Does my auto insurance cover my rental car?

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Are you traveling for Spring Break? If so, you have probably declined the coverage offered by the rental car company when you picked up your rental car in town or at your destination. But if you’re like most people, there will be a tiny voice in the back of your head asking if you have made the right choice in declining the coverage. But you’ve been waiting to get to the pool or beach for the past four months, so you just signed the paperwork and grabbed the car keys.

The good news is that your auto insurance probably does cover your use of a rental car, depending on where you are and what type of coverage you have. If you are in the U.S., a U.S. territory, or Canada, you are probably within the coverage territory of your auto insurance policy, which generally means the broadest coverage you have on any vehicle on your auto insurance policy will apply to your use of a rental car. Therefore, as long as you have comprehensive and collision coverage on at least one vehicle you own and you are vacationing within the U.S. or Canada, your auto insurance coverages should apply to your rental car. Your liability coverage (i.e. lawsuit protection) should also apply to your use of the rental car.

If you are traveling outside the U.S. or Canada, or do not have comprehensive and collision coverage on your auto insurance policy, then we typically suggest that you purchase the coverage offered by the rental car company.

Insurance companies vary in terms of coverage provided for a rental car, and there are certain types of expenses rental car companies can charge that most auto insurance policies do not cover. Please confirm with your insurance agent if you are unsure how your auto insurance applies to a rental car.

We hope this information helps ease your mind while you relax with your family. Safe travels!

This article was written by Brian Boer and Tori Roughley. Please send any questions or comments to victoria.roughley@boerinsurance.com.

Does my auto insurance cover damage to my bicycle?

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After another long Michigan winter, spring is finally upon us! For many, this means preparing for favorite springtime activities like going on bike rides. Once bicycles are taken out of storage and their tires pumped full of air, they’ll likely be parked in a driveway or loaded onto a bike rack at some point. So what happens if you back out of your driveway and, forgetting that your bike is parked at the end of it, run the bike over? How about if it falls off the bike rack while heading up north for your next scenic ride? Is the damage to your bike covered by your auto policy?

The Property Protection Insurance (PPI) coverage listed on your auto policy provides liability coverage for damage your vehicle does to other people’s property. However, it does not provide coverage for damage to your own property. Therefore, if you run over your bike while backing out of your driveway, the damage is not covered by your auto policy. However, if a friend or neighbor runs over your bike, the PPI coverage on their auto policy will cover the damage, given certain criteria are met.

In general, an auto policy does not provide coverage for damage to the contents of a vehicle, including items affixed to it (i.e. a bike on a hitch-mounted rack, a kayak on a roof rack, etc.). Therefore, if your bike is damaged when it falls off the rack while you’re cruising down the highway, your auto policy will not provide coverage. However, following the same logic as the driveway example, if someone else runs it over after it falls off the rack, the PPI coverage on their auto policy will provide coverage for the damage. One of the rare instances when it’s actually preferential to have someone tailgating you…

The best way to obtain coverage for your bicycle is to insure it on your homeowners policy. However, keep in mind that your homeowners deductible may exceed the value of your bike, negating any sort of claim. If your bike is especially valuable, it may be wise to specifically schedule it on your homeowners policy, which eliminates your policy’s deductible and provides broader coverage. Doing so is usually very affordable.

This article was written by Derek Boer & Tori Roughley. Please send any questions or comments to Tori at victoria.roughley@boerinsurance.com.

Do you have basic documentation of your personal property?

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When people think of homeowners insurance they often think of protecting the structure of their home. Often overlooked is that homeowners (or renters) insurance also helps protect your personal property, like clothes, furniture, electronics, and other household items. But what happens if these items are destroyed in a fire? How do you prove what you owned?

As with most things in life, there are quick and easy steps you can take to prepare for those future “worst case scenarios.” Though tedious, having an inventory of your personal property is one of those steps. It may be impractical to maintain an updated physical list detailing each item you own, but having some sort of documentation certainly helps the overall claims process in the event of a largescale home insurance claim. Taking this extra step of precaution will help ease your mind during the claims process, improve your memory recall, and assist in proving ownership for replacement.

