The problem is most people who cancel their insurance on a recreational vehicle or motorcycle during the winter months do not surrender the tag to PennDot and de-register the vehicle. Thus, they have a registered vehicle without insurance. This situation may result in fines, suspending your vehicle’s registration and suspending your driver’s license. In addition, it may also deny you benefits on your auto insurance!

According to Section 1714 of the PA Motor Vehicle Code, keeping a registered vehicle without insurance prevents the owner from being able to claim first party benefits (ex. medical bills, loss wages), even if they are injured in a vehicle that carriers insurance. This provision is meant to ensure that “one may not receive medical and wage loss benefits unless you have the ability to provide them to another.”

While the law’s intent is commendable, its application raises huge concerns for individuals who have innocently kept the tag on a motorcycle or ATV during the winter months. Also note that this same rule applies for a vehicle that is inoperable or being repaired.

How Can Prevent This Major Problem?

You have 3 options if you want to cancel coverage on a vehicle because:

• it is inoperable or under restoration, OR
• it is used on a seasonal basis, OR
• it is used occasionally (such as a classic, collectible or antique car),

Option 1- You must send the tag back to PennDOT immediately. This will suspend the registration and ensure that the owner is compliant with Title 75. To return the license plate, fill out form MV-141 and send it to the Bureau of Motor Vehicles, Return Tag Unit, P.O. Box 68597, Harrisburg, PA 17106-8597. Form MV-141will be stamped by PennDOT upon receipt and returned to the sender, thus evidencing receipt. As an alternative, you may return the tag directly to any PennDOT agent. 

Option 2 – You can choose to maintain insurance on the vehicle. It is, after all, a very simple solution. If it is possible, you may be able to save money just by reducing liability limits to the minimum legal requirement on that vehicle only.

Option 3- If, and only if, you qualify, you may apply to PennDOT for seasonal registration. If properly handled, you will be able to drop Financial Responsibility (Insurance) during the off-season of a seasonal vehicle. However, due care and diligence in choosing the new expiration date for the registration is of utmost importance. The individual should be clear as to when the registration ceases and make sure the Financial Responsibility matches that date. The vehicle must never be operated during the off-season.

Again, bear in mind that the majority of seasonal registration applications are incorrectly filed. Seasonal registration is more likely to be applicable when you are dealing with recreational vehicles, motorcycles, or trucks or farm vehicles with a gross weight not exceeding 9,000 pounds. It is not applicable to antique, classic and collectible vehicles, or vehicles that are inoperable or under repair/restoration.

To read PennDOT’s Fact Sheet about seasonal registration, click here.

To apply for seasonal registration, click here.

The bottom line is that if you do not have insurance on all registered vehicles, your medical bills and loss wages as a result of an auto accident may not be covered. If you are thinking about cancelling insurance on a vehicle make sure to contact your agent and have them verify your first party benefits will not be compromised.

On October 25^th Gov. Tom Corbett signed a new bill to help young drivers, like myself, from making a call to dad about an accident with a car load of friends. The bill creates new training requirements and rules for junior drivers and mandates the following

Passenger Restrictions: According to statistics from Pennsylvania AAA, the chances a 16-year-old will die in a crash increase 39 percent with one teen passenger; 86 percent with two teen passengers; and 182 percent with three or more teen passengers. The new law allows no more than one passenger under the age of 18, except for immediate family members, for the first six months and no more than three passengers under the age of 18 after the first six months.

More Driver Training: The new law increases the behind-the-wheel training from 50 to 65 hours, including 10 hours at night and five hours of during inclement weather to give junior drivers more experience.

Seat Belt Enforcement: More than half of teen driver and passenger deaths are the direct result of failure to buckle up. Now, drivers and passengers under age 18 must wear seat belts at all times in a moving vehicle and are subject to a $75 ticket for violating the law. The bill also allows a police officer, for the first time, to pull over a teen driver if the officer sees or suspects any driver or passenger under 18 is not buckled up.

The bill is also known as “Lacey’s Law” was named after Lacey Gallagher, 18, from Philadelphia, who was killed in car crash on April 28, 2007. She was a passenger in an SUV with six other teenagers. All of the other teens were injured; none wore seat belts.

If I Choose Limited Tort What Am I Giving Up?

