal with the part of the insurance that pays to repair the car.

Collision pays to repair your car if you damage the car by hitting something or over-turning the car. The Other than Collision coverage, OTC, pays if there is a deer hit, glass breakage, flood, fire, or theft. The thinking generally goes like this… “My car is worth less, so why doesn’t that cost go down?”

The simple answer may sound a bit snarky, but does your mechanic charge you less to work on your car since it is older? Of course not, so the cost of the labor involved in repairing a car is the same. What else goes into repairing cars? Paint is involved with most repairs. The cost of paint is the same whether it is a new or old car. How about parts? New parts for old cars aren’t any less expensive and if you are lucky enough to be able to find used or after-market parts, those may save a few dollars.

Fewer than 2% of all car accidents result in “total losses.” A total loss means that the car costs more to repair than the car is worth. This might be the only reason you might see a small reduction in the cost of your collision or OTC.

“Sell Only What You Need”

GEICO and Progressive spend a combined $1.5 billion a year on advertising. We have gecko lizards, cavemen, Flo, Jake, and now an emu as the pillars of these ad campaigns. One of the more confusing ones I have heard lately is a carrier that says “We will only sell you what you need.” I wish someone would tell me what that means. Is that like asking the barber if you need a haircut?

I have 39 years experience in the insurance world. Everyday I think I have seen and heard it all, until the next day. When I started in business, the concept of replacement cost for property was brand new. ID Theft had not even been contemplated in 1982. The insurance industry is dynamic, adjusting and adapting to the coverage concerns as society changes.

What you need today is not what you needed yesterday and certainly isn’t what you will need tomorrow. It is the job of your insurance professional to keep you apprised of the new offerings and balance that against your exposures AND your insurance budget. Insurance isn’t what you pay, it’s what you buy.

Having an insurance professional will help you understand the risks that exist and the best ways to handle the exposures. Frees Insurance provides an annual review, complete with the coverage options that are available and what coverage you currently maintain. If you have any questions, or wish to discuss any aspect of your coverage, please give us a call at 610-933-4950.

Life Insurance: Do I Need It?

Life Insurance. Where to begin? At the beginning is probably the best place. Insurance of all kinds is designed to protect you in the event of a loss that you could not otherwise afford. Insurance is where you have a known loss in exchange for an unknown loss. You insure your house in case it gets struck by lightning. You insure your car in case you hit a deer. So, how do you decide whether you need life insurance, and if you do, how much do you need?

Life insurance would deal with the financial consequence of dying too soon. If you are the parents of young children, you want to make sure you have coverage. This would take care of the costs of raising them, college, and weddings. Me? I am 58. My children are grown and no longer my financial responsibility. My mortgage will be paid off soon, and if I am really lucky, retirement isn’t too far off. The financial consequence of me dying is different than that of the young family. 

Once you figure out if there is a financial impact of you dying too soon, now we have to figure out how much you need. First, figure out how long you are going to be dead. (That’s a bad joke but we need to worry about providing for the financial impact for some time in most cases.) The best way to start would be to take your current salary and multiply it by at least 20. If you make $50,000 a year you should start by thinking about buying $1,000,00 of coverage. If you invest the $1 million in tax free municipal bonds, your yield is about 3.5%. 3.5% of $1 million is about $35,000 a year. This should be close to your after tax pay.

Of course, the cost of the insurance will always be an issue. Buy what you can afford because even some protection is better than nothing. In a future blog, I will deal with the types of coverage you should consider and why. Please consult your insurance professional regarding any important insurance decision. Don’t have an insurance professional? Call us at 610-933-4950.

LKQ vs OEM Auto Parts

Ersatz. My 11th Grade English teacher would be so happy that I was finally able to use one of those SAT words. Ersatz means “… made as a substitute, typically, an inferior one.” You are probably asking yourself why an insurance blog is offering vocabulary advice. Actually, I wanted to use this as a way to start the conversation about how cars get repaired after an accident. There are three types of parts that get used. They include original equipment from the manufacturer, OEM, parts that are used and are of like kind and quality, LKQ, and parts manufactured by someone other than the original manufacturer, “after market.”