We suggest at least taking photos and/or videos scanning your house to have basic documentation of your personal property. This includes documenting items stored in:

  • Closets and cabinets

  • Garages, sheds, and other outbuildings

  • Attics

  • Basements

  • Other storage spaces

Taking five to ten minutes of your day to complete this process may save you many hours, and many thousands of dollars, in the event of a large claim.

This article was written by Tori Roughley. Please send questions or comments to Tori at victoria.roughley@boerinsurance.com.

Does my home insurance cover my engagement ring?

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According to businessinsider.com, the average amount spent on an engagement ring in Michigan is $7,028, which is the 19th highest cost across the U.S. Having so much money invested in a single item is often cause for concern. Thankfully, all homeowners insurance policies provide coverage for personal property, like clothes, furniture, and electronics. But does this coverage also apply to a $7,000 engagement ring?

Most homeowners policies provide coverage for jewelry. However, they usually include a coverage limitation of $1,000 for unlisted jewelry claimed due to theft, which is significantly less than the average cost of an engagement ring. Additionally, like most homeowners claims, the policy’s deductible applies to a claim for unlisted jewelry, thereby reducing the claim payment by the deductible amount.

For example, a stolen $7,000 engagement ring is subject first to the homeowners insurance deductible, which is commonly $1,000, and second to the jewelry overage limitation, which typically is also $1,000. Generally the deductible, the coverage limitation, or both will drastically reduce the amount of the claim. In this example, the claim payment would be calculated as:

  • Ring value: $7,000

  • Deductible: ($1,000)

  • Gross Claim: $6,000

  • Policy Limit: $1,000

  • Net Claim: $1,000

So how do you adequately cover your $7,000 engagement ring? List it on your homeowners policy. Doing so will provide three critical benefits: (1) your ring will be covered for its replacement value (instead of only $1,000), (2) your homeowners insurance deductible will be waived in a claim, and (3) your ring will be covered for much more than theft, including simply losing it.

This generally includes explicitly listing the item’s description and value on the policy, which are typically assessed and verified through an appraisal. Although some insurance companies do not require the submission of an appraisal when adding jewelry items to a policy, it is important, and recommended, to obtain an appraisal to prove ownership and to have an accurate description of the item if a claim arises.

The cost of scheduling an engagement ring on a homeowners policy is dependent on the ring’s value, but it is generally about $10 per $1,000 of value, which is usually worth the investment in the long run.

This article was written by Brian Boer and Tori Roughley. Please send any questions or comments to Tori at victoria.roughley@boerinsurance.com.

Does my auto insurance cover Uber?

If you drive for a ridesharing company like Uber, you were asked to provide proof of insurance when signing up. Since auto insurance is legally required for all vehicle owners in Michigan, everyone should technically qualify to drive for a ridesharing company. However, the question is: do you have the right type of insurance?

It’s pretty simple: if you have a standard personal auto insurance policy, then you are not adequately covered to drive for a ridesharing company. As soon as the ridesharing app is turned on, your personal auto insurance policy turns off. However, most of the ridesharing companies provide some coverage for drivers if certain criteria are met.

According to Uber, the company provides $1 million in liability coverage for bodily injury and property damage their drivers cause to others. They also provide collision and comprehensive coverage (with a $1,000 deductible) for damage to the driver’s vehicle, as long as 1) the driver has collision and comprehensive coverage on his or her personal auto insurance policy; 2) the ridesharing app is open and in use; and 3) the driver has accepted a ride request or is actively providing a ride.

However, if you are between trips, then Uber will only provide liability coverage slightly greater than Michigan’s minimum requirements, which is insufficient for most people. Furthermore, if you do not have physical damage coverage on your personal auto insurance policy or you have not yet accepted a ride request when an accident occurs, Uber will not cover any damage to your vehicle. The infographic inserted below is from Uber’s webpage discussing their insurance requirements and provisions:

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Insurance companies are requiring drivers to disclose whether or not they use their personal vehicles to drive for a ridesharing company. As a full-time ridesharing driver, you should have a commercial auto insurance policy to protect you in the event you are sued for injuries you cause and for physical damage to your vehicle. If you drive only part-time for a ridesharing company, however, some insurance companies are beginning to offer ridesharing coverage via a special endorsement on a personal auto insurance policy that will expand your personal auto insurance coverage to be more appropriate for the risks associated with driving for a ridesharing company.