Simply put, Limited Tort limits your right to sue. Full Tort does not limit your right to sue, however, Limited Tort prevents you from recovering non-economic losses, such as pain and suffering unless one of the following situations apply…

1. You are seriously injured. “Serious Injury” means an injury resulting in death, serious impairment of body function or permanent disfigurement

2. The person at fault is convicted or accepts Accelerated Rehabilitative Disposition (ARD) for driving under the influence of alcohol or a controlled substance

3. The person at fault is operating a vehicle registered in another state

4. The person at fault has not maintained insurance required by law

5. The person injured as an occupant of a commercial vehicle

6. The person at fault intended to injure themselves or another person

7. The claim for a vehicle defect is against a person in the motor vehicle industry

However, under both Limited and Full Tort, you can collect for economic losses such as unpaid medical bills, unreimbursed lost wages or other out-of-pocket expenses with no restrictions.

What is an Example of the Tort Options?

While sitting at a stop light someone negligently rear-ends your car and you are taken to the hospital for a knee injury. After several knee surgeries you still have knee pain and discomfort caused by the accident and you would like to recover $10,000 for the lifetime pain and suffering.

Since the pain and suffering of the knee injury would be considered a non-economical loss, your tort selection may impact your ability to recover for damages. If you have Full Tort you have no limitation and the right to sue for the $10,000. However, if you have Limited Tort, you may or may not have the right to recover the $10,000. Your ability to recover these non-economical damages would only apply if the situation meets one of the previously mentioned Limited Tort exceptions.

The point of this example is not to demonstrate when Limited Tort does and does not give you the right to sue for non-economic losses. The courts will ultimately decide that. The point is that Limited Tort may be limiting, and Full Tort is not.  

What is the benefit of Limited Tort?

Since you are giving up some of your rights, choosing Limited Tort should reduce your auto insurance premium. Reports show, you could receive up to a 40% reduction in premium for bodily injury, first party benefits and uninsured and underinsured motorist coverage. Note Limited Tort will not reduce comprehensive and collision coverages.

Which Tort Option Should I Choose?

Overall, Limited Tort = limited rights = limited price and Full Tort = full rights = full price. Selecting a Tort option on your auto policy is an important decision that impacts your entire family. The decision is something you need to make yourself after considering all the facts and implications of each option. An agent is a great resource to help provide you with information on these choices so that you can make an informed decision.

This article is intended to help consumers understand Tort choices under PA Motor Vehicle Financial Responsibility Law and is not a substitute for your responsibility to make your own choices under law.

The Forgotten College Student Auto Discount

It is no myth that adding a young driver to an auto insurance policy can be expensive. According to MSN Money adding a teen driver will increase your auto insurance by an average of 156%! One of the factors driving this shocking auto insurance increase for young drivers is, not only who is driving the car but how they are using it.

This fall many families will be sending “young drivers” away to school and many of the students will not be taking cars that are insured on their parent’s auto insurance policy. For these families, the young drivers will not have regular access to that car and many insurance companies may offer a significant discount for the reduced car use by your young driver.

One thing to keep in mind is this discount usually has a distance requirement. The insurance company assumes if your child is attending college within a few miles from home, they will most likely still have regular use of that vehicle and the discount may not apply. However, other discounts like “good student” may still be available for college students that live close to home.

Are My College Student’s Belongings Covered?

The short answer is it depends. To have any coverage for liability or their belongings at school they must first qualify as an “insured” on your homeowner or renter insurance policy. According to the PA Insurance Service Office’s (ISO) homeowner insurance policy, an “insured” on a homeowner insurance policy includes a student enrolled in school who meet all the following:

1. Enrolled as a “full time” student defined by the school

2. Who was a resident of your household before moving out to attend school

3. Under the age of 24 and your relative

Thus, if a student is not enrolled full time or is over the age of 23 attending school, they may not have homeowner insurance coverage from your policy. The good news for families in this situation is that endorsement HO 05 27 “Student Living Away From the Residence Premises” may be used to extend coverage from the parent’s homeowner insurance for a student who is 24 or older.

If a student is an “insured” on the parent’s homeowner insurance policy they should have coverage for their “stuff” at school – laptops, books, TVs, ipods, ect. However, the standard ISO homeowner policy has a limitation of 10% for personal property located off the insured’s “residence premises”. This means if your homeowner insurance policy has $100,000 of personal property coverage, student(s) at college would only have $10,000 of coverage for their “stuff”.

This may sound like more than enough coverage but $10,000 can go quickly depending whether you have multiple college students or just one student with some really nice “stuff”. Again there is an ISO endorsement to provide extra coverage beyond the 10% if needed. It is HO 04 50 “Personal Property at Other Residences” endorsement and it allows you to purchase additional coverage above the 10 percent limitation found on most policies.

I always use the phrase “you don’t know what you don’t know” and for many families sending students off to college this fall they don’t know how their insurance works for this major life event. Take five minutes to ask your agent if any additional auto insurance discounts apply and how your homeowner insurance covers or doesn’t cover your college student. The answer could be a very big surprise!

