Teenage Drivers?

What fond memories we have of turning 16… Taking our drivers test, buying a car, driving to school for the first time, or picking up your friends for the first time, many exciting things happen around that age(or at least from the child’s perspective!).  For parents it opens the door for many new worries and anxieties, including “how much is this going to cost me?”  Adding a teenage driver to your insurance policy is very expensive, I will try to help you understand why, as well as give you some pointers to help lessen that, and explain the importance of having them on your policy instead of on their own.

Teenagers are risky, we all know it.  At 16 years old the human brain is not finished developing nor is it common that a 16 year old brain has reached its full capacity for decision making.  The biggest issue insurance companies have with teenage drivers is simply lack of experience.  It is very common that an accident that you or I would easily avoid safely, can cause an inexperienced driver to panic and overreact.  Add on top of that the numerous distractions they have from stereos and smart phones to friends in the car with them.  Aside from smart phones there are other risks associated with younger drivers that may not have been an issue in years past such as the time constraints placed on teenagers these days.  Teenagers today are under more pressure than ever to play sports and practice, study for SATs, figure out where to go to college, all on top of much harder curriculum which requires much more time studying at home.  These factors all lead to the second biggest risk which is speed.

Now, if you are looking to save as much money as possibly when you add your child there are several things that will help significantly!  #1 Be a Good Student, most insurance companies offer sizeable discounts to those underage drivers who can maintain a 80 or above average, some as much as 15%.  #2 Driver Training!  In the state of Georgia you are now required to take a drivers training course to get your license, and some insurance companies still offer a discount for it.  However, there are other programs including an offensive drivers course that can help get some additional discounts.  #3 Choose the right car! If you put your child in a new high performance sports car, you will pay heavily for it.  The best option for saving money is to buy a cheaper car that you do not need comprehensive and collision coverage on, these two coverage is where the bulk of the premium will go.  In the end it is not just the discounts you get on the front end.  The best thing you can do is get them as experienced as possible, and make sure they are aware of the dangers of driving and the importance of paying attention.  When they have the learners permit take them every day to drive, put them in situations that they will experience and get them used to ignoring distractions and issues that can arise.   This may not save you money the day you add them to your policy, but if it helps avoid a ticket or an accident it will be worth more than any discount, let alone if it saved them from injury!

The last topic I want to discuss is a very common mistake that parents make.  Even Clark Howard gets this wrong!  There are certain situations where it is cheaper to put your child on a policy by themselves.  The problem is that while it might save you money it opens you  and your family up to a very large amount of risk!  The problem lies in Georgia State statute that if they can prove that you are supporting your child in anyway, they will name you in the lawsuit.  Your child’s insurance will pay first, but in the case of a serious injury or death it will not be enough coverage.  Your insurance will not protect you because your child was not a listed driver and the vehicle was not insured on your policy so they have no duty to defend you.  Even if the judge and jury determine that you should not have to pay anything(very rare cases), you will be responsible for all of your legal fees which as you can imagine can get very high especially involving death or serious injury.

Please remember the purpose of Insurance.  It is not for you to fix your car when you have a fender bender, it was designed to protect you against catastrophic losses that could ruin you financially.  Think about it; as bad as it would be to get a $30,000 car stolen from you, wouldn’t it be much worse if you seriously injured someone and had a judgement against you for $1,000,000?

The safest option is to do it the right way, when it comes to insurance it usually does not pay to try and skimp on coverage.  The amount of liability you buy is not the most the other person can collect, it is simply the most your insurance company will pay on your behalf!  If you carry 25/50/25 and you seriously injure or kill someone, you will get a judgement against you, and if you do not have anything worth taking, they can garnish your wages fro the rest of your life!

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All about deductibles

A deductible is the amount of money you must pay out of pocket in the event of a loss before the insurance company will step in and pay.  The most common deductible amounts are $500 and $1000, but most companies offer as high as $5000 or higher for homeowners policies.  We often get asked, “What deductible should I choose?”  That is a very difficult question for us to answer, simply because we usually do not know your entire financial situation.  As a general rule I suggest people purchase the highest deductible amount that they would be willing and able to pay in the event of a loss.

If you have very little savings and only one car that you rely on to drive to work every day, then I would suggest a very low deductible simply because if something happened to that car, you would need it fixed right away and you want to make sure you have enough money to cover your deductible.  On the other hand if you are financially well off, and have more cars in your household than drivers, I usually suggest a higher deductible.

In Auto Insurance it is common for your Comprehensive and Collision Coverage to be the two most expensive coverages you have.  However you can always lower your premium by raising your deductibles.  A higher deductible not only means you are paying more of the cost to repair/replace, but it also cuts down on the number of claims that are turned in, thus reducing the number of employees the insurance companies must hire to adjust all the claims.

While raising your deductibles will decrease your premium, it will not decrease by the same amount for everyone.  For the most part when you raise your deductible, the insurance company reduces your premium by a percentage.  Therefore, if you have a bad driving record, or teenage drivers on your policy  raising your deductibles can save large sums of money, whereas a older couple with clean driving records it may not save much money at all.