Through this endorsement, your personal auto insurance policy will provide liability coverage as long as the app is on and you have not yet accepted a ride. Once you accept a ride, you are relying on Uber’s provided coverage until the ride is complete. During this time, your personal auto insurance policy may provide excess physical damage coverage outside of Uber’s $1,000 deductible. In other words, if you have a lower deductible on your personal auto insurance policy than Uber’s, your insurance policy may pay the difference between your deductible and Uber’s deductible.

Even though these ridesharing companies advertise themselves as quick and easy ways to earn extra income, the cost of gas, vehicle maintenance, and auto insurance can quickly add up. Therefore, it is important to understand the costs and requirements, as well as what your insurance company will and will not cover, prior to applying.

If you need help understanding how your policy applies to ridesharing, or help determining which policy is appropriate, please don’t hesitate to ask.

This article was written by Tori Roughley. Please send questions or comments to victoria.roughley@boerinsurance.com.

Does my home insurance cover ice dams?

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With temperatures predicted to be back up to the 40s next week, it will feel like a relief after this week’s persistent snow storms. While the roads will finally be clear of snow and ice, can the same be said about your house?

If an ice dam has formed along the edge of your roof, you may be in trouble as the warmer temperatures melt the ice and snow that have accumulated behind it. The ice literally acts as a dam, trapping the water resulting from the melted ice and snow. As temperatures drop overnight, the water freezes and expands, lifting your roof’s shingles in the process. When it unfreezes, the water penetrates the roof deck and leaks into your home. Do you have coverage for the damage?

In general, a home insurance policy will cover damage caused by an ice dam, as long as the damage is to the home itself. For example, if the ice dam pries the shingles off your roof or causes water to leak onto your walls, ceiling, or insulation, then your home insurance policy will cover the loss. Don’t forget though: the deductible always applies on home insurance claims.

Although damage to your home caused by an ice dam generally is covered, damage to your personal property is not. Keep that in mind if you store valuable personal property in your attic as it’s usually the first area damaged by an ice dam.

The cost of removing an ice dam is likely less than your homeowners deductible, so if you see one forming on your roof, it’s best to contact a snow and ice removal company as soon as possible.

This article was written by Derek Boer & Tori Roughley. Please email questions or comments to Tori at victoria.roughley@boerinsurance.com.

Does my auto insurance cover hail damage?

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We made it past last month’s holiday season without the hassle of a typical Michigan winter, but with the snow and ice storms predicted to continue, we know that the dreaded winter season is finally upon us.

Therefore, it is time to ensure that you have the proper winter (and spring) related auto insurance coverage and that, more importantly, you understand how that coverage protects you.

As roads worsen, there is usually an increase in the number of collision claims as the risk of car accidents increases. But what about non-collision related losses, such as hail damage?

If you have comprehensive coverage on your vehicle, your auto insurance will cover hail damage to your vehicle. However, if you only have liability coverage (commonly referred to as “PLPD”), then this type of coverage is not included.

Like collision coverage, comprehensive coverage typically has a deductible that applies to each claim. Comprehensive coverage deductibles can range from $0 to $1,000 (or higher), depending on the policy. This deductible reduces the amount that the insurance company will pay toward the repairs to your vehicle and will be your out-of-pocket cost for the repairs.

For example, assume you have comprehensive coverage with a $100 deductible on your Honda Civic. When a storm rolls through town, your Civic is dented by hail. A body shop prepares a repair estimate of $1,900 to fix the hail damage. Your comprehensive claim would be calculated as:

  • Amount of damage: $1,900

  • Deductible: ($100)

    ————

  • Comprehensive claim: $1,800

Comprehensive coverage tends to be less expensive than collision coverage, which is why we generally suggest using a lower deductible for comprehensive coverage than collision coverage. This helps keep insurance costs reasonable, yet minimizes the amount of out-of-pocket cost in the event your vehicle suffers hail damage (or any other comprehensive claim).

This article was written by Brian Boer and Tori Roughley. Please email any questions or comments to Tori at victoria.roughley@boerinsurance.com.

Will the legalization of recreational marijuana affect my auto insurance?

