MONEY health

Raising an Autistic Child: Coping With the Costs

A new study pegs the lifetime cost of caring for a child with autism at $1.4 million. For parents, there are no easy solutions.

When Linda Mercier’s son Sam was around two years old, she knew something wasn’t right.

Sam was becoming withdrawn, not speaking or playing with other kids, and focused on specific tasks like lining up his toys. Eventually the mystery was solved: He was diagnosed with an Autism Spectrum Disorder, or ASD.

That was the beginning of a very long road, one that has involved significant time, effort — and money, plenty of it. Hundreds of thousands of dollars so far, Mercier estimates, on tutors, therapists and lost wages.

The good news: Same is now high-functioning, and in many respects a completely normal 13-year-old. The downside: The price tag to get to this point has been massive.

“Only a parent of a child with special needs can ever understand the struggles, and the financial commitment, of raising and recovering an autistic child,” says Mercier, a business owner from Winnipeg, Canada. “It’s an endless battle — and an expensive one.”

Indeed: A new study in the medical journal JAMA Pediatrics has pegged the total lifetime cost of supporting an individual with an ASD at an astonishing $1.4 million in the United States. If there is also intellectual disability, the total rises even more, to $2.4 million.

RELATED: Paying for My Special-Needs Child

Such costs typically include an ongoing mix of special education programs, medical care and lost wages. After all, many parents of autistic children reduce their work hours, or even quit their jobs altogether, to help their child full-time.

The study is the most recent to tabulate just how crushing these figures really are.

“I can believe it,” says Mercier, when told of the million-dollar-plus price tag. “Easy.”

Even the study’s lead author admits to being taken aback by the final number.

“I was really surprised,” said Dr. David Mandell, director of the Center for Mental Health Policy and Services Research at the University of Pennsylvania. “The old estimates were from 8 or 9 years ago, and at first I was skeptical they needed updating.”

New studies are providing more current cost estimates. “What we found was shocking,” Mandell said. “This is a huge hit on families.”

Journalist Ron Suskind knows about that financial hit first-hand. His son Owen, now 23, was diagnosed as being on the autism spectrum about 20 years ago, a journey Suskind has recounted in the book “Life, Animated.”

Owen has made remarkable strides, thanks to what Suskind calls “affinity therapy,” or tailoring treatment depending on the child’s particular way of understanding the world.

In Owen’s case, his preferred frame of reference is Disney movies. Using that template, Suskind and his wife got to work unlocking Owen’s full potential. But it did not come cheaply.

The organization Autism Speaks estimates that it takes around $60,000 a year to support someone with an ASD, Suskind says, adding that treatment for Owen cost about $90,000 a year.

“When we first got the diagnosis, the doctor asked me what I did for a living, and I said ‘newspaper reporter.’ He said, ‘I’m so sorry to hear that. You know, private equity is a nice way to go.'”

MOVING FOR SERVICES

The costs are so prohibitive that many affected families actually pick up and move to states that offer a superior array of therapeutic services. Suskind calls it a “Grapes of Wrath”-style migration, of families ultimately headed for locales like New York or Massachusetts. (To choose the right place for your family, check out Autism Speaks’ state-by-state resource guide.)

There is also a measure before Congress that aims to mitigate the financial burden for families: So-called ABLE accounts would be patterned after 529 college-savings plans, but specifically geared toward those with disabilities. The tax-advantaged savings could be put toward expenses like education, housing, therapy and rehab.

RELATED: Paying for My Special-Needs Child

One piece of advice from Mandell: Don’t automatically think that you have to drop out of the workforce in order to manage your child’s case full-time.

It’s the natural human instinct to want to do so, of course. No one knows your child and his or her needs like you do, and navigating multiple layers of city, state and federal services can indeed be a full-time job.

But when one parent drops out of the workforce, just as out-of-pocket expenses start to mount up, “it can become very financially difficult,” Mandell says.

He urges families to take a long-term view of caregiving. “In some cases it might be better for the mother to stay in the workforce, and then hire additional support to provide case-management services,” he says.

For Linda Mercier, the towering costs hit her family budget every single day. It meant cutting back wherever possible, taking second jobs and foregoing trips to visit family. All well worth it, of course, since Sam has been such an inspiring success story.

But there’s no question that raising a child with an ASD is a sobering financial reality.

