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Auto Insurance Coverage

If you own a car, you must have insurance. That's the law. In many states, auto insurance is so expensive it's been a major, bitter issue in state political campaigns. Auto insurance premiums have gone up 3 percent within the past two years and are only expected to drop 0.5 percent in 2007, according to the Insurance Information Institute.

Helping to moderate overall rates is the emergence of baby boomers into late middle age. That means fewer accidents and lower rates for them. A second factor working to lower rates is that cars have become safer. Despite those trends, the average annual car insurance costs for Americans are estimated at $847 in 2007, according to the Insurance Information Institute. Because auto coverage and rates are highly specific, your annual premium could vary greatly from that amount. Your rates depend on: your age your driving record your vehicle the vehicle's age where you live Knowing this information, you can still cut your costs. By tailoring your coverage to what you really need and then shopping around carefully, you can get a better deal on your insurance. Three Types of Coverage Before shopping for auto insurance, it's best to understand the different components of coverage: liability, collision and comprehensive, with each accounting for a distinct part of the premium you pay. Both the collision and comprehensive sections of your policy, which together account for 40 percent or more of your premium, involve a deductible amount that you must pay before the insurance kicks in on each claim. Policies also might include medical payments coverage for you and your passengers, regardless of who is at fault, and uninsured motorist protection in case your car is hit by an uninsured driver.

Most policies also offer lower-cost add-ons such as rental reimbursement in case your car is incapacitated for a period of time after an accident for repair, as well as towing insurance.

What You Need
To keep costs down, figure out what types of coverage you can avoid entirely and then take just what you need of the essential sections. Nearly all states require drivers to carry liability insurance, but in some states the amount of coverage required is quite low — say $15,000 to $25,000. No matter what your state regulates, get a policy with coverage limits of at least $100,000 per person injured and $300,000 per accident. Lower limits won't protect you because the average personal-injury award in such cases in recent years has been about $323,000, according to the Insurance Information Institute. Get at least $50,000 in property-damage-liability coverage. Though state limits are much lower, repair bills can escalate swiftly on luxury cars and other expensive vehicles. The fastest way to cut your premium is to increase the deductible on your collision and comprehensive coverage. Raising your deductible from the common $200 or $250 limit to $500 can cut 10 to 15 percent a year from your insurance bill. Weigh these potential savings against the higher out-of-pocket expenses you'll incur if you file a claim. For older cars, you may be able to drop comprehensive and collision coverage entirely; if the car is more than five years old, consider this option. After all, keeping up costly premiums makes little sense if the car isn't worth that much. Remember that any payout will be on the market value only of that car. As a rule of thumb, don't keep up coverage if the premium for collision and comprehensive is more than 10 percent of the retail used value of the car. Most states require uninsured/underinsured motorist coverage, which is often $20,000 to $40,000 in protection. If your vehicle is hit by a driver who has no or insufficient insurance, this section will cover injuries to your passengers and other expenses that ordinary health insurance does not pick up. It also protects you if an uninsured motorist hits you while you're walking or riding a bicycle. You can purchase $100,000 in coverage for about $50 or less each year, but it's usually worth the cost to step up your limit. On the other hand, you may be able to save on medical-payments coverage. Regardless of fault in an accident, this coverage will pay doctor and hospital bills — and sometimes funeral expenses — for you and your passengers. But check to see if a combination of your life and health insurance would cover these items. If so, decline this optional feature, which could save as much as $100 a year.