Michigan is about to join the list of states that have legalized the recreational use of marijuana. Although public support is high, 64% according to a 2017 Gallup poll, this bill does not come without questions or concerns, which mostly revolve around the issue of driving under the influence. Just one more complex factor to further complicate the insurance industry, right?

Two 2017 studies reported that there was an approximate 6% increase in car accidents in states where the recreational use of marijuana is legal, and another 2017 study reported that recreational marijuana led to 3% more insurance claims. If these early statistics hold true, how will the legalization of recreational marijuana affect auto insurance rates?

Autonomous Vehicles: Believe the Hype?

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Does today’s hype around autonomous vehicles remind you of the flying car predictions we heard back in the ‘90s? There is much debate about the timeframe for widespread adoption of autonomous vehicles, from Silicon Valley promising five years to Detroit predicting five decades. However, something of little debate is the societal benefits that autonomous vehicles will provide. A few include:

  • Reduced frequency of auto accidents and the injuries and deaths that accompany them

  • Increased mobility for the elderly and those with disabilities

  • Reduced transportation costs due to vehicle sharing

Despite these benefits, there are several questions to consider, including:

  • How will we protect vehicles from hackers? Whose responsibility is it to do so?

  • How will autonomous vehicles interact with human drivers, pedestrians, and bicyclists?

  • Will autonomous vehicles function properly in heavy rain, sleet, and snow?

While these questions may seem difficult to answer, the most difficult question may be the one that is least discussed: who is liable when an accident involving an autonomous vehicle occurs? The answer will likely change as the technology used in vehicles advances from driver assistants (adaptive cruise control, automatic braking, lane keeping assist) to semi-autonomous (human intervention required in limited instances) to fully autonomous (no human intervention needed) and the percentage of vehicles on the road that are fully autonomous increases from .001% to 100%.

Let’s first address one of the easier liability questions. Who is to blame when an accident occurs with a fully autonomous vehicle? It’s hard to fathom a court assigning liability to a “driver” in these instances, so the liability must fall on the automaker. However, that leads to a deeper question that’s nearly impossible to answer: how should autonomous vehicles be programmed to operate when an accident is unavoidable?

For instance, if a tree falls in the road and an autonomous vehicle must decide whether to hit the tree or swerve onto the sidewalk and hit a pedestrian, which does it do? Would it be programmed to consider the age of the driver and pedestrian and take the action that preserves the youngest life? Would all automakers be required to program their vehicles to act in the same way? In the best case scenario, society will collectively decide how autonomous vehicles should be programmed and each vehicle will act accordingly. In the worst case scenario, certain automakers will program their vehicles to always preserve the life of the “driver.” If those automakers charge a premium for such vehicle behavior, the preservation of life would essentially be determined by wealth.

If assigning liability for a fully autonomous vehicle seems nearly impossible, it must be easier for a vehicle that is semi-autonomous, right? Not necessarily. What happens when a vehicle notifies its “driver” that human intervention is necessary? If that notification occurs three seconds before a crash, would it be up to a court to determine if three seconds was sufficient warning? What if a crash would have resulted regardless of the “driver’s” involvement? How will a court evaluate the adequacy of the evasive action the “driver” took?

A final liability question surrounds the inevitable period of time autonomous vehicles will share the road with human-driven vehicles. Autonomous vehicles will be programmed to behave cautiously and, in most instances, that’s a good thing. However, can you imagine being stuck behind an autonomous vehicle that’s trying to make a Michigan left on the East Beltline during rush hour? It could take hours for it to find enough space to pull out. A human-driven vehicle has the distinct advantage of using eye contact and body language to communicate with other vehicles as it forces itself into the flow of traffic.

Also, driving styles vary wildly across the country. An autonomous vehicle programmed to fit in with drivers in New York City would cause quite a ruckus on the streets of Holland, MI. Humans can adapt their driving techniques when needed – something autonomous vehicles won’t be able to do. Who is responsible when an autonomous vehicle causes an accident not because it broke a driving law, but because it just didn’t quite fit in with traffic?

However the determination of liability plays out, one thing is for sure – insurance will follow suit. In the meantime, let’s all do our best to achieve the main thing autonomous vehicles promise to accomplish – reduced car accidents. After all, for the foreseeable future, we’re all still liable!