“I would tell other parents of special-needs children that there is hope,” says Mercier. “It can get a lot better, and it does. But it takes a whole lot of money to get there.”

RELATED: Paying for My Special-Needs Child

TIME Hong Kong

‘Racist’ Insurance Commercial Draws Outrage in Hong Kong

Hong Kong's Domestic Help System Under Scrutiny Following Recent Cases Of Abuse
Indonesian domestic workers protest in the streets of Causeway Bay to demand better working conditions in Hong Kong on Jan. 26, 2014 Jessica Hromas—Getty Images

An insurance commercial in Hong Kong has been deemed as racist by advocates of domestic workers and prompted outrage on social media

An insurance commercial in Hong Kong that features a male Chinese actor who impersonates a clumsy Filipina maid has been deemed as racist by domestic-worker advocates and prompted outrage on social media — reminding many Hong Kong residents of the unfair treatment of foreign domestic workers.

The advertisement for domestic-helper insurance by Malaysia’s Hong Leong Bank shows the Chinese actor as “Maria” while wearing a curly wig and covered in dark orange makeup. Foreign maids who are mostly from Indonesia, the Philippines and Thailand have become a common fixture in Hong Kong since the booming of the economy in the mid-1970s.

Along with the immigration of more than 300,000 domestic workers to Hong Kong have come horror stories of their unjust treatment by employers. Recent high-profile cases like the hospitalization of Erwiana Sulistyaningsih, an Indonesian maid who was allegedly beaten by her employer for eight months, have brought to light the abuse of foreign domestic workers in Hong Kong and prompted many of them to speak up. During the One Billion Rising event in February, a global campaign to end the abuse of women, hundreds of domestic workers there joined together to demand fairer treatment.

Erwiana’s employer, Law Wan-tung, is currently on trial and has pleaded not guilty to charges of withholding payment, criminal intimidation and causing bodily harm.

An Amnesty International report in 2013 stated that Indonesian women trafficked as domestic workers face “slavery-like conditions” in Hong Kong and that both the Hong Kong and Indonesian governments turn a blind eye to the “widespread abuse and exploitation” that foreign workers endure.

The controversial commercial comes only a few weeks after pictures from textbooks that feature racial stereotypes went viral on social media in Hong Kong. One exercise in the book invited students to match job descriptions with nationalities, prompting children to associate domestic work with a seemingly Filipina figure.

Advocates for domestic workers say the recent outpourings of racial discrimination are only a fragment of the mistreatment that domestic workers have experienced for years. Eni Lestari, spokeswoman for the Asian Migrants’ Coordinating Body, told AFP the commercial lampooned an entire community by dressing the Chinese actor up in blackface instead of hiring an Indonesian or Filipina woman to play the role. Although it was supposed to be funny to Chinese residents, Lestari added, “what they don’t realize is what’s funny is actually racist.”

[AFP]

MONEY Health Care

Rx Relief: How to Save Up to 80% on Prescription Drugs

Five strategies to help you leave the pharmacy without having to swallow a bitter pill.

The average American filled 12 prescriptions last year, according to the IMS Institute for Healthcare Informatics, and as a result the pharmaceutical industry grossed $329 billion. (You’re welcome, Pfizer.)

Minimize your pain at the pharmacy counter by taking these steps when your next script is written:

1. Use coupons. For expensive prescriptions, you can save 50% or more this way. There are a lot of ways to get your hands on prescription coupons, but start by asking your pharmacist. Call ahead or ask at the counter; the pharmacist may have some on hand or be able to tell you where to find them—most likely online. If you want to search yourself, try the drug company’s website first, then check the website of your pharmacy.

2. Try mail order. Mail-order pharmacies save you money by skipping the bricks-and-mortar middleman and sending the drug directly to you, typically in 90-day quantities. Your health insurer may work with a specific mail-order house, and often you’ll get better pricing by going this route. Alternately, your prescribing doctor’s office may have a preferred pharmacy they work with regularly, so inquire when the prescription is written.

3. Ask your doctor about pill splitting Most drugs come in more than one dosage, but aren’t priced on the same scale as the dosages. This means that, per milligram, higher dosages of the same drug are often cheaper—and you could save money by purchasing double doses of your prescriptions and halving them. Not every drug should be split, so consult with your doctor first. If you’re given the go-ahead, make sure to purchase a pill splitter from a drug store to ensure consistent and equal dosing.