Caution: Many insurance companies have their homeowner policy forms and their provision may be different than the standard ISO form I outlined above. Always consult your insurance company to verify their specific requirements for definitions of “insured” and coverages.

What is this New Product?

The new product is called “Erie Rate Lock” which is offered by Erie Insurance for PA residents starting July 6^th. Erie Rate Lock is an optional endorsement that offers pricing stability by locking your current auto insurance rate beyond the normal policy period of 12 months. Once the rate is locked, it does not change even if you have an accident or violation.

How Much Does It Cost?                     

The cost is based on individual characteristics so pricing will vary for each policy. Thus, you may see no change in price to lock your rate, you may see an increase or you may see a decrease. It is not a flat charge or fee.

How Does Your Rate Unlock

Only you can remove the Erie Rate Lock feature, which can be done at any time. The endorsement cannot be removed by Erie Insurance or lost. In addition, if you make three basic policy changes the Rate Lock will also be removed

- Change in vehicles

- Change in drivers or

- Change in location where the vehicle is principally garaged

When the Lock Rate feature is removed the policy will be re-rated using Erie’s current pricing and any accidents, claims or violations that did not impact the “old rate” will be calculated into the “new rate”. You will have the option to re-lock the “new rate” but your driving record will be subject to Erie’s underwriting guidelines.

Who is It Available To?

Erie Insurance is the only auto insurance company that has the Rate Lock feature. It is available to new customers and to existing Erie Insurance customers only. However, existing Erie customers can only lock their rate when either their policy renews or if they make any of the 3 qualifying changes listed in “How Does Your Rate Unlock”.

After getting the basic information about this new product, what do you think about the concept of locking your auto insurance rate?

To my surprise, I was expecting everyone to support higher limits, 12 voters supported the higher limits and 10 voters opposed it. However, it should be noted that the voters did not have any details on the current or proposed liability limits because Facebook has a character limitation for creating poll questions. Thus, this poll was more of an initial reaction since they did not have all the relevant facts.

Supporters from the Facebook poll commented that the current liability limits were too low. They did not want someone with those low minimum coverages hitting their family or property. They also cited that the low liability limits didn’t adequately protect the at-fault driver either, because the current liability insurance coverages could run out quickly if someone was seriously injured.

Those opposed basically did not want the government dictating how much insurance they should buy, but several people did recognize some minimum level of coverage was necessary. They also thought the high liability limits would raise prices and make auto insurance unaffordable for many drivers.

PA Minimum Auto Insurance Facts

Since we do not have a character limitation on our blog here are some relevant facts to help you form your own opinion.

1. The current PA state minimum liability coverages and limits are…

A) Bodily Injury Liability — If you injure someone in a car accident, this coverage pays their medical and rehabilitation expenses and any damages for which you are found liable. The minimum limit is $15,000/$30,000. The $15,000 pays for injuries to one person, while the $30,000 represents the total available for one accident.

B) Property Damage Liability — If you damage someone’s property, for example another person’s new car, in an accident and you are at fault, this coverage pays for it. The state minimum limit is $5,000 of coverage.

2. The proposed liability limits in Senate Bill 918 increases Bodily Injury Liability to $30,000 per person and $60,000 per accident and Property Damage Liability to $10,000

3. Here is list of other state minimum liability limits to use as a point of reference for where the current and proposed limits would place PA relative to other states.

What are your thoughts? Would you support or oppose PA increasing the state minimum auto insurance liability limits? We would appreciate hearing your feedback below or on our Facebook poll.

Using only the “payback period” method described in a prior blog post, Does Raising Your Car Insurance Deductibles Really Save You Money, it was clear that dropping the coverage was not the best economical decision for their situation. The amount they would have saved was not worth giving up coverage to repair or replace their vehicle in a covered auto accident.

However, after asking a few more questions, they described how they just bought a home, they had significant school debt and were planning to start a family in the near future.  They also mentioned that neither of them had any life insurance to pay-off the debt or take care of the surviving spouse and children.  

So instead of focusing strictly on the “payback period” to determine if they should drop the auto insurance comprehensive and collision coverage, we discussed if life insurance was more important than having coverage on an older vehicle. Quickly the customer came to the conclusion that life insurance was more important to them. They both purchased life insurance policies that met their needs and used the savings from their auto policy to fund a large portion of the life insurance cost even though the “payback period” was not ideal.

