Motor insurance gets difficult when you own a car at 23 years old. - RICARDO MAKYN/STAFF PHOTOGRAPHER
Question: I am a 23-year-old University of Technology graduate. I am about to enter the job market for the first time. One of my job offers includes a car. The salary in the other is higher but does not include a vehicle. I will have to provide my own since the job includes travelling. This means buying a vehicle and paying all expenses including, taxes, gas and insurance. I will get a monthly allowance to cover the expenses. What are the insurance implications? The job with the lower salary includes group health insurance while the other one does not. I need your help to make the right decision.
M.H., Montego Bay P.O., St. James.
Answer: Some guys (this include persons of the female gender) have all the luck! Two offers in a market where 400 persons turn up for 15 jobs. The proposals say something about you, your school and field of study. Based on your approach to decision-making, my guess is that you are the most important of the three factors. Congratulations.
The companies treat risks differently. In one case the firm assumes all of the costs and risks associated with owning a car. Some risks are transferred to an insurer. Health-related risks are treated in the same way. In the other, the employer gets the employee to assume both types of risks. This results in a bigger salary. Two questions arise: are you comfortable in carrying the risks? Is the higher pay sufficient for the risks you will bear?
AT-FAULT ACCIDENTS
You should have few insurance problems with the job that comes with a car and group health. It is the employer's job to ensure that proper plans are in place. This is so if you have been driving for less than 12 months with two speeding tickets and six at-fault accidents. In the case of the health insurance, coverage will apply after a waiting period, even if you suffer from a chronic disease. Some companies ask persons who drive their vehicles to fund policy deductibles (or excesses). This is done to promote safe driving. Find out if this policy will apply in your case. A five per cent excess on a $1.5 million car could create a $75,000 hole in your pocket in the event of a mishap.
Motor insurance gets difficult when you own a car at 23 years old. First you have to get coverage. How much you pay depends on (1) you, the owner/driver; (2) your job; (3) the type of vehicle and its value. Included under the first heading are items such as your age, how long you have been driving, your accident history and the number/type of traffic citations you have. Young males are considered to be in a 'high risk' group.
Persons in sales or marketing positions who are on the road a lot tend on average, to pay higher premiums than those who sit around computers all day.
HIGH-PERFORMANCE AUTOS
Smart buyers know that the type of vehicle affects the premium they pay. The not-so-savvy complain about the price of insurance after they buy high-performance autos at top-end prices. You can save thousands of dollars in premiums over several years when you make the right choice. This also happens when you do not allow immature and irresponsible friends no matter how dear to drive your vehicle.
Use 7.5 to 10.0 per cent and five per cent of the estimated value of the car the rules-of-thumb to calculate the premium and deductible respectively.
Other variables to examine include: whether to use a broker [or an agent] or dealing directly with an insurer; choosing the best product [policy], and selecting the right insurer. The last item is very important especially in the wake of the Dyoll problems. Pay special attention to insurers' audited 2004 financial statements. They are being published in this newspaper and provide valuable information. Also, do not forget to contact a health insurance company to find out the cost of buying individual health coverage.
Do not be intimidated if this looks like an end of term project. Who said the real world was not complicated?
Cedric E. Stephens provides independent information and advice about the management of risks and insurance. If you need free information or counsel to help you solve a problem write to The Financial Editor or contact Mr. Stephens directly at aegis@cwjamaica.com