4. Opt for generics If there’s a generic version of your brand-name drug available and you’re not taking it, you could be wasting a lot of money—on average, generics are 80% to 85% cheaper than their brand-name counterparts. Contrary to the myth that generic drugs are held to different standards than brand-name drugs, there is no significant difference between them. Generic drugs are allowed to differ from brand-name drugs only insofar as appearance and inactive ingredients. By law, medication dose, safety, quality and instructions must be the same. Stores have gotten into price wars over generic drugs: Target now charges $4 for hundreds of medicines, for example, and Meijer and Publix are among those that offer some drugs gratis, which is why you may want to…

5. Compare pharmacies. Drug prices can vary widely between pharmacies, even locally, so you may want to shop around before simply going to the nearest drug store. Websites like GoodRx and LowestMed compare pharmacies within zip codes for specific medications, and even offer coupons and drug information. You may be surprised to find that some drugs vary by $50 or more for the same supply and dosage. In that case, the cost of convenience may just be too high.

 

More stories from NerdWallet Health:

So You’re Pregnant? Here’s What You Need to Know About Your Maternity Coverage and Benefits

How to Save On Asthma Medications

Patient Advocates: Your New Best Friend for Managing Your Health Care Experience

TIME energy

Earthquake Insurance Becomes Boom Industry in Oklahoma

Chad Devereaux
Chad Devereaux examines bricks that fell from three sides of his in-laws' home in Sparks, Okla., on Nov. 6, 2011, following two earthquakes that hit the area. Sue Ogrocki—AP

At least one industry is benefiting from the recent epidemic of tremors in the Sooner State

Just a few years ago, earthquake insurance wasn’t something many thought much about in Oklahoma. That’s changed with the outbreak of tremors that has rattled the state in recent years, which many blame on increased oil- and gas-drilling activity.

“Every time there’s a decent-size earthquake, there’s a spike in interest,” says Matthew Ramirez, an agent for Farmer’s Insurance in Edmond, which has been affected by many of the recent quakes. So far in 2014, Oklahoma has seen 200 earthquakes of magnitude 3.0 or stronger.

Standard homeowner policies generally don’t cover damage caused directly by earthquakes (to a building’s foundation, for instance), though they usually do cover the damage that earthquakes can cause, such as burst pipes or fire. Before November 2011, Ramirez insured “three or four homes” for earthquake coverage, “including mine,” he says. On Nov. 6, that all changed. A magnitude-5.6 earthquake — the largest ever recorded in Oklahoma — destroyed 14 homes and injured two people. “In the days that followed, we were flooded with earthquake calls, about 20 per day for two weeks,” Ramirez says.

Roughly 1% of the homes Ramirez insured in October 2011 had earthquake insurance. Today, he says, more than 40% of the homes he insures are covered for earthquake damage. Statewide, according to the Insurance Information Institute, the total premiums on earthquake insurance policies in Oklahoma more than doubled between 2009 and 2013, to $12,407.

According to Amberlee Darold, a seismologist with the Oklahoma Geological Survey, it’s no longer a matter of debate that hydraulic fracturing of oil and gas wells, or fracking, causes earthquakes. “It’s known that fracking can cause earthquakes and has caused earthquakes,” she says. Whether or not the injection of fracking wastewater into old wells for storage leads to earthquakes is a matter still up for debate, she says, but “there’s no question with fracking.”

Fracking, due to the nature of setting off underground explosions, is by its nature a seismic event, and the American Petroleum Institute (API) does not dispute that fracking can contribute to small-scale seismic activity. But the industry group rejects the idea that fracking causes earthquakes of a strength that can lead to a damaged home, for example. “A review of published research shows no cases of injuries or damage as a result of the very low level of seismicity related to this well-completion technique, which has been used in more than one million applications,” says an API report on the question.

Attributing any single seismic event to fracking is tricky, in the same way that attributing any single weather event to climate change is problematic. But taken on the whole, it’s hard not to link the notable increase in earthquake activity in Oklahoma with the boom in oil and gas drilling driven by advances in fracking technology. That boom shows no sign of slowing down, which may mean more earthquakes — and for the people selling earthquake insurance, more sales.

