I got to be a part of the Dream Team and help coach some wonderful athletes at winter Special Olympics basketball tournament in Helena, MT this year! The athletes starting in the back row from left to right are John Bronec, Tom Dohrman and in the front row from left to right are Josh Lewis, Adam Selstad, and Nick Roberts. We took silver!
It seems like every time we turn around, our insurance keeps going up! For those of us that have a budget, it is frustrating to keep having to factor in constant increases in monthly insurance payments. The most frustrating is car insurance. Most car insurance polices renew every 6 months so there seems to be constant increases happening all the time. So why are insurance companies trying to raise their rates all the time and take money from us when most of us are actually good drivers? The answer is pretty simple. Not everyone is a good driver and cars are more expensive to repair these days.
But that doesn’t really explain why my premiums go up. Car insurance goes up because insurance companies have to pay 3 different industries in addition to covering company expenses. The first is medical fees. Health insurance always keeps going up. Why? Advances in medicine are able to save/extend lives but because we are always learning and inventing new ways to fight disease and health care costs rise consequently. In car accidents, medical fees are a large part of where your premium ends up. The second industry that gets your money is attorneys. In the United States, we have almost 5% of the world’s population. We also have 70% of its lawyers. Attorney fees gobble up another chunk of premium because we live in a day and age where people tend to sue each other first instead of a last resort. Attorneys aren’t lowering their prices at all and that has an impact on car insurance. The third industry is auto body shops. Cars and trucks today are equipped with sensors and backup cameras and a host of other amazing technological advances. This is well and good but means that cars today are more expensive to repair than cars from 5 or 6 years ago.
But this is only part of the reason. We talked about where your premium goes and the three industries that helping to drive insurance costs up but what if you haven’t had a claim, sued anyone or gotten hurt in a car accident? Another facet to why car insurance is so expensive is unemployment rates are low right now. So we see more people out driving. It also doesn’t help that gas prices are also remaining relatively low. Additionally, distracted drivers are causing a lot of accidents and texting and driving has been a large culprit. We also have to keep in the mind the steady march of inflation. The inflation rate right now is 1.9% and that slow increase impacts our entire economy and car insurance is no exception.
But we didn’t really answer the question. Why do YOU have to pay more because the rest of the world decides to improve itself and make global decisions without ever bothering to ask for your input? If you drive the same car you did 5 years ago and you haven’t gotten in a wreck or even a speeding ticket then why should you have to pay more and more for car insurance? Well the answer to that is easier to understand in a scenario. Let’s say you are driving down a road 5 years ago in your vehicle. The car next to you happens to be a 2005 Toyota Camry. Let’s also say you are a great driver and thus there is only a 5% chance of you getting in a wreck with this Toyota Camry. Now fast forward to today. Let’s say you are on that same road and you’re still a great driver with no tickets or accidents so there is still a 5% chance of you getting in a wreck with the car next to you. Now the only thing that has changed is there is a greater possibility that there isn’t a 2005 Camry next to you but a 2015 Camry. Why? Well more people in the last 5 years are financing more expensive cars. This means we are seeing more expensive cars on the road that have more technology on board with them. Now going back to our scenario, there is still only a 5% chance you will hit this newer vehicle but IF you do, your insurance company will pay more than it would have 5 years ago. That’s not your fault, your insurance company’s fault or the fault of the guy driving the new Camry. It’s simply the day and age we live in right now.
The good news is that the Balthazar Insurance Agency is a Farmers Insurance agency. And the direction that Farmers Insurance is headed as a company means we have anticipated these increases in auto insurance. We are prepared to cover the losses that some people will experience without substantially raising rates to compensate. This has to do with the way Farmers has built themselves as a company and it bodes well for our customers because we have stability for years to come and know that Farmers has the financial means to provide a premier product at a competitive price.
Traveling is a very fun experience but it can also be very expensive. So when it comes time to rent a car, you are going to get offered insurance by the rental company. But doesn’t your personal car insurance cover you in that rental car? If it is domestic then the answer is most likely yes. If you’re in Mexico, Canada or overseas then it might be different depending on your carrier. Ask your insurance agent if you’re covered or not.
So let’s say you have insurance that covers you. Why buy the insurance offered by the rental company? Well there are a few things to consider. First of all, your insurance will extend your liability and the comprehensive and collision coverage if you have it, but your deductibles extend as well. So let’s say you don’t buy rental car insurance and you parked your rental at a supermarket and return with your groceries to find someone door dinged your car. Well the rental company is going to see it and they are going to make you repair the door. Most people with full coverage have $500 deductibles which means you’re either paying $500 for that ding, or fixing it out of pocket. Both will be pricier than just paying the extra for insurance for most vacation timelines.
Here’s another scenario, let’s say you get in a hit and run and the cops haven’t caught the guy yet and you have to return the car. The rental company will make you fix their car and while your own insurance will cover the damage, each day that car is at the shop and not in their line up, that company is going to charge you a “Loss of Use.” This number is usually what it costs to rent that car to another customer so they don’t lose any money.
Another important thing to mention is that it will be a claim that gets put on your record and that could affect your rate. Getting the rental car insurance on its own means you can bring the car back with heavy damage (usually up to $50,000) and they will cover the damages.
Now what about credit card insurance? Some credit cards have rental car insurance built into them. It depends on the card type but the 4 major card carriers usually have this feature. There is a lot of fine print on how these cards work in an accident. Some cards require rental car insurance from the rental company to be rejected. Some do not extend liability. Some force you to put a claim on your personal insurance first and then the credit card picks up the rest. Some do not let you insure certain types of vehicles. And some only will insure you in certain countries. But some cards will pick up the “Loss of Use” charge if you get tied up in that. They can also help out with your deductible if you have to put the claim on your personal insurance. But then you have to deal with the increased insurance premium due to a claim. It all depends on what your card carrier’s terms are to determine if having this insurance is a good idea.
Who knew rental car insurance could be so complicated? So when you’re planning your next trip, give us a call and let us take a look at your situation so you can get that peace of mind.
State Farm lost billions in car claims last year! Why? Well there are a number of reasons why– texting and driving, low gas prices, and expensive cars are some. But the real problem is that it’s just really expensive to insure bad drivers. And unfortunately, there are a lot of them. Bad drivers are always a problem but when combined with low unemployment and low gas prices, there are a lot more drivers out there than in the last few years. When you add to the fact that many people text and drive AND cars are more expensive than ever, it’s not wonder that insurance companies are struggling to keep up with the large volume and dollar amount of claims. State Farm got hit hard and is taking action to recover from their losses. Check out the article Here to read more.