Monthly Archives: October 2013

Avoiding Private Mortgage Insurance

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Some lenders require private mortgage insurance, or PMI, when you obtain your mortgage. It can cost you hundreds, even thousands of dollars each year. It is rather easily avoidable, however, by simply making different financial arrangements. Here are a few ways that you can get out of this extra financial burden.

Private mortgage insurance, sometimes also referred to as Lender’s Mortgage Insurance (LMI), is required by law if you borrow more than the necessary 80% of the loan to value (LTV) of the house. Once you go and borrow beyond this 80%, PMI becomes necessary. PMI can range anywhere from two-tenths up to nine-tenths of the total amount of the loan.

Lenders look at loans larger than this value as being a greater risk to themselves. The private mortgage insurance is designed to offset their risk. However, what has actually happened, is that while it makes the lender more comfortable, it can also make it that much harder to get a mortgage because now the payments become larger to pay for the PMI. There are three ways around this problem.

* Make A Larger Down Payment

When you come up with the remaining 20% of the value of the house, you then make it unnecessary to pay the PMI. Simply by putting down this amount, you can save hundreds of dollars each year. Even if you have to borrow the money from a relative, the savings will make it worthwhile if you can produce cash at closing.

* Piggyback Loans

This is a recent feature among lenders to help people have a way around PMI. Instead of taking out one mortgage, you actually take out two. The first one is for 80% of the amount you need. Obviously, if you go more than this, you pay PMI. This becomes your first mortgage.

A second mortgage is taken out at the same time, as a piggyback on top of the other one, typically either for 10%, or even 15%, of the remaining balance. The amount not included in this amount is expected from you as a down payment. These percentages may vary with different lenders, but they will be similar.

* Reduce Amount Owed

Private mortgage insurance was designed to be required only when more than 80% is borrowed. This means that mortgages should contain clauses in them that automatically eliminates this added charge when you get the principal down to 80%. The lender can, however, require you to pay PMI until you actually bring it down to 78%, and you must be current with your payments. (High risk loans may have different terms.) In some mortgages, however, there may be a required period of time to pay the PMI – even if you pass the 80% mark. Still, some lenders may let you talk them into removing it once you do so.

If you already have a mortgage and are paying PMI, it would be worth it to make larger payments if you can just to be rid of it. Once you reach the 80% LTV, PMI can usually be removed soon after.

In 2007, if you took out a mortgage this year and are required to pay PMI, you may be able to claim some of it on your taxes. The main requirement is that you make less than $110,000 for the tax year. It may not be available after this year.

Avoiding PMI – Private Mortgage Insurance

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PMI – a recurring, monthly, unwelcome guest. It sounds similar to and is about as welcomed as a similar acronym. PMI is private mortgage insurance. This insurance policy is paid for by the homebuyer when the amount of their primary mortgage is greater than 80% of the value of the property.

You will note that the term “primary mortgage” was used. This is for a specific reason. It is not the total of all mortgages and home loans on the property that is evaluated, but rather the amount of the primary or largest mortgage on the property that can trigger PMI.

PMI is calculated by taking 0.5% of your primary loan balance and dividing it by 12 (12 monthly payments). For example, if your primary mortgage is $200,000 and you are required to pay PMI, your mortgage payments would be an additional $83.34 per month. For most homebuyers, this additional premium is a considerable financial burden to undertake.

There are ways around PMI for those homebuyers unable to put down 20% or more on their new home. Mortgage lenders have created loan packages which include two or more home loans that when combined exceed the 80% threshold, while no one of the loans exceed that threshold. Typically there is a primary mortgage and either one or two home equity loans taken out simultaneously which are 81% – 100% (or sometimes more) of the home value. This affords the homebuyer to put less than 20% down, or perhaps put nothing down at all while at the same time eliminating the need to pay PMI.

If you know you are going to be putting less than 20% down on the purchase of your home you should immediately speak to your home lender about avoiding PMI. A good home lender will inform you about these types of packages. Though the rules on these packages may differ from state to state, the vast majority of states allow for these types of loan packages.