When cars are damaged, the insurance companies, in conjunction with your repair shop, are permitted to use the best, least expensive parts available. Typically, for the first two or three years, insurance carriers will use OEM parts, but there is no guarantee. (Some carriers do offer you the option to buy an OEM protection that will always provide new parts. This can be expensive so if that is what you want, be prepared to pay.) LKQ parts are those manufactured to the carmaker, but are “used” which means that they would have come off another car that was “totaled” and the parts are being salvaged and reused. (Imagine a car gets struck in the rear and totalled, but the parts on the front of the car can be reused.) For the most part, people are understanding that original parts or parts from the original manufacturer are being used to repair their car. When does the trouble start? You guessed it, when ersatz parts enter the picture.

Aftermarket parts are like the generic drugs of the pharmaceutical world. These are made to cost less but accomplish the same job. When aftermarket parts were first introduced, they were truly inferior, truly ersatz. Even now, shops have difficulty making some parts fit. So, what are we to do? As cars get older, they obviously depreciate in value. Once cars are three years old, they have incurred significant depreciation. When a car gets damaged, if the cost of repairs exceeds about 70% of the car’s value, it is considered a “total.” Using these aftermarket parts can make it possible to keep the cost of repairs under that 70% and make sure that you do not find yourself car shopping when you least expect it.

So, ersatz means a substitute, typically an inferior one, but not always and may be the best way forward. If you have any questions on how your coverage works, be sure to speak with your insurance professional before any loss occurs. Don’t have an insurance professional? Call us at 610-933-4950.

Non-Owned Auto Coverage

So, I don’t own a car. Do I still need coverage?

When you own a car and carry car insurance protection, the policy typically has two very important sections of coverage. The first is liability and physical damage. Liability protects you in the event you are sued by others for injuring them or damaging their property. Physical damage is also known as collision and other than collision and these protect the car in case you damage it. These coverages follow the car. If you are driving, you are protected. If you loan the car, you are still protected for what others might do. Hit a parked car and the liability pays for the damage to the car you hit and collision pays to fix your car. If you loan your car and the other driver strikes a parked car, the same claim settlement occurs. (If you have loaned the car, the other person’s insurance does not get involved.)

The second area of protection follows you. This includes the coverage for medical bills related to car accidents and Uninsured, UM, and Underinsured Motorist, UIM, coverage. Pennsylvania is a “No-fault State.” This means that regardless of who is at fault for an accident, you are responsible for your medical bills. You must have the first $5,000 under your car insurance and can buy coverage up to $1.1 million. Uninsured and Underinsured Motorist protection provides coverage for you if you are seriously injured by someone else who has no coverage, uninsured, or insufficient coverage, underinsured.

If you don’t own a car, you probably don’t need liability coverage or physical damage coverage. But if you EVER ride in a car belonging to your children, the neighbor, a fellow church member, Uber or Lyft, you have the potential exposure of being injured and needing the medical coverage, or needing the uninsured and underinsured if you are seriously injured.

Remember, I started by saying you need to weigh the risk of exposure against the cost of coverage. Fortunately, the insurance industry has a policy designed to protect people who don’t own cars but still have the medical and UM/UIM exposure. Believe it or not, it is called “Non-owned Auto Coverage.” On average, it costs about $150-$175 for $500,000 of UM/UIM and the maximum medical. (This can vary based on locations and drivers).

Want to learn more about this important protection? Contact your insurance professional. Don’t have an insurance professional? Please call us at 610-933-4950.

Tree Removal

Tree removal is always a point of contention among homeowners with their insurance companies. These issues usually come up after a storm when trees have fallen in people’s yards. Most insurance companies will not pay if a tree falls over in your yard and does not hit anything. In most cases, the only time an insurance company will pay for tree removal is if it hits your house, hits some other insured structure (shed, fence), or blocks your driveway / handicap ramp.

Insurance companies are only concerned with structures, fences, and driveways, not trees or your yard. If it just falls and hits another tree or your yard, they will not pay to remove the tree. Even if the tree does hit a covered building, there are usually limitations for the amount of coverage for removal. This amount is typically only $500 to $1000 per tree, with a per policy limit of 2 trees per claim.

For those who have had trees removed, $500 to $1000 is rarely enough. If there are trees close enough to fall on your house, please make sure they are well maintained and trimmed or just have them removed in advance.