This article was written by Derek Boer. Please contact Derek with questions or comments at derek.boer@boerinsurance.com.

Escaping the Cold This Winter?

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Based on how fall played out this year, it looks like we could be in for a long winter! If you’re planning to take a break to someplace warm and sunny, you’ll need to know if, and how, your insurance travels with you.

Renting a car? If your personal auto insurance policy has Comprehensive and Collision on at least one vehicle, those coverages will also apply to a private passenger auto you rent short-term in the United States or Canada (as well as territories of the U.S.). The deductibles that apply to your own car will also apply to a rental car. So, if you have a $500 deductible for Collision coverage on your car, that same deductible will apply to collision damage to a rental car.

The liability and other coverages on your auto insurance policy will also apply to your use of a rental car. But remember, your auto insurance policy covers you only in the U.S. and Canada. If you rent a car outside the U.S. or Canada, check with the car rental company to see what coverage they offer. If you have an Umbrella Liability policy, it may provide liability coverage for your use of a rental car outside the U.S. and Canada. This would protect you against lawsuits for bodily injury and property damage caused while driving the rental car, but not for damage to the rental car.

Car rental agreements usually hold the renter responsible for three costs that may not be covered by your auto insurance policy:

1. Loss of use. The rental company will charge you for their lost rental income while the damaged car is being repaired. Depending on the amount of damage, the time required to make repairs could be several weeks, so this expense can add up.

2. Diminished value. Even though the rental car may be repaired to perfection, the mere fact that it was involved in an accident may cause used car buyers to pay less than they would for a vehicle that was never in an accident. As a result, when the rental company sells the vehicle they may get less than they would for a similar vehicle that wasn’t damaged. This is when you get a bill, which can amount to hundreds, or thousands, of dollars.

3. Claim administration fees. The rental company will incur expenses for the time spent administering repairs to the vehicle and pursuing reimbursement, so they’ll charge you a fee to cover this expense. We commonly see claim administration fees of $250 to $500. In addition, they can charge you for towing and storage if the car is damaged while in your possession.

How can you avoid these potential additional expenses? You can purchase a “loss damage waiver” (LDW) from the car rental company. This will relieve you of responsibility for damage to the vehicle (as long as you use the vehicle in compliance with the provisions of the rental agreement) and will normally include coverage for the three items noted above. Check with the car rental company to be sure. Or, you may be able to add coverage to your own auto insurance policy for minimal cost to provide coverage year-round. This way you’ll have coverage anytime you rent a car in the U.S. or Canada. Check with us if you’d like to know more.

What about your personal belongings, such as skis, golf clubs, and clothing? If you have a home, condo, or renter’s insurance policy, chances are, your personal belongings will be covered anywhere in the world. The same perils (the causes of damage or destruction) that apply to your property while it’s at your home will apply while your personal property is traveling with you. This usually includes coverage for damage caused by fire, smoke, theft, wind, hail, lightning, vandalism, explosion, and several other causes. If your property is stolen, the provisions of your policy will require you to report the theft to police before you file a claim on your insurance. What about the airline losing it? Sorry, that’s not covered.

If you plan to travel, we hope you have a safe and enjoyable trip. And, please bring some sunshine home to share with the rest of us!

This article was written by Dave Boer. Please send comments or questions to Dave at david.boer@boerinsurance.com.

Before You Head to the Blind

Keep these things in mind this hunting season:

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  1. Extend your liability coverage. In general, the personal liability coverage on your home insurance policy will follow you away from your home, including while you are hunting. However, if you own or lease the property you are hunting on and don’t have an insurance policy on that hunting property, be sure to tell your insurance agent. In most situations you can extend the liability coverage from your home insurance policy to your hunting property in order to protect yourself in the event of a lawsuit resulting from a hunting accident. The charge for this liability extension is minimal (usually less than $15/year).

  2. Add your expensive guns to your home insurance policy. Guns, bows, and other hunting equipment typically is covered by a home insurance policy, but subject to certain limitations. The best way to adequately cover your expensive guns is to schedule them on your home insurance policy. This provides coverage for nearly all types of damage, including dropping your bow from a tree stand, dropping your gun over the side of the duck boat, or someone stealing your gun out of your truck. This scheduled coverage for guns is inexpensive at about $15 per $1,000 of coverage.