When you review this type of package you will note that there will invariably be a different interest rate on the mortgage than there is on the home equity loan(s). The mortgage rate may have a slightly lower interest rate or perhaps even a considerably lower interest rate. You should be able to calculate what the monthly payments would be for the combined loans and then determine if it comes out less than a single mortgage with PMI. Obviously, a good lender is only going to present you the package if the payments are cheaper than a single loan with PMI.

You are able to refinance the loans at any point and combine them into one payment. You would only do this when the value of the home is more than 20% above of the amount you will mortgage. As the value of your home increases through home improvements or time, you can receive an appraisal and speak to your home loan professional to determine if refinancing the loans into one loan makes sense.

These types of loans are often referred to as 80-10-10 loans or 80-15 loans, among other names. An 80-10-10 loan is a mortgage at 80% of the amount to be financed and than two home equity loans at 10% each. You will likely find that all three loans will have a different interest rate with this type of package. 80-15 loans are similar but would be the main loan at 80% and a secondary loan at 15% with the buyer putting down the additional 5%.

It is important to note that when financing 90% – 100% of a home, or more, the appraisal will play a key role in the loan approval process. If the appraisal does not come out at a pre-determined amount, the lender may feel that the transaction is not a sound one. You may need to go back and renegotiate the purchase price of the home or run the risk of being denied the mortgage. Most real estate contracts, however, do have a clause in them that allows the buyer out of the contract if they are denied a mortgage. You will want to speak to the lawyers and real estate agent in advance if you are planning for applying for this type of loan. Some contingency clauses in contracts specify a maximum percentage of a loan you need to qualify for and if you are denied for a loan at a higher percentage you are not protected by this clause.

It is important for you to have all of this information in place before you start your home search. By knowing how your financing is going to be handled you will be able to make sure you are protected in the transaction and you will also be able to negotiate a better deal since your financing has been completed or is close to being completed. The key is knowing in advance what percentage of the value of the home you are able to and willing to put down on your new home.

Aviation Insurance More Than Sky- High For The Fly Boys

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“Those magnificent men in their flying machines” Ever since the Wright brothers pioneered our ascent into the skies we have strived to fly higher, faster, further with aeronautical advancements surpassing one another at an ever-increasing rate.

Taking to the skies is, of course, much more than the romantic notions upheld in quaint versions of “Up, up and Away” or “Come fly me, let’s fly, let’s fly away” It is, for most aircraft owners, a significant part of their livelihood and not to be contemplated without the proper insurance.

Aviation insurance is different from other forms of insurance in that it is very subjective. Due to the vast array of aircraft types, uses and pilot experience, policies should always be specifically tailored to suit the unique requirements of each individual applicant. For this reason it is recommended that a broker, specialising in aviation insurance be engaged to arrange cover.

When applying for aviation insurance, several matters will be taken into account including:

Sum insured: Aviation policies are divided into

i. Hull: The loss of or damage to the aircraft.

ii. Liability: Loss of or damage to property belonging to others and/or bodily injury to others as a result of the insured’s negligence

Aviation insurance is based on “agreed value”. This means that, in the event of a total loss in respect of the hull, the amount agreed to in the policy is what will be paid upon acceptance of the claim.

It is vital that the aircraft be insured for its true value as major difficulties can arise for the owner if the amount is under or overinsured. For example, if an aircraft is grossly underinsured, the agreed value will not be enough to enable the owner to replace it.

In the case of overinsurance, the insurer may decide to approve a lengthy repair process, costing more than the market value but less than the agreed value. This will result in major delays to plans of getting “back in the air”.

Liability is a different issue with settlements determined in most large cases by the courts.

Type of aircraft: Generally, helicopters cost more to insure than fixed wing aircraft. Here in Australia, this is partly due to the manners in which they are employed, for example, mustering livestock and heavy industrial use.

Helicopter accidents are also more likely to result in a total loss of the aircraft than fixed wing accidents. What would seem a relatively minor “heavy landing” in a fixed wing aircraft would most likely write-off a helicopter.

The best way to ensure the lowest price possible is quoted for the aircraft, fixed wing or rotary, is to be clear with the insurer exactly what it will be used for. For business owners, it may be worthwhile considering whether diversifying from the central business function is worthwhile if diversification results in more hazardous usage of the aircraft.