Marine (boats, yachts) Insurance

What you need to know about boat and yacht insurance policies. Common Mistakes Two of the most common mistakes boaters make when it comes to marine insurance is, first, not understanding the basic principles of boat insurance, and second, not reading their policies. “Unlike other forms of insurance most people purchase — for example, your home or car, which are extremely standardized packages — boat insurance varies quite a bit from carrier to carrier,” BoatU.S.’s Jim Nolan said. “Losses covered by one carrier may be excluded or partially covered by another, so consumers really have to look at the details and the experience of the people they are considering in order to decide if the price is reasonable.” And sometimes the boat owner’s cost is, on the surface, more reasonable than it may seem at first. “Given the gaps in various policies, even large differences in premium can be made up rather quickly if you have the wrong loss with the wrong company,” Nolan explained. As far as the specific policy language is concerned, you must read it to make sure you understand what has been sold to you and if it will meet your needs as anticipated. “I understand the whole concept of reading a policy is rather laborious, but it is important,” Nolan said. “Look beyond the numbers. Just because a company says it’s going to insure your boat for ‘x’ amount doesn’t mean the policy doesn’t exclude coverage for the types of losses to which you might be exposed.” A third common mistake is focusing too much on cost. “Just as with boats themselves, cost is most often related to quality,” said Bruce Wixson with ACE Recreational Marine Insurance. “While it may seem prudent to save a few dollars on premium up front, the boater often pays later in the form of poor customer service and claims adjusting when it matters most — after a claim.” Rick Stern with Progressive agreed. And, noting that some boaters may seek marine insurance policies through their home or auto insurers to save money, he emphasized again that expertise is critical. “Many providers offer boat insurance products but don’t necessarily know boats and boating,” he said. “Many boaters think they have the coverage they need through their homeowner’s policy, but this coverage is often very limited. Consider purchasing coverages specifically designed for boats in order to be protected in the areas that are not covered under that homeowner’s policy.” A final mistake boaters make is misunderstanding the liability insurance known as “bodily injury/property damage” coverage. “While BIPD will provide coverage for injuries caused by a boat owner to another person or damage to another person's property, this liability coverage does not provide coverage for injuries to the boat owner or damage to the boat owner’s own vessel,” Stern said. “Injuries to the boat owner can be covered by purchasing medical-payment coverage.” He also advised that, to be fully protected in the event of a loss, physical damage coverage will be needed. Boat owners also may want to consider specialty coverages for personal items and fishing equipment, as well as for wreckage-removal services and fuel-spill cleanup. … And Avoiding Them According to Nolan, the best way to avoid the most common mistakes is simply to do your homework. Dock talk, he advised, is a great resource. “If you ask around at a marina or the boat ramp (about) who's providing good coverage and service, I think you will get some useful information,” he said. “I'd (also) ask boat repair facilities, independent marine surveyors and adjusters who work with various carriers. “The other aspect that I'd continue to pound on is that boat insurance is different than most coverage, so it’s important to deal with someone who has expertise in this particular field,” he continued. “While a carrier might be able to repair the fender on your automobile or replace your jewelry after a theft, it may not be able to provide you with the expertise to salvage your boat if it sinks… and avoid fines and penalties for polluting the environment.” Stern and Wixson both agreed. “Consult with many providers and agents, and ask lots of questions,” Stern said. “Again, boat owners should work with a provider that is knowledgeable about boats and boating. Boats are expensive investments, and owners should feel comfortable with, and confident in, their insurance provider and the coverages they elect.” “Work with marine insurance specialists, and know who your agent and insurance company are,” Wixson advised. “You should not be asking yourself these questions after the claim occurs. “When in doubt, ask fellow boat owners, dock neighbors, club members and even your local marina for references,” he added. “Word of mouth and reputation can be a very powerful tool, and there is no substitute for first-hand advice from those who have suffered a boating claim in the past.”