  3. Plan ahead and be safe. There’s always the next day, the next week, or the next season to get back in the field or on the water. If the conditions aren’t safe or something doesn’t feel right, head back to camp and relax by the fire.

Whether you’re hunting ducks, deer, or discounts on Black Friday this season, be safe and have fun!

Especially in Michigan

You know you’re made for the insurance industry when:

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Every time you hear "Especially in Michigan" by Red Hot Chili Peppers you can't help but think how appropriate that song title is for auto insurance in Michigan.

Medical coverage is critical (especially in Michigan...).
Liability coverage is important (especially in Michigan...).
No-Fault insurance is confusing (especially in Michigan...).

We've created a short video to explain, in simple terms, how auto insurance works, especially in Michigan. Check it out here: 

Over 50? What Are You Waiting For?!?

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Your grandfather. Your aunt. Your mother-in-law. We all know someone who requires significant assistance with the daily activities of living in the latter stages of life. Some of us are even the one who is tasked with providing the care our loved one can no longer provide for themselves. Yet very few of us plan for the likelihood that we will be in that position someday, too.

According to the U.S. Department of Health & Human Services, about 70% of people over age 65 will require at least some type of long-term care in their lifetimes, and 40% are likely to need care in a nursing home. A serious injury, illness, or the onset of Alzheimer’s or dementia can quickly lead to the inability to fully care for ourselves, and sometimes we simply lose the ability to fully care for ourselves as we age. And, if the person responsible for caring for us, such as a spouse or other family member, passes away, moves, or develops an inhibiting condition of their own, we will be left to fend for ourselves. These are not pleasant thoughts, but it is the reality for many.

For-hire assistance is available, but the cost of long-term care is staggering. These were the average annual costs in Michigan in 2016:

  • Nursing home: $103,164

  • Home health care: $47,720 (skilled care from a nurse is more expensive)

  • Assisted living facility: $44,658

These expenses have the potential to wipe out savings and put an extra burden on family members, who are often forced to provide daily care or help with long-term care expenses. While many people assume that government programs, such as Medicare, will pay for long-term care expenses, it’s unfortunately not true.

Medicare and most health insurance plans pay for acute medical services, but they don’t typically pay for long term custodial services. They won’t pay for help with activities of daily living, such as eating, bathing, dressing, continence, toileting, and moving from place to place. If you’re not able to perform these activities on your own, you’ll need help. The same is true if you develop severe cognitive impairment, such as Alzheimer’s or dementia, and require continuous supervision.

There are three ways to address long-term care expenses:

  1. Be rich (so you can afford to pay these expenses yourself)

  2. Be far from rich (so Medicaid will pay)

  3. Be insured (for those in the middle)

The best time to consider long-term care insurance is when you don’t need it. You’ll probably never be healthier than you are today, and you’ll definitely never be younger! Long-term care insurance requires an applicant to meet certain standards of health in order to purchase a policy, so it’s important to apply before your health deteriorates. And, the cost of a policy increases with age, so it makes sense to purchase a policy sooner rather than later. The age bracket when most long-term care policies are purchased is 50 to 60, but most insurance companies will consider applicants up to age 80, assuming they are in good enough health to qualify.

If you’re considering ways to manage long-term care costs, we can provide benefit and cost illustrations for traditional long-term care insurance and for a hybrid policy that combines life insurance with long-term care insurance. A valuable feature of the hybrid policy is its return of premium guarantee, in case you ever decide you want your money back. With this policy, you’ll get your money back one way or another… either by using the long-term care coverage, receiving the life insurance payment, or by cancelling your policy before using any of the coverage and getting back every dollar you paid for it. It’s hard to go wrong with this type of policy, since you’ll never get back less money than you paid (following an initial five year graded surrender charge).

We know planning for long-term care expenses can be a daunting subject, and I’m sure you have some questions about it. Please call or email and we’ll be happy to provide insights for your specific situation and help any way we can.

Pay Up To Pay… Less?