Pilot Experience: Pilot experience and qualifications are the most important aspects of determining the amount of the premium and level of coverage. In some cases, cover may not be extended if the pilot has not enough hours in the air logged.

If any persons other than the owner are to be flying the aircraft it is the owner’s responsibility to ensure all details regarding additional pilots be accurate and up to date. Inaccurate information can lead to a claim being rejected. There are basically three types of pilots able to fly the insured aircraft:

i. Owner: Self explanatory

ii. Open Pilot Warranty: The Open Pilot Warranty (OPW) is the minimum standard of requirements that must be met in order for a pilot to fly the insured aircraft. Although names of OPW pilots do not have to be notified to the insurer, it is crucial to ensure that all OPW pilots meet the requirements for the insured aircraft. Remember that the OPW for one type of aircraft may not be satisfactory for another.

iii. Named Pilots: These are persons you will be permitting to fly the aircraft but who do not meet the OPW standards. Using Named Pilots will generally mean a higher premium.

It is useful to consider the insurer’s position here. An aircraft is a high level of risk to the insurer. In order to underwrite that risk it must be worthwhile. Since most aircraft accidents are statistically due to pilot error, more premium must be charged for less experienced pilots to justify the risk.

Once cover is granted, renewal after one year is not always automatic.

As the renewal date approaches, cover is re-evaluated along with the premium. This can have a positive outcome as pilot experience and any additional training undertaken will be considered when calculating the new premium.

Overall, the main issue to be understood is that all information given regarding the aircraft to be insured and its pilot(s) is to be as accurate and up to date as possible. Whether or not this leads to a premium one may deem “cheap” is irrelevant. What is relevant is that the premium will be a true reflection of the risk.

And that is as insurance should be.

Auto Insurance Companies

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Almost everyone needs to know about auto insurance companies. Even if you don’t drive right now, you may one day find that you need to. Even if you live in the city and have no need for a car, you may find that one day you move from the city and suddenly, a car is a necessity. Though there are some that go through life without driving, you know that almost every does so. This is why there is such stiff competition out there for insurance.

You may notice that auto insurance companies have a lot of advertisements on television, and you may also notice that they are vastly different in appeal and target audience. Some products have a simple audience they know they must reach. Almost any product has an age and gender group they target and they place their ads accordingly. This is not the case with auto insurance companies. They have to target everyone. This is why the ads are so diverse and are on at all times of the day. They have to appeal to every age group and gender, and that means a huge number of different ad campaigns.

Because there are so many ads out there by auto insurance companies, it can be easy to get confused. Who really is the best? Truthfully, there is no right answer to that question. You want to save money, everyone does, but your location, automobile, and your driving record all play a part in how much you pay. You also pay more for full coverage. Auto insurance companies can’t promise you the best deal because each individual will have a different story when it comes to what they need and how much it will cost them.

There are some auto insurance companies that offer to compare prices for you. It sounds good in theory, but I’m not sure I’m buying it. They can say they are giving the quote from other companies, but how many of these quotes are accurate? I know that one of the auto insurance companies give you four quotes from other companies. The problem with this is that there are so many companies out there that it is impossible to know if they have selected the highest quotes and left off the ones that might truly save you money. The best way to get the best price is with old-fashioned hard work. You have to check it out for yourself.

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Auto Repair Insurance: Extended Warranties – Myths And Facts

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How much insurance does one need? You have the big four: home, health, life, and car insurance. Then there’s a second category, which starts getting a little hazy with credit card insurance, purchase protection plans, fraud insurance and more. Extended warranties, also called extended service contracts, or extended service policies fall into the mist of this second category.

Extended warranties are supposed to pay (in full or in part) for specified repairs for a specific period of time after the expiration of the factory warranty. They can be a great value. They can also be a significant waste of money. It gets quite foggy in the details. What exactly is covered? How long? How much? Are there hidden charges?

