Do your homework before buying insurance

Answer:

This newspaper reserves almost one page each week for young persons to discuss with an expert matters about sex. There is nothing sexy about insurance. This probably explains why my editor has placed a modest word limit on the articles that I write. Interest in sex is driven by genetics. Insurance is a necessary evil, according to some. Don't get me wrong. I am making a contrast - not registering a complaint. I like your question. It offers evidence that persons in your group read some of the things that I write about and are also interested in insurance and how it helps them to manage some of the risks that are as much a part of life as sex is.

First-time buyers of motor insurance should know about the why behind this subject. The Motor Vehicles Insurance (Third-Party Risks) Act creates a demand for this type of insurance. It makes insurance compulsory for all vehicles that operate on public roads. Insurance that is mandated by the law is intended to provide a minimum level of compensation to persons who are injured or whose property is damaged due to accidents. Injured persons can claim money for compensation that is sometimes 40 to 50 times greater than the amount in the act. It is easier to appreciate the reason for insurance and shortcomings of these types of contracts when basic facts like these are understood.

The Financial Services Commission (www.fscjamaica.org) regulates the insurance business. Visit the commission's website. Click licensees and registrants. Look under general insurance companies. You will see a list of the companies that are approved to write motor insurance. Use that information to visit the companies' websites to learn more about the risks that are covered by these policies, the types of coverage that are offered and get a 'feel' of the companies.

The make/model of the vehicle that you will buy could be an important rating factor. Certain kinds of vehicles are more prone to theft than others. As a result, the premiums for those vehicles tend to be higher than those that are less prone. Discuss the make of your preferred SUV with a few insurers/brokers. This will help you to find out if it falls in the higher-than-average group. If it does, consider buying a vehicle in the low-risk group. The savings from this simple decision could save you hundreds of dollars over the years.

Insurers also use the driver's age to decide how much premium to charge. If the main driver is male, 25 years old and under and has been driving less than two years, he may have some difficulty in getting coverage, at best, or have to pay an arm and a leg if the insurers agree to quote. Two things account for this. The first is that most accidents are caused by young males in the 23 to 30 age group. The second is that motor insurers, as a group, have been losing money on this line of business for the last decade. In order to staunch the flow of red ink, they have become far more aggressive in avoiding those classes of drivers that are statistically more prone to cause accidents and/or charge premiums that are higher than average.

Evaluating the pros and cons

You will also have to make a choice between buying insurance directly from an insurer or through an intermediary. In evaluating the pros and the cons, identify which of the following criteria are more important to you and which broker/agent/insurer offers the best mix. The criteria are market knowledge, product knowledge, after-sales service, cost, claims assistance, premium financing, contract language, optional extras and deductible (excess).

CNNMoney (http://money.cnn.com/magazines/moneymag/money101/lesson22/index.htm) published a series of articles under the heading Money 101 on automobile insurance. These articles were written in the context of the US legal system and are based on the practice of insurance in that country. Bear this in mind when you read those articles. When you read them after you have visited the websites of local insurers, you will know which parts are relevant to Jamaica and which are not. I believe that they contain valuable information for a first-time buyer like you. Real estate experts advise buyers to concentrate on three things when buying property: location, location and location. For a first-time buyer of insurance like you, my advice can be summarised in three words: homework, homework and homework.

Cedric E. Stephens provides independent information and advice about the management of risks and insurance. aegisja@gmail.com. SMS/text to 812-7233.