Finance Tips

Come the fall, the retired and monied folk who live in the northern regions look up in the sky and see birds getting ready to fly south. Like these snowbirds, they also seek leisure time where it’s warmer and drive or fly down to Arizona, Southern California, Florida and Texas. The same lifestyle itch affects most people as the summer months come along. This is also the time to hit the road and find somewhere by sea or lake, mountain or valley for a little rest and relaxation. But, before you set off, there are a few basic precautions to take. It starts with the vehicles. Hopefully, you had everything ready for the winter. You prepared for freezing weather with carburetor settings and the addition of antifreeze to the cooling system. Now comes the time to change the set-up for summer driving. As the temperature rises, there’s more of a chance of leaks so check the clips and hoses, make sure the belts are tight and the fluid levels are topped up. How are the tires? If you’re suddenly going to take off down the interstate at higher speed than usual, you want to avoid a blow-out. With the cost of gas still edging up toward the $4 per gallon, you want the engine running lean and change your own driving styles to a more even tempo. Less aggressive acceleration and braking saves gallons over longer distances.

Now let’s come to the insurance policy. You can plan your road trip for months but, if things go wrong, there can be a mass of unexpected bills to pay. The first step is to make sure your policy covers you for out-of-state driving. Now assume you are stuck. What might you need? It could be something simple like a helpful mechanic to jump start the vehicle when the battery has run down or to deliver fluids to temporarily solve a problem of overheating. Even more annoying, suppose you locked yourself out of the vehicle. Solving any one of these problems involves a basic callout fee plus expenses plus an hourly rate plus the cost of any materials supplied. Then what do you do while waiting for essential repairs. Did you budget for overnight accommodation? Can you afford a rental replacement while the repairs are done?

There are a range of additions to the standard auto insurance policy that cover interruptions to your journey. But be careful what you buy. Some policies require you to be at least one-hundred miles from home or have other conditions to fulfill before you can claim. Then look at the amount of the cover. Most pay expenses up to $1,000 for the cost of essential repairs, accommodation and food. Are you feeling unlucky? More importantly, watch out for the anti-fraud conditions. Some policies ask whether the problem is one you should have fixed before you set out. It’s not unknown for dishonest drivers to try claiming the cost of routine maintenance as emergency repairs while on holiday.

Just as your vehicle could do with a tune-up before you set off, so your auto insurance policy should be reviewed to ensure you have the right terms and reasonable limits on the amount you can claim.

When you buy a new vehicle, you want it to be easy. Assuming you have a license and can afford to pay cash or service the loan, it should be sign here and drive away. No extra hassles in finding the best deal on insurance, no shopping around, just the convenience of a one-stop service. Well, here comes GM with a test marketing offer. Presumably, if it shows an increased level of sales, it will be rolled out to other states. For now, this is for those who live in Washington and Oregon. It’s all very simple. You walk into a GM dealership, pick one of the models included in the offer, arrange payment of the list price, and then drive it away.

As well as only being available in two states, there’s no haggling on the price of the vehicle. You buy at the list price or not at all. The dealers will not offer a discount, even if you refuse the insurance cover on offer. This leaves you complete freedom on the models not included in the offer, but ties you into the insurance package if you buy the eligible vehicle. Second, it only applies to you as a private individual. If you want to use the vehicle for any kind of commercial purpose, you will be refused cover. Other than these two limits, the insurance cover is automatically available. So is this a good deal?

As with all deals, the answer depends on you. When setting the premium rates, the insurer looks at whether you represent a risk. If you have years of experience and have not made a recent claim, you will get the lowest rates. Should you be under 25 or over 75, you will be quoted higher rates. If there are convictions for driving offenses suggesting you are in the highest risk groups, cover may be refused or only offered at the highest rates. So if you are currently receiving the lowest rates and want to buy new, check out the discounts available on new models not included in this promotion. The discounts may pay your first year’s premiums. Better still, you avoid the interest payments on the element of the vehicles list price representing the premium. But if you’re in a high risk group, this may be a good deal, buying you one year’s cover for an “average” premium rate. A little research will confirm whether you will benefit or not.

As an aside, GM also suggests this will reduce the number of uninsured drivers on the roads. This is a Pinocchio moment because most of the people who drive uninsured cannot afford to buy new cars. There’s little chance of the claimed public benefit being real. As it is, the cover offered includes basic liability at 100/300/50, collision, comprehensive and medical expenses. For everyone borrowing on a standard auto loan, this offers reasonable protection. Once the first year is over, the insurer will offer you the commercial rate to continue the cover. At this point, get auto insurance quotes from all the main insurers in your state. Just because you’ve had a payment holiday does not mean you abandon the best habits for buying auto insurance. Always shop around to find the best deal.

Purchasing auto insurance can be quite an involved process and whilst it may sound like it is a simple enough job, anyone that wants to ensure that they get the right policy for their needs and the right price for their budget will need to put in a little work in order to boost their chances of getting the ideal cover without paying over the odds.

This is why comparing auto insurance is such an important part of finding the right cover and there are certain important aspects of insurance cover that you should pay careful attention to when you are comparing different plans and policies. This can help to make sure that you end up with the right insurance plan for your requirements and that you do not pay more than you need to for this cover.