There are numerous extended warranty companies and an even wider variety of warranty packages available: silver, gold, platinum, platinum-plus, and a host of other confidence-building words. What’s the best plan, and are extended service contracts worth the money? Extended warranties, like life insurance policies, are a numbers game. They’re a gamble. You pay $2500-$4500 for a 2 year, 100,000-mile protection plan and hope that you get at least that back in warranty repairs. The provider on the other hand, hopes to pay out less than it insured.

There are three major types of plan providers: The manufacturer, the dealership/third party, and third party providers. Each one has its assets and liabilities (discussed ahead).

What exactly is covered in an extended service plan? As mentioned above, what’s covered depends on the package purchased. Some plans only cover the power train: the mechanical components of the engine, transmission, and rear-end. Others cover the power train plus some electrical components. Still others cover electrical, advanced electrical, and computer components. Some only cover what’s listed in the contract. This is called a “Stated” or “Named” contract. This means that if it’s not stated, it’s not covered. Some cover bumper-to-bumper, similar to a manufacturer warranty, except trim pieces, upholstery, exterior components, cosmetic items, and a number of other exclusions.

Never before has the adage, “The devil’s in the details,” been so applicable.

Manufacturer Extended Plans:

Extended service plans from the manufacturer are the best in terms of coverage, convenience, and quality. Coverage is similar to the warranty while the vehicle was under its original factory warranty-with similar exclusions stated above. The billing is direct, meaning you don’t have to pay out-of-pocket, except for a deductible, if applicable. Quality is great too, as an extended warranty from the manufacturer will only use factory parts. They also have money, so there’s less risk of bankruptcy.

The down side of manufacturer extended service plans is that they are not cheap. These plans are generally the most expensive, require low mileage standards, and necessitate servicing your vehicle at a dealer for coverage.

Dealership/Third Party Plans:

Extended warranties from a dealership are actually from a third party insurer. These providers are “generally” reputable, but not always. However, if there is an issue (such as the warranty provider filing chapter 11, which is quite frequent in the extended service contract business), the dealer “may” step in to cover any repairs that would have been covered under the defunct plan. Also, claims are easier: billing is direct because the dealership has a working relationship with the provider, and there is usually agreement on price.

Some dealers set up their own “internal extended warranty,” which is honored by the selling dealer. This is rare, and should not be confused with a manufacturer warranty. Important: extended warranties are often passed off as “manufacturer” warranties. They’re not. This is a sales trick. Also be aware that there is a significant mark up, as the dealership is merely acting as the middle man. Lastly, extended warranty companies often go bankrupt without warning.

Third Party Plans:

These plans are called third party plans because they are outside the responsibility of the manufacturer and the service center performing the repairs (unless there’s a working relationship with a repair shop as stated above).

There are hundreds of extended service contract companies. Some have good reputations, some don’t. Third party plans are frequently sold by used car dealers. You may also receive an official looking notification in the mail stating that your warranty is expiring, and directing you to call an 800 number ASAP. This is a marketing tactic by an independent warranty provider. Despite the “official” appearance of the postcard or envelope, it’s not from the manufacturer. Manufacturers do not send out reminders about warranty expirations.

Given the wide-variety of third party plans there are numerous red flags.

1) Claims: Extended warranty companies will be quick to tell you that filing claims is easy, and that the service center gets paid immediately via a credit card. Thus, there’s no out-of-pocket expense for you. However, the warranty company can’t dictate a service center’s policies. Some service centers will only accept payment from the repair customer. Thus the burden is on the repair customer to fill out the forms, contact their warranty company, and await reimbursement via check, which can take 2-8 weeks.

It is the service center’s responsibility to contact the extended warranty company to let them know what’s wrong with the vehicle and to check coverage. This process can take anywhere from 20 minutes to 20 days, sometimes more, depending on the degree of repairs and especially the amount. (See $1000 and Adjusters ahead)

Service centers and extended warranty companies frequently battle over the “fair” price of repairs. Many repair shops no longer negotiate, and just state the price, leaving the contract holder (i.e., the service customer) responsible for the difference.