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The vast majority of people pay their bills, especially for insurance, on time, which is great because it’s becoming more important than ever to do so. On top of avoiding late fees, cancellation notices, and the risk of a lapse in coverage, rumor in the industry is that insurance companies will start using on-time payment history as a rating factor for insurance policies, providing a discount for those with good payment history.

Insurance companies subscribe to a service called CLUE (Comprehensive Loss Underwriting Exchange), which is used primarily for sharing claims information, driving history, etc., among insurance companies to ensure each company is privy to the same information when determining how to price a policy. More and more information is being gathered by the CLUE service, including prior coverage limits, length of time a policy was in force, and, you guessed it, payment history.

Following up on late payments and mailing cancellation notices is expensive for insurance companies, and analysis of massive amounts of data shows that people who consistently pay their premiums on time are less likely to have a claim. Therefore, we suspect that insurance companies will eventually reward those who regularly pay their insurance invoices on time with improved policy rating.

To encourage paying on-time, most insurance companies offer the option to have payments automatically withdrawn from a checking account or charged to a credit or debit card with little or no fees. Automatic payments are easy to set up and can be done online or by calling our office. If you don’t currently use automatic payments but feel it’d be advantageous to do so, please don’t hesitate to let us know.

We think it’s important to provide this insight before the potential rating change takes place because there is still time to improve payment history and, therefore, take advantage of the corresponding discount that will likely be associated with it in the future.

MCCA Fee: Why The Change?

Michigan’s auto insurance has been a topic of interest to many for a long time, often due to its cost relative to auto insurance in other states.  While our no-fault law is viewed negatively by some consumers that haven’t been involved in a major auto accident, the Personal Injury Protection benefits provided by Michigan’s law, which far exceed those of any other state, have helped many who were seriously injured in auto accidents avoid bankruptcy and receive the care they need.  

All auto insurance policies issued in Michigan provide medical and rehabilitation expense coverage with no time limit or maximum dollar limit for individuals injured in auto accidents, as well as replacement of lost income up to $65,000 per year for up to three years.  Over half of the claim expenses paid in 2017 were for attendant care for individuals who were unable to care for themselves following a serious auto accident.  

As a case in point, we have a client who was severely injured in an auto accident in 1994 who is still receiving medical and attendant care benefits paid by his auto insurance policy.  So far, almost $7,000,000 has been paid by his insurance company for these expenses.   In any other state, his coverage would have been exhausted long before receiving the care that he needed.  

Because a claim of this size could threaten the financial stability of some insurance companies, a non-profit fund known as the Michigan Catastrophic Claims Association (MCCA) was established in 1978 to provide a form of reinsurance to all insurance companies writing auto insurance in Michigan.  Currently, an insurance company’s medical expenses over $555,000 for any single claim are reimbursed by the MCCA.  

Each year a board of directors for the non-profit MCCA reviews past claims and expenses, as well as projections for future injuries and related expenses, and adjusts the MCCA charge accordingly.  Each insurance company is required by the state of Michigan to collect the MCCA charge as part of auto insurance premiums and remit the funds to the MCCA.  

For the period of July 1, 2018 to June 30, 2019, the annual charge is increasing from $170 per vehicle to $192 per vehicle, a $22 per year increase per insured vehicle.  This charge of $192 is the same for each vehicle regardless of the type of vehicle (old vs. new), the coverage on the policy (PLPD vs. full coverage), or the driver of the vehicle (experienced vs. youthful).  Insurance companies do not determine the charge and may not use the funds for their own business.  The actual charge shown on your policy will be slightly higher because the mandatory charge also includes a few dollars to fund the Michigan Auto Theft Prevention Authority.  

You can find the charge listed on your policy where premiums for the coverages are shown.   Each insurance company uses slightly different language when describing the charge, but it is generally noted on an insurance policy as “MCCA/MATPA”, “Programs Required by State Laws”, “State Mandated Assessments”, or something similar.  

We know that changes in insurance costs can be disruptive to your budget and think it is important that you understand the source of this change.  We feel there are reasonable ways the state of Michigan and the MCCA can better manage these rising expenses (see here), but that’s a story for another day.  
 

What Is an Independent Agent?