MONEY Kids and Money

How to Get a Grip on Your Child’s Therapy Bills

Parent and journalist Beth Pinsker explains how to get your kid the mental health treatment he or she needs without breaking the bank.

When I signed up my kids for therapy after my divorce, I made some financial mistakes. The biggest was choosing an out-of-network provider, over one who takes my insurance.

Instead of a simple $20 co-pay, I spent $150 out of pocket and get 70 percent of it reimbursed, which works out to about $1,000 more over a school year. In contrast, I have a friend whose child’s therapy sessions require no co-pays at all.

In this way, mental health coverage has a lot in common with airline pricing, where seats on the same plane may sell at many different price points.

Overall, Americans spend about $2,100 per child for healthcare, according to the Health Care Cost Institute’s report for 2007-2010. During that period, HCCI says, the use of mental health services by children jumped 24 percent.

At the same time, nearly half of all psychiatrists no longer take insurance, according to JAMA Psychiatry, with a similar portion of psychologists now only accepting private payment.

Add to that an overall shortage of providers – there are 8,700 child and adolescent psychiatrists, compared to about 50,000 for adults, according to Dr. Paramjit Joshi, division chief of psychiatry and psychology at Children’s National Health System – and you have a supply and demand problem that makes cost a real issue for parents.

Stay in-network

Finding a provider in your area may be easy enough, but finding one whose availability suits your child’s schedule could be downright impossible.

That’s why I went the private-pay route. My area of Brooklyn has no shortage of doctors on my plan, but after calling a dozen and finding that an after-school slot would entail a months-long wait, I went with a personal recommendation.

To avoid the appointment runaround, lean on your plan’s customer service department to make calls for you, says Dr. Ian Shaffer, executive medical director for behavioral health for Healthfirst, a New York health plan.

Need a therapist with a specialty? You may be able to get that provider covered if you ask, Shaffer says.

He cited a case where the family wanted a therapist who shared their ethnic heritage, and had been recommended someone who charged an eye-popping $350 a visit. Healthfirst found them another therapist with the same credentials, and covered the visits.

Reduce co-pays

My friend with the zero co-pay has insurance through the state’s child health plan, but enrolment in the plan is possible only if you don’t have access to other coverage.

Most people who are on health plans through their workplace don’t have payment wiggle room, but you can ask individual providers what they can do to help, especially if you have a high deductible.

Many private-pay therapists have sliding scales based on income; others have lower fees if you work with a trainee. Since the latter are supervised grad students, “it’s like getting two doctors for the price of one, says Clair Mellenthin, director of child and adolescent services at Wasatch Family Therapy in Salt Lake City, Utah.

Also check state resources to help pay for therapy, especially if treatment is needed for some kind of trauma following a crime. Many states have victim funds, says Mellenthin.

Mark progress

Therapy can seem like an endless process, so parents need to make sure it’s staying on track, says Mitchell Prinstein, a professor of psychology at the University of North Carolina at Chapel Hill.

After the initial evaluation, make sure you have a clear treatment plan and markers to help you figure out if your child is making progress. If there’s little improvement, get a second opinion, Prinstein says. And don’t feel bad about moving on if the therapist is not the right fit.

Fight for your rights

For ongoing treatment, it’s important to make sure the insurance company is not crimping your coverage.

Even though parity clauses in the new healthcare laws say you should get as many sessions as you need, that’s not always the case.

After a while, insurers may start saying the sessions are no longer medically necessary. This is especially true if your child has a serious ongoing problem, says Alan Nessman, senior special counsel for the American Psychological Association.

Any denial of coverage can be costly.

Joe Hoyle’s bill for one month of his daughter’s treatment for a serious illness was $125,000 after his insurance company denied the claim (he negotiated a lower payment with the hospital directly). To obtain ongoing coverage, Hoyle and his wife, who live in Virginia, got her on Medicaid.

“They say they cover things, but then they get to decide when things are ‘stable,'” he says.

Hoyle urges parents to get care early for their children to try to head off bigger problems.

“You can go along for 10 or 12 years and think your kid is just quirky, then almost literally overnight, it can go to full-blown mental illness,” he says. “You hate to talk about it, but people need to know because state governments need to do more to help people out.”