2) Rentals: Rental coverage is a great benefit. However, there are fixed rates and time limits. In other words, the warranty company is not going to pay to have you drive a Mercedes-Benz, even if you drive a Benz. Rental allowances range from $25 to $35 per day. Also, rental coverage is based on the number of hours it takes to repair the vehicle, NOT how long your car has been at the shop.

3) $1000 and Adjusters: Repairs that approach $1000, or that require a significant amount of work, will be cause for the warranty company to call in an adjuster to confirm the diagnosis. This will delay the repairs by a minimum of 24-48 hours. It may cost you additional money when an adjuster is involved. You may be charged to have your vehicle pulled back into the shop for inspection, as well as for the time spent with the adjuster.

4) Tear-down Charges: In many cases, an extended warranty company will require that a particular component be taken apart for inspection to determine if the repair is indeed needed and covered. This puts the service customer in a very awkward position. The customer will have to authorize potentially hundreds of dollars of tear-down expense in the hopes that the repair is covered. If it’s not, the customer is out the hundreds in tear-down PLUS the actual repair. This does happen!

Common Myths:

1) “Extended warranties cover maintenance services and brake work.”

No. Extended warranty plans do not cover maintenance or wearable items. Brake pads and rotors are wearable parts. Maintenance such as coolant, brake and transmission flushes, tune-ups, services, oil changes, bulbs, wipers, and more are not covered.

2) “They told me it’s bumper-to-bumper, so it covers everything right?”

Wrong. Not even a factory warranty covers everything. When pitching the sale for the extended warranty, one is very often lead to believe that he or she will have nothing to worry about. This is just not true on so many levels. For example, if your bumper falls off it’s not covered.

3) “I don’t have to pay anything, right?”

Wrong. Despite the claims of 100% coverage, there are many factors involved. The labor rates, labor hours, diagnostic times, parts prices, and machine work are just a few items that often conflict with a service center’s policies. Some extended contracts only pay a maximum of $55 per hour, and only allow one half hour for diagnostic time. This is generally unacceptable to the service center, as labor rates have skyrocketed to over $100 per hour at many dealerships, and average $75 at local shops. Moreover, with the complexity of today’s vehicles, diagnostic time is at a premium. The customer pays the difference.

4) “If I have an expensive problem, I can just purchase an extended service contract.”

It’s unethical, but it’s an option many attempt. However, most service contracts have a minimum time requirement before the first claim can be filed: usually three months. Also, many contracts require that your vehicle be inspected by a service center to check for pre-existing conditions-just like life insurance.

5) “My contract lasts up to 100,000 miles.”

Only if the time limit doesn’t run out first. All extended warranty plans have a time limit. For example, a typical contract will state that the vehicle is covered for two years or 100,000 miles, which ever comes first. During the sales pitch, however, the emphasis will be on the 100,000 miles, not the time.

6) “If my car breaks, it gets fixed like new.”

Actually, depending on the contract, an extended warranty company can insist on installing remanufactured or even used parts.

Items commonly not covered by extended warranties:

Any component with a pre-existing condition

Any component related to a Technical Service Bulletin (TSB)

Many components that has been updated by the manufacturer

Extra components necessary “due to manufacturer updates” to complete the repair

Trim pieces: molding, cup holders, dashboard, console, body parts, glass

Many accessories: radios, DVD players, TVs

Many expensive electronics: climate control units, navigation assemblies

Service contract positives:

Some service contracts are transferable, and may thus increase the resale value of a vehicle. Many come with trip interruption reimbursement, towing and 24-hour road side. Some plans can also be financed, or have E-Z Pay Plans. Others offer a money-back guarantee.

What should you do?

You’ll get lots of advice about doing the research, comparing plans, and reading the fine print. This is all sound advice. But what about doing the math?

Let’s say a plan costs $2500 for 2 years or 100,000 miles, whichever comes first. To break even you’ll need a minimum of $1250 per year in covered repairs, excluding regular maintenance. Remember covered is the vital word here.

Another way to break it down is to anticipate having to pay $104.17 per month over the next two years in “covered” repairs. Do you want to take that bet?

What could happen?

You could double your money or more in repair work. You could conceivably get a new engine and transmission (or used ones anyway). You could also easily spend $2500 for a service contract, and still have to pay another $2500 for repairs, which for a variety of reasons, were not covered under your plan. Now you’re out $5000.