Some of the areas of auto insurance that you need to pay careful attention to when you are comparing different providers and plans include the following:

• The cost of the cover: This is obviously an important part of choosing your cover, as you need to ensure that the cost of the cover is suited to your budget. You will find that the cost of cover can vary quite considerably from one provider to another, which means that you could save a significant amount of money by checking the different prices available
• The features and benefits: The features and benefits of different auto insurance plans can vary based on the provider that you choose and the plan that you opt for. You need to ensure that you check the various features and benefits of the plans that you are considering carefully so that you know exactly what you are getting for your money
• The level of cover: It is important to make sure that you have adequate cover for your needs when you take out an auto insurance plan, so make sure that you keep an eye on the level of cover being offered by the different providers so that you have adequate protection for your vehicle
• The restrictions and exclusions: Most insurance plans will come with a range of exclusions and restrictions that will determine when you can and cannot claim amongst other things. The restrictions and exclusions are often hidden away in the small print of the cover, so it is well worth making sure that you check this so that you know exactly what the restrictions are before you take out the cover

All of these things will help to make sure that the cover you take out is going to be suitable for your requirements without requiring you to pay over the odds for your cover.

There’s a remarkable difference between the premium rates charged by insurers in different states. Because there are no national insurers, it’s actually quite difficult to compare state with state. But the overall picture is that, without there being much competition in each state, some states can have an average premium rate $1,000 more than the cheapest states. When you ask experts why there should be such wide variations, the answers come in two basic flavors. The first focuses on the legal systems. Some of the most expensive states are no-fault, i.e. everyone must insure their own vehicles and provide adequate cover against medical expenses. Once you add in the mandatory personal injury cover, the total package is always going to cost more. The second reason is the persistent refusal of states to enforce laws relating to driving.

In all but three states, carrying a minimum amount of liability cover is mandatory yet, in many states up to 20% of all the drivers on the roads is driving uninsured. Let’s be straightforward about this. If everyone carried insurance, the cost of insurance for everyone would fall. As it is, the law-abiding have to pay more because the chances of being hit by someone uninsured or underinsured is increasingly high. It would be easy to link the computer records to allow the police agencies to check who owns a vehicle but is uninsured. If drivers believe they risk being caught, they are more likely to buy the insurance. Yet, when you listen to many local politicians, they resist allocating more money to the police. They say forcing people to buy insurance is like taxing poor drivers to be on the road.

But the number of drivers breaking the law is not restricted to the failure to insure. In a survey last year, more than four million adults admitted to driving while under the influence of drink or drugs. Curiously, one of the sources of information about the consequences of this admission is the Centers for Disease Control and Prevention. Its statistics show about one-third of all fatalities has one of the drivers with an excess of alcohol in their blood. In 2009, the CDC estimates more than 11,000 were killed by incapacitated drivers. Given the range of often quite serious penalties if caught, it’s revealing how many admit to driving while drunk. Most people believe they will avoid detection. In part, this is the confidence created by the alcohol, but it also reflects the number of police officers actually trying to catch drunk drivers. One the most common results of conviction for DWI/DUI offenses is the rise in the premium rates. In some states like Florida, the local laws increase the mandatory liability minimum as a precondition of being allowed to drive again. In other states, the insurers increase the rates on the basis that, with one conviction proving the driver a danger to other road users, trust has to be earned. This means paying higher premiums and not claiming for three or more years.

Cheap car insurance would come our way if our politicians allocated proper resources to the police. Enforcing the law would make the roads safer for everyone and the premium rates would fall. Until this happens, the best you can hope for is affordable, not cheap auto insurance.

So here’s a simple question for you as a fantasy decision-maker in charge of a state’s finances. Let’s say you go to court against Big Tobacco and come out with a big win. Because the court finally agreed to accept the medical evidence, Big Tobacco was ordered to pay money into a massive settlement fund. Every year, this pays out a big chunk of change to your state. What do you want to spend it on? It could be education except you really want to fire all the bad teachers first. Then you can use the extra money to pay higher salaries to attract better people into teaching and raise education standards. Ah, but that’s going to provoke a fight with the unions, so we’d better look for something less controversial. What about health? This would be ideal politics. The tobacco industry has made so many ill, it’s only right its money should be used to improve health care for all. Except how is that going to be done? Even a big lump of change gets lost in the total cost of running health care in a state. . .

Pennsylvania decided to use part of the money to fund adultBasic. This was an outreach plan for adults who would otherwise fall through the cracks. Their income is too great to qualify for Medicaid, but they can’t afford the premium rates for a private plan. The way it worked was simplicity itself. The state funded its own health plan. The actual cost per person was $600 per month, but the state only charged each person $36. The total cost of this plan in 2010 was $166 million. To give you an idea of the popularity of the plan, the state was subsidizing some 40,000 people with half-million people on the waiting list. Remember, there are some 50 million people without any form of insurance across the country. It should not surprise you there were so many people who felt they met the entry requirements for adultBasic in one state.

However, in February, the Pennsylvanian government announced it was looking at a big deficit, so Governor Tom Corbett looked around for cuts. Presumably feeling the 40,000 enrolled in the plan were freeloaders, he ordered the plan shut down immediately. Big Tobacco’s money now flows directly into the state’s coffers and is mixed in with general revenue. Curiously, the state has now discovered it will have a surplus of more than $750 million in the current year. It’s remarkable how quickly the fortunes of a state can turn around. One of the immediate consequences has been a 30% increase in the number of people walking into ERs around the state. This adds significantly to the cost of running the health care services. Ironically, this additional cost alone may be more than the state was spending on adultBasic.

The Democrats have been frustrated at their failure to get adultBasic reinstated. It was one of the few state-funded health insurance plans for the low-income group. Yet a Republican governor will always get political traction out of cutting such a high-profile example of “big government”. Adult Americans should pay for cover out of their own pockets and not look to the state to provide cheap health insurance (even with money from the tobacco industry).