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Kids, Cars and Insurance

Its among the most commonly asked questions by parents of teenagers to insurance agents: we just bought our teen a car, so should we put the car in the teens name and let them insure it separately or keep it in our name and insure it on our policy? And while I don’t mean to sound like a politician, there are compelling reasons for both courses of action depending on your individual approach to risk.

Ultimately, the issue is insulating you from the dangers of teenage driving that you as the parent become responsible for. An accident is every parents’ nightmare, made worse when the lawsuit papers show up a few days or weeks later from Dewey, Suem & Howe PA. So what’s the right answer?

It depends. What the parent is asking  in reality is an economic question. What they really want to know is ‘which is the cheapest way to go?’ Cheapest in this article is surely a relative term. What’s the ‘cheapest” way today may not turn out to be later on. Certainly, placing the car in the teens name and having them buy their own policy has some merits. It may teach them some sense of responsibility as a vehicle owner. Purchasing their own policy, or assisting in it, exposes them to a business transaction that forces them to pay attention and act responsibly as well as having to meet the monthly payment obligation. However, is there any doubt whether or not the teen, when faced with making coverage decisions,  will chose the least expensive route? Even if you’re assisting them, the whole premise of this method is to save money, right? So coverage sacrifices will most likely have to made to keep costs down. And this is where the rubber meets the road. Simply stated, vehicle insurance follows the car…coverage purchased on a car stays with that car. Further, car insurance policies contain an exclusion that in, so many words, excludes liability for vehicles ‘regularly furnished’ to you. Simply, if there’s another car kept at your home regularly (your teens car) and its NOT insured on your (parents) policy, then its NOT covered by the parents insurer. So, teens car is parked behind parents…parent wants to run a quick errand, takes teens car and has an accident. The insurance that responds will be the coverage on the teens policy, exclusively, as the parent’s policy will likely exclude it. Same works in reverse…if teen drives parents car then parents insurance is their exclusive coverage. Usually, not an issue if, we assume, the parents have chosen a comprehensive package of coverage with higher limits than their teen did. Further, if teen is involved in a serious accident and is sued…a suit that likely nams both the teen AND the parents, the only insurance protecting the entire family is the teens policy. Why, same reason just mentioned —the teens car is regularly available in the home and thus excluded from the parents policy. Policy language does vary from one policy to the next, so you should consult with your agent for exact wording.

Instead, I recommend keeping the car in your (parents) name as long as the teen remains in the home. This way, there are no worries about coverage gaps for vehicles that are regularly available and the teen receives the full benefits of your policy and all of its available coverages. They benefit from your buying power and credit rating and receive, theoretically at least, coverage limits they likely wouldn’t have chosen for themselves. You rest easier knowing that your teen is as adequately covered as you are.

So what about when the teen turns 18?  Even after the age of 18 mom and dad can still be “on the hook” so to speak. Suppose that Junior turns 18 (or 28, or 38, or 48) and still lived at home. One Saturday dad asks Junior to run a few errands and gives Junior a list of things to accomplish. They include using Juniors car and picking up the mail from the post office, stopping by Home Depot, making a grocery stop at Albertsons, and returning the yard tiller that was rented from the Rent-All Shop. On the way from Home Depot to Albertsons Junior runs a light and injures someone. It’s possible (and likely) that mom and dad would be sued since Junior is “on a mission” for them. (The auto policy refers to this as “anyone legally responsible for the conduct of an insured.”) The principle here is the same as a situation where an employee uses his auto for business purposes to benefit the employer, such as a real estate agent transporting potential buyers. Just like the real estate agent is “on a mission” for the real estate agency, so too is Junior “on a mission” for mom and dad. The good news is that in such a situation Junior’s policy does defend mom and dad as “a insured.” The bad news (a double whammy) is Junior has low liability limits, and mom and dad’s policy will not defend them.

The bottom line is, as long as the teen can be tied to mom and dad they can be sued and the only defense is Juniors auto policy. So as long as Junior is in the house mom and dad should have concerns about being sued and should insist that Junior carry liability coverage adequate to protect them should they get sued. Not likely to happen, but a recommendation I must make nonetheless.

So, Title the car in mom and/or dad’s name and insure it on your policy. Following this recommendation will result in the best coverage for all family members, no coverage gaps, and in most cases will be the least expensive way to provide coverage.

1099 or W2? How does it affect business insurance?

This is a common issue being raised by an increasing amount of businesses these days, especially in the construction trades. Although, it is not exclusive to construction as the General vs. Sub contractor relationship exists everywhere in business. As it relates specifically to general liability and workers compensation insurance though, there can be a great deal of rammifications, and costs, associated with how an individual is classified.