Alternatively, you could keep the initial $2500. In many ways all an extended warranty does is prepay for repairs. You could stick the money in the bank and collect interest. Then you could withdraw the money for repairs as needed.

Another consideration that’s rarely discussed is the cause of the problems. Many car repairs problems are the result of wear and tear, neglected maintenance, physical damage, or acts of God-such as flood damage. None of this is covered. The gamble only covers failed components.

If the vehicle you’re driving does cost $2500 to $4500 in repairs due to outright failed components, is it a vehicle you even want to consider keeping? A vehicle that needs this kind of repair work due to mechanical, electrical, or computer failures may not be worth it. The $2500-$4500 would be better spent on an upgrade to a quality vehicle rather than insuring a lemon.

There’s no question that auto repair is expensive, and even quality cars break from time to time. But do they breakdown to the tune of $2500-$4500? That’s a hefty bet on a “possibility.”

Terence O’Hara from the Washington Post makes an excellent assessment about extended warranties in general. He writes:

extended warranties play upon a basic human trait to avoid loss, even if it means sacrificing a possible future gainthe gain is all the other things of value that a consumer could buy with the money that was spent on a warranty

What’s the best plan?

Money in your bank account!

Auto Insurance Quotes

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By taking the time to shop for and compare auto insurance quotes, you can find the best policy that is right for you, and many times you can lower the cost of your auto insurance coverage.

Many drivers see auto insurance as a necessary expense, but one that is distasteful to them. When asked if they’d pay for auto insurance if it wasn’t required by law, some admit that if they didn’t have to pay for auto insurance they’d save themselves the money.

The truth is that given the right insurance, in unexpected circumstances it can be very beneficial to have paid those insurance premiums every month. Auto insurance can provide financial protection and help prevent severe financial hardship in the event of an unexpected accident.

Shopping around and getting auto insurance quotes from several companies can allow you to compare the companies, their policies, and the cost of their premiums. In order to effectively do this though, you need to have enough information to make a real comparison between one set of auto insurance quotes and another.

This information can help you make sure that you get the coverage you need from a good company at the lowest rate.

So what should you do to make sure that you get the most accurate auto insurance quotes available? Here are some suggestions from experts:

1. Make sure that you compare similar policies.

Auto insurance quotes take into account the types of coverage you select, the amount of deductibles you’re willing to pay and a number of other factors when figuring your premium. In order to accurately compare a number of quotes, make sure that each quote you request is for the same options on your policy.

2. Give the same amount of information to each agent that you ask for auto insurance quotes.

Whether you’re comparing quotes online through a web interface or over the telephone, the amount that you’re quoted will be affected by where you live, how far you drive to work each day, how old you are, who else may drive your car, as well as a number of other factors.

The more information you can give when you ask for a quote, the more accurate the insurance agent can be with his estimate. The opposite of that holds true, too the less information you give, the more general the quote will be. If there is any question, an agent will usually quote you a higher rate.

3. Ask about special discounts for safety features as well as safe driver points.

When you’re gathering quotes for auto insurance, be sure to ask directly about safety feature discounts and safe driver discounts that may apply in your situation. Then you can be sure that they are included in your quotes.

4. Understand the differences in insurance terminology.

What is the difference between collision coverage and comprehensive coverage? How can raising your deductible lower your insurance costs? What will replacement transportation or glass coverage cost, and is it worth it for you? Researching the answers to these questions and knowing which options are included in your auto insurance quotes will make it far easier to decide which is the best policy for you.

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Auto Insurance Quote: Should I Include My Children When Getting A Policy Or Purchase A Separate One?

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Parents can consider car insurance as expensive. But when the safety of your children is on the line, the cost does not really matter at all. However, there are factors involved when deciding to whether to include your children when getting a policy or purchase a separate one. And sometimes, the decision to make is a bit confusing.

To make your decision making easier, you have to weigh the following factors and decide which is most advantageous to you:

Cheaper rate Auto insurance companies always offer cheaper rate when the added vehicle’s insurance is purchased under the parent’s policy. Also, it is assumed that younger and single drivers are more prone to accidents than older and married ones. So if your child will buy auto insurance under his or her name, he or she would certainly pay more money.