Boat vs. Yacht Insurance
There IS a difference—do you know it? Unlike a typical homeowner’s or vehicle insurance policy, the language in boat and yacht policies can vary tremendously from company to company, and even from policy to policy. Insuring a boat is completely different from insuring a yacht. Yachts are classified as vessels 27 feet or more in length, while boats are 26 feet or less. Agreed-to-value policies provide for all damages incurred, except sails, outboard motors, canvas covers, cushions or other specified items. They do not reflect depreciation or market values, which means you will get a greater settlement in the event of a claim because in a typical actual-cash-value policy, depreciation and market values are subtracted from the payoff you receive. “Many boat policies have ACV coverage on the hull and equipment, which means those items would be depreciated at the time of a loss,” said Mike Smith of Global Marine Insurance Agency Inc. “Most yacht policies provide agreed-value hull and replacement cost coverage, which is much better. The insured would know exactly what they were getting after a loss, versus having to negotiate with an adjuster as to value.” Smith also observed that a boat policy is designed for vessels with different exposures. “For example, a boat policy typically includes unlimited overland transportation on a trailer,” he explained. “A yacht policy would restrict overland to, say, 300 miles.” Then there are the deductibles. A yacht policy offers a deductible of up to 3 percent for any hull damage. However, deductibles for a total loss, marine electronics loss or a windstorm loss can vary depending on your specific policy. By contrast, a boat policy offers a flat deductible, typically of $250, $500 or $1,000. “A new option on deductibles is just hitting the market, which is a disappearing deductible,” Smith said. “Every year you don’t have a claim, your deductible reduces by 25 percent, and then you have a zero deductible after that without an increase in premium.” If the boater does have a claim, the deductible resets to the standard, but it will begin to reduce again with each claim-free year. “You can only get this on boat policies right now, but I’m sure it’s coming on yacht policies,” he said. The protection and indemnity (liability) feature of yacht insurance provides broad coverage designed to shield you from the effects of maritime law. Your coverage is much broader than with a typical watercraft liability policy, and offers protection to permissive users, captain and crew liabilities, along with the Jones Act, a federal law that allows a seaman who gets injured on the job to bring a suit for damages against his or her employer. “You’re better served to buy more,” said Bob Luellen of Worldwide Marine Insurance. “We’re a lawsuit-oriented culture, and if something happens, the response will be, ‘You didn’t adequately cover your boat.’” In addition, yacht insurance addresses salvage to a damaged yacht, legal liability to remove a sunken wreck and uninsured boater coverages. In a typical boat policy, only general liability protection is included. “This is important,” Luellen said. “For example, if your boat sinks in the Great Lakes or any of its tributaries, the U.S. Coast Guard says it must be raised. There will be salvage costs, fuel clean-up – and you’ll have to pay the bill regardless of your coverage.” Smith observed that while most yacht policies provide salvage coverage, they do so in different ways. Some choose to limit the dollar coverage to a stated amount or percentage of the hull amount. “The better policies provide salvage coverage up to the total hull value,” he said. “A very important part of the salvage issue is wreck removal. Some companies include wreck removal under their hull coverage, which then limits its value. A true yacht policy will include it under the protection and indemnity limit, which will provide much higher limits and additional coverage.” Regarding uninsured boaters, Smith said this coverage is usually offered by both boat and yacht policies. “It’s important coverage for the insured in case he or she is injured or an uninsured or underinsured boater,” he said. “There are many, many uninsured boaters.” Another difference is that in yacht policies, your legal defense is in addition to protection and indemnity limits, while boat policies offer legal defense within the limit of liability. “This coverage is generally included,” said Paul Sexton of American Modern Insurance Group. “In our policies it is provided as additional to any limits of liability.” Yacht policies have warranties, including the seaworthiness, navigation limits territories and navigation lay-up limits. While some boat policies do not require warranties, others may incorporate them. “Warranties are found among many boat and yacht policies, and they vary widely,” Sexton commented. “Our policies do not generally carry too many warranties. We rely on exclusionary language as opposed to warranties.” “The typical ones for both are private pleasure use, navigation territory, lay-up and seaworthiness,” Smith said. “Some unusual ones used typically in high-performance-boat policies are named-operator, dusk-to-dawn and locked-trailer warranties. These are serious issues that should be clearly understood by the boat owner.” The issue of boater education is a critical one. “Shop wisely,” Sexton cautioned. “The lowest rate should not be the deciding factor.” Indeed, many boaters consider adding their vessels to their homeowner’s insurance in an attempt to reduce their costs. According to Leah Knapp of Progressive Insurance, a recent survey revealed that many respondents believed they would be covered in specific boating-related situations. “One-third mistakenly believe that by simply adding their boat as an endorsement on their homeowners policy – meaning the boat has been listed as an asset, the same way someone would add jewelry or other personal items – they would be covered in specific boating-related claims situations, such as lost or stolen fishing equipment and personal belongings, broken-down tow vehicles, oil or gas spills, et cetera,” Knapp said. “The reality is many of those situations are not covered by a standard homeowner’s policy endorsement. Coverage for those types of losses is available from specialty boat insurers. Boaters should know what coverage options are available and select those that best meet their needs.” Smith also said that homeowner’s coverage won’t be nearly as broad as a specific boat or yacht policy. “The cost is substantially less when you add a boat to a homeowner’s policy, but you don’t get near the coverage,” he said. “For a little more money, you get the right protection; you never know what can happen. Specialty marine insurance agents know all the important issues facing a boater and how best to cover those exposures. The old adage still holds true – you get what you pay for.” “If you need to insure your boat or yacht, the best thing to do is to get in touch with a marine specialty agent,” Luellen agreed. “It’s a specialized market. You’ll be dealing with an adjuster who specifically does boats. Ninety percent of upset clients have problems directly related to mistakes that were made in how the policies were written. It wasn’t intentional; the agent just didn’t know. You also need to be educated, and understand what you’re buying.” Luellen cautioned that some policies have features designed to make them look better, but these features often aren’t functional. “Watch out for gimmicks in marketing,” Sexton agreed. “Some companies tout their coverages, but don't get into the weeds with exclusions and warranties that are found throughout. For smaller boat, customers should probably stick with a company that allows them to tailor their policy; many larger companies may package coverages that just aren't needed for the average boat owner.” What would your current boat or yacht insurance policy pay if you needed to collect from a claim? The following are examples of the policies insured for the same amount and with the same deductible by three different insurance companies. The claim is for both cosmetic and hull damage to a 1999 boat with a repair estimate of $21,000. No other parties are held responsible for damages. The difference between the amounts paid is based on the fine print of the policy. The bottom line is not the amount of your policy premium, but how much you will collect at the time of loss.