Many employers, in an attempt to avoid payroll taxes and other employee-related expenses (health benefits, etc.) will elect to call an individual a “subcontractor” (ie: 1099) rather than a salried employee (W2). While there may be other issues surrounding an improper classification beyond insurance, that’s all I’ll discuss here. To properly classify someone as a true independent subcontractor, they must meet several criteria as set forth by the IRS that have to do with the amount of control over job performance and outcome that the individual has. Obviously, the employer is attempting to avoid, in addition to any payroll tax expenses, paying liability and workers compensation  insurance on these individuals. By declaring them as “subs” they hope that their insurer will exempt them from any payroll audit and thus reduce their premium costs. Many an employer has been caught in this failed attempt, however, as their desire to lable these workers as subs…and their actual qualifications as a true subcontractor, can sometimes differ. The result is a general liability or workers compensation (or both) audit that uncovers employees that failed to qualify and are subsequently included as employees, and additional premium is owed. I urge you to review the website of the IRS for a full discussion on this topic ( start here: http://www.irs.gov/businesses/small/article/0,,id=99921,00.html ) to help you determine how to proceed and avoid a costly payroll audit. Audited payrolls for insurance that generate additional premiums are typically due in full, compounding the problem.

While your business insurance agent can assist you in proper classification of employees, ultimately its up to the employer to research and classify workers correctly. We can tell you the costs associated with either path you take, but come payroll audit time it will be up to you and the worker to either satisfy the requirments or not. I have had many a disgruntled employer presented with an insurance bill for workers that were issued 1099′s only to have their sibcontractor status denied, and premium charged. Find out ahead of time and classify correctly as once the year is over, its impossible to go back and change a workers status.

Whatever Happened to the Auto/Home Package Policy?

The demise of the package policy that included automobile, homeowner’s and sometimes personal umbrella insurance into one policy is practically complete in Florida. There are still a few left that offer this convenient package and Bissell & Associates represents them, but more on this later.

The series of events that led up to this change began with hurricane Andrew in 1993. This mega-storm shook our state and its insurers to their core and created a collective shudder in insurance boardrooms across the country. Back then, national companies did business in most, if not all, states without regard for geographic boundaries. A company would, for example, back its obligations with its full corporate financial strength in every state it sold policies in. So, a homeowner in FL whose house was lost in a hurricane had some comfort in knowing that his insurer fully backed his policy with all the strength of their national corporation. Fast forward to today and take a look at the insurance company landscape and you’ll see a vastly different scenario. Virtually no large insurer does business here under their national corporate banner. Instead, they’ve set up subsidiary companies to handle just their FL business in an attempt to insulate themselves from the performance of just one state—ours. Thus, we get for example, St. Farm Florida and Allstate Floridian. Both owned by their parent organization but set up to stand or fail on their individual performance. Others less willing to go through this hassle just pulled up stakes and left altogether. What has filled the void is a procession of underfunded brand new start-up companies that sell homeowners policies only. This is the driver behind the huge decline in the financial stability of the insurance marketplace in Florida and that has us in the bind we now find ourselves.

As a result, insurers that used to offer a package of Auto and Home insurance are gone. Allstate and St. Farm barely write property coverage at all…GEICO and Progressive don’t sell property in FL, period. So the Florida homeowner is left to stitch together a patchwork of insurer’s for each need and may face the dilemma of dealing with 2 or 3 different agents. Not, however, if you deal with an independent agent like Bissell & Associates Insurance. Not only are we a one-stop agency for all your needs and expertly capable at piecing together the right mix of insurer’s to solve your needs. We also represent 3 insurer’s that still offer the 3-legged insurance stool of Auto, Home and Umbrella. All with the same company, on one policy and with one billing statement. So if you’re sad for the day when this was commonplace here or tired of having to deal with multiple companies and agencies, call our agency today. Bissell & Associates.

