DECEMBER 17, 2008
Road Risks Rise as More Drivers Drop Insurance
Higher Premiums, Joblessness Contribute to Alarming Trend; What to Do When You're Hit
By M.P. MCQUEEN
More drivers are letting their car insurance lapse because of the sour economy, putting themselves and others at risk.
Several hundred thousand drivers dropped their insurance in the past year as the jobless rate climbed, estimates a study to be released next month by the Insurance Research Council, an industry-funded group. Online agency Insurance.com says it also is seeing evidence recently of more uninsured motorists. It says that as many as 40% of callers following up on online applications had let their previous policies lapse, up from less than 10% a couple years ago.
Without a Net
A slumping economy is putting more uninsured drivers on the road. Here's how to protect yourself:
* Make sure you have extra coverage that compensates you if you're hit by an uninsured motorist.
* Set your own liability insurance amount commensurate with your assets. This amount also helps determine the limit of your uninsured motorist coverage.
"I am seeing a lot more canceled policies than ever, especially in the last couple of months, usually due to job loss," said Christine Williams, a licensed agent at Insurance.com's call center outside Cleveland.
The trend is bad news for everybody on the road. If you're hit by an uninsured motorist, you may have to sue to recover costs, and many uninsured motorists have few assets. You can protect yourself by carrying uninsured-motorist coverage -- almost half of states require the added coverage -- but this may boost your premium.
Even in good times, many Americans drive without insurance. The Insurance Research Council's previous study, released in 2006, found that nearly 15% of drivers nationally were uninsured in 2004, up from about 13% in 1999. In some states, including Mississippi, California and Arizona, roughly a quarter of drivers weren't insured.
Preliminary data from the council's forthcoming study "indicate that a single percentage point increase in the unemployment rate is associated with a half-point increase in the percentage of uninsured drivers," said David Corum, council vice president. The nation's jobless rate was up two percentage points to 6.7% in November from a year earlier. The group estimates the number of uninsured motorists based on data from insurance claims.
Possibly adding to the problem is the fact that auto-insurance rates are rising again after a couple of years of flat or declining premiums. Premiums nationally rose 3.8% in November from a year ago, according to the Labor Department's consumer price index.
Agents say a growing number of customers are stripping down their auto-insurance policies, taking the absolute minimum level of liability coverage legally required to drive in their state.
"A good proportion of people on the road are either uninsured or underinsured, and so you have to protect yourself," said Robert Hartwig, president of the Insurance Information Institute, a nonprofit group. "Your odds of being in an accident with an uninsured driver are substantial."
About 20 states require drivers to buy coverage for uninsured or underinsured motorists. The coverage compensates policy owners and their families for injuries, including if they are injured as pedestrians, caused by hit-and-run drivers and drivers without insurance. Uninsured and underinsured motorist coverage adds roughly 7% to 9% to an average auto premium, according to State Farm Mutual Automobile Insurance Co. and Allstate Corp.
Debbie Kuban, 47 years old, of Stratford, Conn., is glad she had uninsured motorist coverage, which is mandatory in her state, when a car she was riding in was hit by an uninsured driver the day after Thanksgiving. The driver of a pickup truck tore out of a shopping center parking lot in nearby Milford and slammed into the Audi A6 station wagon her husband was driving.
Ms. Kuban, an operating-room nurse, suffered a gash in her head that required stitches and had two broken bones in her foot. She was taken to the hospital by ambulance. Her husband wasn't severely injured. Since then, Ms. Kuban has been recuperating at home. Because the at-fault driver had no insurance, Ms. Kuban has relied on her $300,000 uninsured-motorist policy for claims reimbursement. She says the other driver was charged with a misdemeanor for driving without insurance on a private road.
"The hardest part of this is that we had a very good record with our insurance company. Our rates were low." Now Ms. Kuban expects the rates to go up because of the large claim.
Motorists driving without insurance also face risks. In a wreck, they could lose whatever assets they own in a court judgment. Also, driving without insurance is illegal in 48 states and the District of Columbia. The only states that don't require insurance are New Hampshire and Wisconsin; these states require drivers to show proof of the financial ability to pay damages for liability.
Motorists who allow their policies to lapse for any reason also often must pay an initial 25% to 50% surcharge for a new policy. Insurance companies charge them more because they consider them irresponsible: Unlicensed and uninsured drivers are disproportionately involved in fatal accidents.
I absolutely hate this, this is going to be great if you get hit.
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