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Should you raise your car insurance deductibles to save money?

7/27/2016

 
This week, I’ll talk about the pros and cons of raising the deductibles on your auto insurance, and then I’ll give you my advice.
 
First, I’ll explain what a deductible is and how it works.
A deductible is the amount an insurance company “deducts” from a check that they pay you for a loss.
For example, if the insurance company determines that the damage to your vehicle costs $3,000 to repair, and you have a $500 deductible, they will send you (or the auto repair shop) a check for $2,500. You are responsible for the deductible amount.
You do not pay the deductible to the insurance company. It’s simply a subtracted amount from what they pay you.
Remember, you can have a different deductible for comprehensive and collision. Comprehensive covers theft, vandalism and other perils not related to collision. Collision covers you for damage to your vehicle if it is your fault.
 
Three reasons to increase your deductibles:
1. You’ll save money.
Studies show that raising your deductible in California is a better savings than in many other states. Savings vary dramatically, based upon the insurance company, year, make and model of the vehicle, and other factors. But there’s no doubt- you’ll usually save a lot by raising your deductibles.
 
2. You’re are a good driver.
If you haven’t had an accident in many years, this is a good reason to consider raising your deductibles. It’s like giving yourself an added discount.
 
3. Your vehicle is getting older.
There comes a point where the premium for “full coverage” or low deductibles isn’t justified. An easy formula to remember is that when the premium to have full coverage, plus your deductible, adds up to the value of the car, it’s time to consider dropping full coverage. Insurance companies will never pay more on a claim than the value of the car.
 
One really good reason to not increase your car insurance deductibles:
If paying out a large deductible would be painful, don’t raise your deductible.
If you are like many in these tight financial times, you may not have a thousand-dollar deductible in quickly available cash. The premium savings sounds great to everyone- until there’s a claim. Then the sobering reality of paying a large amount out-of-pocket hits hard.
 
My advice:
First, never have a deductible higher than you can easily pay out-of-pocket.
Second, if you decide to raise your deductible, put the amount that you save into a short term savings account, so it’s ready to use in case you have a claim. Once you’ve set aside enough of the premium savings into a separate account, you are essentially “self-insured” for your higher deductible. Everything after that is yours to use elsewhere.
Finally, call your local insurance agent to get comparison rates for different deductibles. Partner with your agent to figure out your best strategy. There’s no “one size fits all” solution.
​
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Bruce Sackrison is an insurance property and casualty broker affiliated with Professional Insurance Associates helping clients with insurance needs for personal, commercial and business insurance. Bruce can be reached at 707-931-0186, bruces@sackifs.com

Am I covered if someone else is driving my car?

7/13/2016

 
I get asked this question more than almost any other question.

The short and simple answer is usually: YES.

But that answer is full of exceptions, explanations, and consequences. There are things that you need to know before you loan your car to someone else. So let me expand on that answer.
 
Disclaimers
Policy limits vary state by state. We’re discussing current provisions of typical policies sold in California. I’m in Napa Valley, and these provisions may not apply in other states.

If your policy has “excluded drivers” then they are not covered, no matter what. Rarely, some policies only cover a named person. Frequent users of your car may also be a problem. Discuss that with an agent. If someone lives with you, they also need to be added to your policy.

Coverage if someone else drives your car requires that permission must be given or implied, and it must be for “occasional” drivers.

Don’t assume anything, and remember- no coverage can be bound based on this article.

Whew. Now let’s talk about a typical situation.
 
Bob and the barbecue.
You have friends over for a barbecue. Someone realizes that you are out of hamburger buns. This isn’t good. But you are the grill master, and can’t leave your station. So you toss the car keys to your friend Bob, and Bob jumps in your car to go get more buns.

Bob gets distracted, and rear-ends another vehicle.
 
What happens “insurance-wise?”
When you loaned your car to Bob, you also loaned your car insurance.

In most cases, the insurance follows the car in California. So Bob does not file a claim with his insurance company- you file a claim with yours, even though Bob was driving. And the injured person gets reimbursed by your insurance- not Bob’s.

The good news: your insurance will pay to fix your car and reimburse the other person since Bob was at fault.
The bad news: even though Bob was at fault (not you), your rates will still go up.

Insurance premiums are based on risks. One of those risks is your judgment on who can be trusted to drive your car. If you choose poorly, you will pay higher premiums.

(Side note: in certain cases, Bob’s insurance may pay part of the damages. It’s complicated, and depends upon specific circumstances. But almost always- your insurance is primary.)
 
My advice:
  1. Be careful about who drives your car.
  2. Never let someone drive who has had too much to drink, or doesn’t have a license.
  3. Always keep proof of insurance and registration inside the car.
  4. Don’t loan your car out to anyone for an extended period of time. If you do, make sure that you add them to your policy as a listed driver.
  5. Disclose all adults and teenagers of driving age who live in your home.

​Talk with your local agent. Make sure you understand who is, and isn’t, covered.

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Bruce Sackrison is an insurance property and casualty broker affiliated with Professional Insurance Associates helping clients with insurance needs for personal, commercial and business insurance. Bruce can be reached at 707-931-0186, bruces@sackifs.com
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    Bruce Sackrison

    Napa, California
    (707) 931-018

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