Homeowners Insurance and the Auto Advertisers

Automobile insurance companies continue to flood the airwaves with relentless advertisements exhorting their rates and the savings that can be achieved. How many hundreds of millions of dollars are they spending to put out this message and what must the average consumer think about it? No product is competed for more than automobile insurance and so the inference by the public must be: ”‘just how profitable is auto insurance since these companies are fighting so fiercely over it”? Fair question, but one that I think misses the point in our hurricane-plagued state of Florida. To me, the question should be: “but what about my Homeowners insurance policy… does anybody care to fight over it just a little”? The answer might astonish you, but GEICO and Progressive, to cite the top two advertisers, DON’T WRITE HOMEOWNERS INSURANCE….Not in Florida they don’t. So, lets get this straight, these two mega-insurers who spend like drunken sailors to advertise for your automobile insurance business choose…CHOOSE, to ignor your needs for Homeowners insurance and “cherry-pick” just the business THEY want. But, what about what YOU want? Homeownwers insurance in Florida is a huge mess and is expected to worsen, with more carrier cancellations and higher rates expected in the future. What do these companies plan to do to assist you? NOTHING! Progressive writes this business in every other state but Florida. GEICO, those wimps, “partner” with independent insurers and routes your request for a quote to those carriers’ websites. The whole thing seems grossly unfair and selfish. Meanwhile, how do you, the insurance consumer in Florida, make fair and balanced decisions on where to purchase your insurance. Start with a professional Independent Agency, like Bissell & Associates in Jacksonville. We’ve been solving the needs of consumers for both Automobile and Homeowners insurance for decades. Why give your money to a company that CHOOSES to ignor your most pressing need and leaves you dangling to fend for yourself. Bissell & Associates represents dozens of automobile and homeowners companies and can solve BOTH of these issues quickly and, most importantly, economically by designing a package that includes all your insurance needs. Many time by using the same insurer for the home, cars and umbrella. Just think about the arrogance and audacity of these insurers the next time you see one of their advertisements and remember who’s here, day in and day out, addressing the whole needs of Florida residents. Bissell & Associates Insurance, Inc.

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Cherry-Picking Auto Insurance in FL

What must the auto insurance consumers of our state think about the profit levels of car insurance? Gauging it by the advertisements that we are all bombarded with there must be insane profits to be had, right?  Seriously, to watch GEICO, Progressive, Allstate and others advertise relentlessly makes you wonder why they fight so fiercely over a product whose profits are supposedly regulated by the state.

Maybe it’s because they don’t write property insurance in Florida. You were aware of that, weren’t you? None of the companies mentioned above currently write property insurance here, plus a slew of other national and regional carriers as well.  Although they all do write property in nearly every other state in the country. Why is that, you wonder…?

Maybe it’s because there’s not an altruistic bone in their bodies for one. And, they’re exploiting the state’s failure to enforce its own regulations to their advantage for another. How convenient that they all only offer vehicle insurance in Florida. They’re allowed to cherry pick the auto business and leave you to your own devices for property coverage. Ask yourself this…what is your biggest concern about insurance (not health insurance) in our state. Of course, it insuring your home….EVERYONE faces this dilemma of not only losing their coverage but also having to choose between a host of non-rated, start-up insurers that are, frankly, scary. The ability to get a GEICO or Progressive Homeowners policy, with their massive financial strength, would be a nice option to have here, would it not? Too bad for you….but quite convenient for them wouldn’t you say?

All these companies continue to cherry pick the vehicle lines here unimpeded even though anti cherry-picking laws are already on the books in FL because the state does nothing to enforce them. Watching them all fight over your car insurance without even a peep from them about your most pressing and important need, is sickening to me. And unfair. Where’s the governor on this issue?

Our agency continues to represent the best home insurance carriers we can find. We will always look to solve your property insurance needs and provide you with the best possible options available. While it would be easy to celebrate not having to compete against those big names, I think our state is hurt by allowing this selective marketing to go on.

St. Farm Withdrawal

The news that State Farm intends to withdraw from Florida further weakens our broken property insurance system and focuses more attention on the small domestic insurers that are left to pick up the pieces. A situation that should be a cause for alarm to us all.

I’m in the business yet I cannot come close to deciphering all the machinations the legislature has put the property insurance industry through in Florida. The result of all this twisted legislation is a regulatory climate that is so foul that the pullout of all the A. M. Best rated carriers is nearly complete….well done, Mr. Governor.  What’s left are scores of small, domestic carriers that are ill-equipped to handle the massive property needs of a state like ours, even though we’re told they have a “rating”. Do not be fooled by these claims of an “A” rating from some mysterious rating bureau. Ask yourself how legitimate a grade of “A” can be when it’s handed to a 1-yr old insurance company that buys its reinsurance from the underfunded FL CAT Fund and has never experienced a Hurricane in FL nor managed the logistics of handling thousands of claims at once. An insurer like this has “earned” a rating of A?—-This is patently absurd. Not all non-Best rated insurers are scary, but the public should be aware of the difference as there’s only one “A. M. Best” and most other just can’t be trusted, especially when they grant superior ratings to clearly undeserving insurers.

The free market system is the best solution for our crises and will bring back the national, Best rated carriers we so desperately need. Government plays a valuable regulatory role but should operate in the background, not the forefront, of this problem. The sooner this is allowed to occur the quicker we get back to a stable insurance system using carriers we all can have confidence in.

David Bissell

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