coveringyourassets

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What is the Difference Between Standard and Nonstandard Insurance?

My agency specializes in nonstandard car insurance and one question I get asked all the time is what’s the difference between the insurance I sell and the “other guys” – you know, the guys who advertise on TV and are more well known.

Most people assume it has to do with the financial health of the carrier, or their quality of service to their customers.  But, the truth is that it doesn’t have anything to do with any of that.

The only difference between standard and nonstandard insurance is the policy forms they are written on, and the range of applicants that can be accepted.

Standard policies are written on “standard” policy forms that are approved by the state – in my case, in Arizona.  These “standard” policy forms are cookie cutter policies that are very similar from company to company in terms of what they cover and what they cost.  Another thing they share is that most standard policies have very narrow underwriting guidelines – so they are geared to the client with good credit and a good insurance history.  They limit exposure for risk for the insurance companies by excluding those with poor credit or a poor driving record.  All of the standard carriers love these because of this reason.  Hence, why they are called “standard” carriers.

Nonstandard policies are also written on state-approved forms, but they vary widely in pricing because they are custom policies designed by the insurance company who issues them to accept a broader range of risks.  Also, many nonstandard carriers don’t take your credit rating into account, although some do what is called “insurance scoring” – which is different from credit scoring in that it’s only looking at your stability at your address, your track record in paying you car insurance, and things like that.

Nonstandard can be less expensive or it can be more expensive than standard policies – it all depends upon the risks presented and the appetite for the carrier for that type of risk (most nonstandard insurers specialize in risks that are unique to their company).  So, it’s important for your agent to know which nonstandard carrier will accept the risks you’ve got (if any).

So, as I’ve said, “standard” or “nonstandard” has nothing to do with the financial health or A.M. Best rating of the insurance company – or the quality of the coverage provided.  I’ve heard people refer to nonstandard insurance as “substandard” insurance.  But, this term is very erroneous as no state would ever permit a substandard insurance policy to be sold.  So, nonstandard insurance should not be considered substandard in any way as it offers essentially the same coverages as standard insurance does – but for a broader class of people who may not be accepted otherwise.

If you have any questions regarding car insurance, please feel free to call us anytime.

Go Time Insurance, (602) 938-1515

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Why Do I Need UM/UIM Coverage?

I’ve learned as I talk to my customers in Phoenix every day that very few people really understand what uninsured motorist and underinsured motorist (UM/UIM) coverage is.

Let me take a few minutes to help clear this up.

Uninsured motorist coverage will cover bodily injury that happens to you or anyone in your car in the event someone hits you and does not have any insurance at all – or if you are involved in a hit and run accident.  It won’t provide any physical damage coverage for your car — only for bodily injury.  If you want your car covered, you have to purchase comprehensive and collision coverage.

Underinsured motorist coverage is similar – but different.  Let’s say someone hits your car, injuring you and a friend.  The person who hit you is cited for the accident (so, they’re at fault) and they have state minimum coverage – which, here in Arizona, is 15/30/10.  This covers $15k bodily injury per person with a total of $30k for the accident, and $10k for property damage.

You and your friend have injuries amounting to $21k for you and $18k for your friend.  Your car has $8k in damage.

So, since the person who hit you only has minimum coverage – they are underinsured for this accident.  Their insurance would cover your car completely since the damage is within their limits, but their insurance would only pay $15k each toward the injuries both you and your friend sustained.  This leaves a $6k balance for you and a $3k balance for your friend that would not be covered by the insurance of the person who hit you.

This is where your underinsured motorist coverage would come into play.  Your coverage would pick up the remaining balances for both of you (up to the limits of your UIM coverage).

In Arizona, you cannot have more bodily injury coverage for yourself than you have for others.  So, in other words, if you have state minimum coverages for others (15/30/10), then the maximum amount of UM/UIM you could purchase would be the same 15/30.  The 10 for physical damage does not apply, since UM/IUM does not cover your car.

The above example explains the concepts in the simplest terms, but the incident described is a minor accident.  Imagine the same scenario, except that your injuries are major – requiring a long recovery period, retrofitting your house for a wheelchair ramp, buying a wheelchair van, etc.  If you have higher policy limits on your car insurance, you’re able to purchase a higher level of UM/UIM.  So, your UM/UIM coverage could mean the difference between being covered for the things you need when you need them (i.e. wheelchair ramp, specially-equipped vehicle, etc.) and having to come out of pocket on these purchases (or going without).  For a major accident, UM/UIM coverage can end up being a big deal.

If you have any questions about your Arizona coverage – and want to make sure you’re properly covered, give us a call anytime.  We’d be happy to review your coverage with you.

Go Time Insurance, (602) 938-1515

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