MONEY Autos

After Giant Hail Storms, Giant Sales on (Dented) New Cars

140612_EM_Hailsales_1
Warren Faidley—Corbis

Thousands of drivers in Nebraska, Colorado, and Iowa are lining up to buy cars with shattered windshields and badly damaged exteriors.

Everyone thinks dimples are cute, right? Well, maybe not so much when the dimples—or dings or dents—are on your car.

A series of brutal hail storms hit the Midwest and mountain states this spring, and among the damages were thousands of new cars sitting on auto dealer lots. Lately, many of the affected dealers have been trying to get buyers to take these vehicles off their hands with “Hail Sales,” in which damaged cars are being sold at steep discounts—sometimes as much as 66% off the sticker price.

Automotive News reported that dealerships including Sid Dillon Chevrolet and Woodhouse Ford in Blair, Nebraska, and Woodhouse Chevrolet in Missouri Valley, Iowa, have all been hosting such sales. Who would want a hail-damaged car? For the right price, lots of folks, apparently. Woodhouse’s marketing team said that more than 150 customers were waiting to speak with dealer sales staffers over the weekend, and the Woodhouse website warns, “Due to the overwhelming response to the Hail Event, all sales representatives will not be able to timely return phone messages of ‘contact us’ messages for the next 2-3 weeks.”

Situations such as this seem to draw out a very specific kind of shopper—the advantageous type who is eager to pounce on a deal, and who doesn’t mind aesthetic imperfections or knows how to repair them in a cost-effective way. “It’s like blood in the water,” the president of a dent repair company told Automotive News. “People sense that [dealerships] are at a disadvantage, bringing people into the marketplace that weren’t there before.”

Dozens of auto dealerships in the Denver-Colorado Springs corridor hosted hail sales leading into Memorial Day weekend, with deals up to 25% off MSRP on new cars, and up to 50% off some used cars. Phil Long, with locations in Denver and Colorado Springs, is still advertising “Hail Savings” of as much as 66% off MSRP. “A few dings mean a whole lot of CHA-CHING to you!” ads promise.

For the most part, the damage caused by spring storms is only cosmetic. Nothing should be wrong under the hood—not as a result of hail anyway—and the new cars being sold should have that all-important new car smell. Still, there’s reason for buyers to be cautious.

It’s important to assess the damage and figure out how much it will cost to make necessary repairs, and who will handle the job, before making a purchase. Check with your insurance company to see what it will cover and not cover. In some cases, the likely repair costs will outweigh any “savings” off the sticker price. Obviously, a damaged (not fixed) exterior will hurt the resale of a vehicle, so that must be factored in as well.

Don’t limit your assessment to what you can see on the outside. Guess what happens after hail ruins windshields, windows, and sunroofs? It opens the door to rain and water damage inside the vehicle. “Just a few inches of water in these new cars can destroy the electronic modules that are located under the seats and the center console,” Mark Dunwoody, a body shop manager at Charlie Graham Body and Service in Omaha, told the Omaha World-Herald. “Rain damage can be as bad as a car damaged by flood.”

MONEY 401(k)s

Should I Rollover My 401(k) Into An IRA?

140605_AskExpert_illo
Robert A. Di Ieso, Jr.

Q: I left my job, and I’m looking for a new one. Am I better off rolling over my old 401(k) to a new employer’s 401(k) or to an IRA? I am being sold hard on the latter option by the firm in charge of our life insurance. — Dawn Deschamp, Lakewood, CO

A: You’re probably better off rolling into an IRA. But steer clear of investments pitched by your employer’s insurance company.

First, a quick recap of your options. When you leave your job, you can keep your 401(k) at your old employer, as long as the balance is $5,000 or more. (If your balance is smaller, employers are allowed to return the money to you.)

You can also roll over your balance into an IRA, which is often the best choice (and it’s what you should do if you have a small-balance account that is being returned to you). “With an IRA, you will have a wide array of choices, and you can often choose funds that charge lower fees than a 401(k),” says financial adviser Allan Roth of Wealth Logic in Colorado Springs.

Make sure you to set up your rollover as a trustee-to-trustee transfer, which moves your 401(k) balance directly to the IRA provider. Don’t let your employer write you a check, or 20% of your balance will be withheld until tax time.