Boer Insurance Group is proud to be an Independent Agency, which means we aren't tied to any specific insurance company.  This affords us the flexibility to find the right combination of coverage and price for you by comparing multiple options and helping determine which one best meets your goals.  Being an Independent Agency allows us to stay updated on coverage enhancements, underwriting trends, and pricing variations.  This allows us to provide unbiased advice to our clients and our community. 

You're probably thinking that all sounds good but are wondering what it actually looks like.  Well you're in luck!  Our pro-bono graphic designer (i.e. Brian's wife) prepared the following, which we think sums it up quite well.  The difference is subtle but the impact is significant.  Which looks like a better model to you?  

                                                                           (Above: Our Chosen Model)                                                                             (Below: The Typical Model)

                                                                           (Above: Our Chosen Model)

                                                                           (Below: The Typical Model)

Captive Model.png

Tips for Managing Auto Insurance Cost

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Most of us are restrained by a budget, which may make selecting the “cheapest” auto insurance policy attractive at times.  However, this is not an advisable insurance strategy for a number of reasons.  Instead, consider the following ways to manage the cost of quality auto insurance without taking unnecessary risks or putting your financial future at stake.

Factors (Somewhat) In Your Control

1) Improve your credit score.  Seems strange, but it’s true.  All insurance companies use Insuring Scoring when developing insurance rates.  Your Insurance Score is a version of your credit score, modified for a number of factors each insurance company feels best reflect your likelihood of filing claims.  Insurance Scoring was approved by state regulators a number of years ago and has proven to be an accurate factor when rating insurance products.  Improving your Insurance Score can significantly reduce your insurance costs.  There are a number of free resources available online for improving your credit score (and consequently, your Insurance Score).

2) Keep a clean driving record.  When you are issued a ticket, insurance companies re-assess your likelihood of being involved in an accident and adjust your rates accordingly.  Statistically speaking, drivers with tickets are more frequently involved in accidents than drivers without tickets, so keeping your driving record clean will help to maintain stable insurance rates.

3) Join an industry association.  Many insurance companies have sizable discounts for members of certain professional organizations, like the Michigan Association of CPAs (MICPA), the Michigan Education Association (MEA), and a number of Engineering Societies.   

4) Choose vehicles with top safety ratings.  One ride in your Uncle’s beat up rust bucket makes it obvious why safer vehicles should be less expensive to insure.  Vehicles with top safety features better protect the driver and passengers from injury, thereby reducing medical expenses associated with an accident.   

5) Use higher deductibles.  Insurance companies reward drivers that choose higher deductibles.  Choosing a higher deductible eliminates the urge to file a small claim, which reduces claim expenses incurred by the insurance company.  Most of these claim expense savings are passed along to the client in the way of reduced premiums.     

6) Consolidate.  Insuring your auto, home, umbrella, and other insurance policies with the same insurance company often creates the best total value.  

Factors (Mostly) Out of Your Control

1) Gas prices are (relatively) low.  Sounds like a good thing, right?  It is, in terms of the cost to fill up your tank.  But lower gas prices allow more people to drive more miles, which tends to result in more car accidents.  An increase in car accidents places upward pressure on insurance rates.

2) Medical costs are on the rise.  Have you noticed the increase in your health insurance cost this year?  Your health insurance plan probably costs between 18% and 30% more than it did last year.  An auto insurance policy covers medical expenses incurred due to a car accident, so auto insurance companies are feeling this squeeze as well. 

3) Vehicle repair costs are rising.  Have you taken your car to the shop recently?  If so, you probably noticed that labor and material costs are rising.  In addition, the increasing amount of technology included in even base model vehicles can add thousands of dollars to a seemingly simple repair.  These repair costs are passed on to insurance companies, which means they need to charge more for insurance in order to cover the increased repair costs.  

4) Distracted driving is catastrophic.  Insurance companies expected driver-assist safety features to cause a decrease in car accidents, and therefore a decrease in insurance costs.  However, distracted driving has caused the reverse to occur: there are more car accidents than ever and the severity of those car accidents is unprecedented.  Claims data shows an alarming number of car accidents where the at-fault driver didn’t even tap the brakes before impact.  These types of accidents cause serious damage to vehicles and significant injuries to drivers.

This article was written by Brian Boer.  Please reach out to Brian (brian.boer@boerinsurance.com) or any member of our team to discuss any of these tips that interest you.