The point of the story is not to highlight my ability to cross-sell life insurance to a new customer. It is to demonstrate that the “payback period” is not the only factor you should use when deciding to raise or drop your auto insurance deductibles. You also need to consider the opportunity costs of what else could be done with those potential savings and if those opportunities are a higher priority. For this younger couple, the higher priority was life insurance but for you it may be keeping the auto insurance coverage, starting a retirement account, or paying off debt.  Your insurance policies need to be working together in concert to achieve your priorities in life, otherwise, your policies might just be an out of tune annoyance.

So what happens if you owe $20,000 on a car that is now worth $14,000 and it’s totaled in an accident? On a standard auto insurance policy, you would receive “actual cash value”, or in this case $14,000. And the $6,000 difference? You’ll still owe it and your bank or finance company will come to you looking for it.

However, you can prevent this financial pitfall by adding “Gap Insurance” to your auto policy. Gap Insurance can cover the “gap” between the actual cash value of your vehicle and the amount you still owe. In the example above, Gap insurance could cover the $6,000 difference you would otherwise get stuck paying. Simply put, it can pay off your entire auto loan, even if your vehicle is no longer worth what you owe and anyone taking out a lease or a large loan on a new auto should purchase it.

Gap coverage is usually available on new vehicles only and insurance companies normally require that it be added at the purchase or lease date or within a few weeks of purchase. However, be aware that some insurance companies have caps on the amount the Gap insurance will pay and some insurance companies may not offer Gap coverage at all. So it is a good idea to not only add the coverage but ask if the coverage has limitations and restrictions. The devil can be in the details!

Premiums vary from company to company, but I normally see prices range from $30 to $100 per year. Dealers and leasing agents may also offer Gap insurance, but it is often a better value and easier to file a claim if it is part of your current auto insurance coverage.

Enjoy your new car without the fear of a financial backlash and fully protect one of your most valuable assets with Gap coverage on all your new vehicles.

How Will This Change Benefit Me?

Let’s say while you are driving down the road you hit the mother of all potholes and it causes $1900 of damage to your vehicle. Assuming you have a $500 collision deductible, a claim would require the insurance company to pay the remaining $1400 of repairs. Under the current PA law your auto claim would exceed the current cap of $1350 and the insurance company could surcharge your policy up to 3 years. However, effective July 1, 2011 an insurance company cannot surcharge your policy for this same $1400 claim because it does not exceed the new cap of $1450.

The good news does not stop there. Section 1799.3(a) of the new law, also states that an insurance company cannot ”cancel or refuse to renew a policy’‘ when the cap is not exceeded. Thus, a higher cap not only means you cannot be surcharged but you cannot be non-renewed by your current insurance company for that same $1400 claim after July 1, 2011.

Your Rates May Still Go Up

The bad new is just because an insurance company cannot surcharge you for a claim less than the current cap, it does not mean your rates still won’t go up. Many insurance companies give accident free or other related “good” driver discounts that could be lost with a claim. This means a claim below the surcharge cap could still cause your rates to increase. If, how much and for how long your rate will increase will be a case by case basis for each insurance company.

Overall, the new PA cap increase does benefit consumers. It provides a higher threshold for consumers being potentially surcharged or non-renewed although it is no guarantee your rates won’t change with a claim.

Why Liability Insurance is Important

- Liability insurance is the part of an insurance policy that pays, up to the limit stated on the declaration page, for claims that you are found negligent for causing. For example, liability insurance on your auto insurance policy could pay if you caused an accident that damaged someone else’s car.  Or, your home insurance policy could pay if you ”accidently” tripped someone at a football game.

- The other very important benefit of liability insurance is legal defense when claims and suits are brought against you.  Typically, the insurance company investigates claims, hires attorneys and you rarely have to do anything other than cooperate in any investiagation. In most liability policies, the defense amount is unlimited.

Intentional Acts are Excluded

The bad news is that if you intentionally cause damage to someone else or to their property, not only is coverage for a claim potentially excluded, but the insurance company’s duty to defend you may be excluded as well. Thus, “intentionally” tripping someone could be excluded since those activities are within your control and they were not accidental. This could leave you personally responsible for a significant amount of damages depending on the severity of the injury and financial status of the person injured.

Some Intential Act Exceptions

- One common exception found in PA homeowner insurance polcies is for self defense, protecting others or protecting property.  For example, you may hurt an intruder in the home who later tries to sue you for these injuries. The homeowner insurance policy will defend and pay any damages awarded.

- Another common PA homowner insurance policy exception is when a child under the age of 13 intentionally causes damage to the property of others. For example, if a 10 year old boy intentionally throws a rock through a window, the homeowner policy may cover the damage to replace the glass up to a $1,000.

Overall, it should be no surprise that intentional acts are excluded on most insurance policies but it is a good reminder how split second decisions could impact our financial futures. Go Browns!