Discount If you own one car in the past and have added another one, you can certainly have a multiple car discount under the same company. Added to that, you can also have a significant great student discount if your child is still in school.

Higher limits of liability When you purchase your child’s auto insurance under his or her name, your natural tendency is to lower the premium and thus, lowering the limits (regardless of who is going to pay). However, if you decide to add your child’s vehicle under your policy, your child’s vehicle would automatically assume the same limits of your vehicle’s coverage. Of course, since you have personal assets, you can have higher limits of liability and thus making your child’s vehicle more covered under your name.

Control Given that you own the policy, you will certainly have the first hand knowledge on the communications and notices released by the auto insurance company.

Liability and Responsibility In the event of an accident and your child is at fault, you will assume the whole responsibility if his/her auto insurance is under your policy. There is a possibility that your assets will be exposed. You can also be sued in the event of an accident even if your child is to blame. One the other hand, you can spare yourself with all of these if you decide to buy him auto insurance under his or her name.

Surcharges Since you own the policy, once your child is involved in an accident or have been cited with traffic violation, all the negative effects will go against your policy and thus, crippling your status as a policyholder. Sometimes if the offense is great or the incidents are frequent, there is a possibility that your policy may be cancelled. The bottom line is, you will assume the responsibility of your child’s actions.

Learning process In one way or another, your child has to learn things including learning how to purchase his or her own auto insurance and the duty that comes with it.

Since you know your child better than anybody else it is important to realize these factors before deciding on the choice you have to make. The decision therefore on whether to include your children when getting a policy or let him or her purchase a separate one is one that deserves careful consideration.

Auto Insurance Online Shopping For First Timers

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A mere thought of a safely net to count on each time you get involved in a car accident would give you peace of mind. Surely, you don’t want to think of any emergency expenses all the time. But if that safety net costs you so much, then you may be getting a good protection yet certainly hurting your pockets. The essence of a safety net is spoiled and the idea of a good protection is wasted. That is why as a first time car insurance buyer, you have to realize that is it not enough to buy any car insurance policy that is suggested by a friend or similar to your parents.

Assuming that you are at the right age, already have obtained a driver’s license, have purchased a vehicle, have learned the terms and the different car insurance policies, then you are ready to buy your car insurance; the best place to do it is online.

However, shopping for car insurance online can still be very confusing if you are just armed with the above assumptions. Here are the step by step procedures which will help you in your pursuit for car insurance online:

1. Shop around

Search for different car insurance companies. Also look for sites that offer free quotes. This will enable you to know the exact amount you will have to pay for your car insurance policy. Search for car insurance company websites that offer online support. Read financial strength ratings of different car insurance company. You may want to visit Standard & Poor’s ratings and the A.M. Best regarding this information.

2. Be ready with the information you need when you ask for quote

These are: home address, previous car insurance details, driver’s license number, details about your car to be insured (model, year, and VIN), driving history, car’s use (business, leisure, etc), mileage per year, and so on. Have them with you once you begin researching.

3. Learn the tricks on savings

There are several factors that influence the amount of your car insurance policy; factors like your location, age, gender, status, credit rating, car’s security (anti-theft) system, number of years as a driver, driving history, etc. Some of them you cannot change while some can. Learn to lower down your premium using these things.

For example, a person with a clean driving record can get a cheaper premium compared to those who have received few tickets purchasing for the same coverage. Another example would be: purchasing a policy with the highest deductible you can afford can lower your premium. Also, a car with security and anti-theft devices such as airbags, car alarms, automatic seat belts, and tracking systems has a lower premium than cars without. There are several of these, know them all and you will surely get the most out of your coverage.

4. Get car insurance quotes from at least 3 sites

Different car insurance companies offer different prices for the same coverage. Make sure you get at least 3 car insurance quotes to know which company offers the best price for the same protection.

5. Weigh and select which one offers the best

Now that you have the quotes from different car insurance online, you have the final say on which one will serve you best.