It is also very important to take into consideration the value of your vehicle when choosing your deductible.  There are many theories out there as to when you should drop comprehensive and collision coverage, but in reality it is a case by case basis.  I always look at what I call the “break even point.”  I take the current value of the car, and divide that by the cost of the comprehensive and collision coverage combined.  This determines how long it will take you to pay for the value of the car through the premiums for comprehensive and collision coverage.  For example a 2007 Honda Accord on a customers account cost $523/year just for the comprehensive and collision coverage with a $1000 deductible.  The current value of that car is about $10,750 in its current condition.  So if that car was totaled the insured would receive $10,750 – $1000(deductible) + sales tax = $10,335.  $10,335/$523 = 19.76 years is your “break even point” There is no way I would suggest removing this coverage.  However a customer with a 1995 Ford Explorer with the same $1000 deductibles on comprehensive and collision coverage is paying about $325/year and his car is worth about $1900 in its current condition, so using the same math as before this vehicle’s “break even point” is only 2.77 years.  This means that if you can drive for 3 years and not have a claim then you came out better financially by not having that coverage even if you total it at the end of that 3 years.

This brings me back to one of my original points, if the customer relies on that car for transportation, and does not believe they could come up with or are not willing to spend the amount of money needed to repair/replace that vehicle I would still suggest keeping that coverage, knowing that in the long run it does not make the most financial sense.

One last item to keep in mind when choosing deductibles is at what point would you turn a claim in.  Yes you buy insurance for when you have a loss, but the reality is that insurance is meant to protect you in losses that could be catastrophic, not necessarily for small fender benders or a small homeowners theft claim.  The problem is that if you turn in a claim, almost 100% of the time your rates will go up at the next renewal.  For example if you have a $500 deductible on your homeowners policy and your backpack gets stolen at the airport that has your $750 laptop in it, I would usually suggest not turning in the claim.  You will only get $250, and it is possible that your rate will increase by more than that over the next 5 years so in the long run it costed you more money to turn it that claim and get $250 then if you had just paid out of pocket.  If this is the case then you should try to save a little money and go to a higher deductible.  I have also heard customers say that they probably would not turn in a claim unless it was over $5000, so I would recommend the highest deductible offered, because there is no reason to buy a lower deductible if you are not going to turn in smaller claims.

The bottom line is there is no correct answer for choosing a deductible, it is a case by case decision.  It is often that the same customer on the same policy may have cars that should have the coverage with a low deductible, cars that have a high deductible, and a car that does not carry comprehensive and collision at all.  It is the insureds responsibility to know what their car is worth, what they are paying for comprehensive and collision coverage, and then sit down with your agent and determine what is the best route for you.

 

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Myth: “Red cars are more expensive to insure”

I have been hearing this for years, and many people still think this is true. I can assure you that the color of your car does not effect the price of your insurance. It should be obvious to anyone that knows me, because I am known to be tight with my money, and yet I have two red cars.

Just a few years ago most insurance companies still only looked at a stanadrd set of statistics and rated on factors such as age, sex, marital status, and driving history. While these are still used heavily, in today’s world of multivariant rating, insurance companies look at hundreds of variables to determine your rate including your credit. The color of your car has never been used in rating however. When you get a quote, or buy a new car your agent does not ask for the color, and there is no way for us to know the color. We do ask for a Vehicle Identification Number but that does not tell us the color of your car either. Furthermore, how easy would it be for people to cheat the system and paint their car?

Red cars account for about 13% of the cars on the road behind white, silver, and black respectively. According to some independent research grey or silver cars tend to be ticketed the most per capita, and white tends to be the least per capita. Red tends to be ticketed very close to the same percentage they represent of the total cars.

The bottom line is you will get ticketed for your driving not the color of your car. Yes getting a ticket can make your insurance go up, but once again it is because you were driving too fast, not because your car was red.

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Still Improving

Thank you for visiting our web site.  We are still working to improve the look and feel of our website, but it is now operational.  From time to time we will post articles on insurance topics from what coverages you need and how they work, to dispelling myths about insurance. Please check back at a later date to read some of our posts, and feel free to leave us comments on how to improve our site!

 

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We’re Home!

We are now officially open in our new permanent home.  We are now located at 2855 Buford Hwy, across the street and a little closer to town.  We have worked very hard, and are very proud of our new home, please stop by and visit us!

Thank you to all of our friends and customers that have already stopped by to tell us how good of a job we did.

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We’re Moving

We are currently undergoing the finishing touches of our new office building. It is across the street and our new address is 2855 Buford Hwy Duluth, GA 30096. Please stop in and check out our new office opening Early July 2011! 

Following our move, we will be putting the finishing touches on what we hope will be a website that is worthy of our excellent customers.

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Corley Insurance is building a web presence!

Please check back at a later date!

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