Another option, when you get a new job, is to move your 401(k) account into your new employer’s 401(k). (Not all plans permit this.) Doing so may make sense if the new plan offers good, low-cost investment options, since with a single portfolio, you can more easily track your asset mix and rebalance.

(Of course, the final option is to simply cash out your account, but that would be such as bad decision, we won’t go into it—except to point out that you would trigger taxes plus a 10% penalty for early withdrawal if you’re under age 59 1/2.)

The best way to choose among these options is to compare the investments you want to own and the fees you would pay. At brokerages, such as Schwab and Fidelity, you can invest in low-cost ETFs and index funds, often with expense ratios of 0.10% or less. Some large-company 401(k) plans, with their negotiating power, can match those low fees, but many cannot. If your 401(k) charges more than, say, 0.8% for a stock fund, you probably should look elsewhere.

High fees are a key reason to avoid investing your IRA with your former employer’s insurance company. Funds offered by insurers often charge sales loads or carry high expenses. And insurance products, such as variable annuities, are typically complicated and costly. “Insurance and investing are best kept separate,” says Roth.

 

MONEY Insurance

Overweight? The Skinny on Insurance

Junk Food
Unhealthy food and lack of exercise can have an impact on insurance planning. Dwight Eschliman—Getty Images

Buying life, disability, and long-term care insurance poses special challenges for people who are overweight or obese, explains a financial planner who's also a physician.

While people think of illness as something that can strike at anytime, that’s not really true for the majority of illnesses that can affect a financial plan. That’s because so many of those conditions affecting people’s finances relate to being overweight or obese. You can literally see the problems that may arrive.

Financial advisers need to be aware of health issues that their clients face; weight and lifestyle are very good places to start. People usually start working with a financial planner once they reach their 20s or 30s — coinciding with the same period people settle into a lifestyle that will determine their future health.

Financial planners: Does your client exercise regularly and avoid unhealthy foods? Or is he or she more likely to watch sports than actively participate? Understanding a client’s lifestyle can improve planning in many areas and may actually spark a healthy lifestyle change for your client.

A key element of a financial plan is insurance. Do you have any young, overweight, and otherwise healthy clients with no plans to change their trajectory? Ask about their family history. If a close family member has diabetes or heart disease, there is a very high chance that your young client will develop the same problem. These illnesses don’t happen overnight – they develop over a number of years. Getting proper insurance coverage early is key in this situation.

The good news: The epidemic of obesity in the U.S. has made it easier for obese people to qualify for good rates on disability, life insurance, and long term care insurance. Since 68% of our population is overweight or obese, who would the insurance company sell policies to if they were too strict on people with weight problems?

The problem is that once a person has actually developed a health problem related to obesity, insurance companies will show no mercy. Getting coverage will be extra difficult.

So what should an overweight person be doing about insurance?

  • Life insurance: Although I usually recommend term life for most clients, you may want to take out a permanent life policy. A person may be uninsurable 10 or 20 years down the road when the term is up. Obtain a rider to waive the premium for disability – this will guarantee that the policy stays in force even if the insured can no longer pay premiums because of disability.
  • Disability insurance: Maximize coverage and consider graded premiums — annual premiums that start out low and rise with age. Since someone who is obese is more likely to claim disability before someone who isn’t, putting off paying high premiums may be a way of avoiding them altogether.
  • Long-term care insurance: Investigate coverage at a younger age. Most people start thinking about long-term care insurance in their fifties. For people with known risk factors, it makes more sense to begin looking in their forties.

Planning is challenging with a young person on the path to poor health. It is important for them to be insured because their risk of illness may affect their ability to save down the road, and they may incur significant health expenses. These conversations are tough for a planner and client to have, but valuable for the client. By addressing lifestyle and health issues in planning, and paying attention to health along the way, planners can help maximize the client’s enjoyment of life now and prepare them for what the future holds.

—————————————-

Carolyn McClanahan is a physician, financial planner, and founder of Life Planning Partners, Inc. In addition to running her financial planning practice, she educates financial planners, health care professionals, and the public on the intersections of health and personal finance.

TIME Saving & Spending

The Surprising Reason You’re Paying So Much for Car Insurance

Understanding why you pay what you do for car insurance can be a bit of a mystery. Insurers throw all sorts of variables in the mix, from your age to where you live to what kind of car you drive. Often, they also factor in your credit — and it’s way more important than you probably think.

A new study conducted by WalletHub.com finds that have excellent credit versus no credit history creates, on average, a 65% variation in the cost of premiums when all other factors are the same.

In some cases, the discrepancy can be even greater. “Allstate appears to be the company that relies on credit data the most, with the WalletHub Scenario revealing a 116% fluctuation in premiums,” the study says. By comparison, State Farm showed the least amount of variation, although there still was a 45% difference.
Geography matters, too. In Vermont, credit only makes a 18% difference in premium prices, but it accounts for a whopping 126% fluctuation in Washington, D.C.

In Massachusetts, California and Hawaii, there’s no difference; these three states have laws that prohibit insurers from using credit information in car insurance pricing.

WalletHub looked at Allstate, State Farm, Geico, Progressive and Farmer’s Insurance for its study. The site got quotes for two hypothetical customers whose information was identical except for their credit information: One was assigned excellent credit and the other was given no credit history.

One thing that can be frustrating for drivers is that it’s not always easy to figure out how much your credit factors into the quote you get from an insurance company. WalletHub looked at the websites of the 10 biggest car insurance companies to see how easy it is for people to find out if the company is using their credit data and which credit reporting agency they’re getting the information from.

It found wide variations in how and how much companies disclose about the way they use customers’ credit data. Progressive came out on top in this analysis with a perfect score of 10, followed by Farmer’s Insurance and American Family Mutual with scores of 9 and 8, respectively. Liberty Mutual was the least transparent with a score of 4.5.

Consumer advocates say it’s important for drivers to know their rights when it comes to the way insurers use their credit information. “The federal Fair Credit Reporting Act (FCRA) Adverse Action Notification…. requires any user of a credit report to notify the consumer if the use of that report resulted in an adverse action, which, in the case of insurance, would be denial of coverage or a higher premium than a consumer with an average or higher insurance credit score,” says watchdog group United Policyholders.

MONEY car insurance

Will Your Auto Insurer Punish You for Charging for a Lift?

140529_FF_NerdWallet_Lyft_1
A Lyft car in San Francisco courtesy of Lyft

In many places, you can pick up extra money by picking up passengers when you're on the road. But watch what that does to your insurance costs.

If you’re low on money and have a flexible schedule, signing on to be a ride-share driver for a company like Uber, Lyft, or Sidecar may seem like the perfect solution. You can connect with passengers via an app whenever you’d like and pick them up in your own car–becoming a player in the so-called sharing economy. By lowering barriers to entry, ride-sharing companies are cutting costs for both users and drivers.

They’re also throwing insurers for a loop. The ride-share industry’s rapid development has resulted in a dearth of adequate–and affordable–auto insurance products. Though Uber, Lyft, and Sidecar are trying to fill the gaps, there are still a few things you should know before driving for one of them.

What Coverage Do You Need?

Standard personal auto policies will cover drivers who carpool, but State Farm spokesperson Angie Rinock says, “when the driver of one of our insured vehicles offers rides for payment, these rides may not be considered to be on the same basis.” That is, although Rinock emphasizes that the company considers each claim individually, insurers often decline to cover damages drivers incur when ferrying around passengers for Uber, Lyft, or Sidecar.

To address this issue, ride-sharing companies routinely provide drivers with insurance–up to $1 million in coverage per accident. As Lauren Altmin, a representative for Uber, explains, “this policy drops down to primary coverage in the event that a driver’s personal auto insurance does not apply for any reason.” Still, this level of coverage is available only while you’re actively transporting passengers.

In response to last January’s deadly crash involving an Uber driver, Uber and Lyft now offer additional, lower-limit policies that apply any time a driver is logged into the app. Sidecar does not. For your own vehicle, Uber, Lyft, and Sidecar offer a combination of contingent collision and comprehensive policies, but typically with a deductible of $1,000 or more–and only if you’re giving a ride. If your car is stolen while you’re between passengers, you’re out of luck.

What Problems Could You Still Face?

None of these plans are much help if your personal insurance drops you, as has happened to some drivers. Few insurers are completely comfortable with ride-sharing programs. Rinock recommends that drivers pursue a purely commercial vehicle policy, but these can also present difficulties.

Adrian Anzaldua, a former Lyft operator in San Francisco, states that the only commercial policies he could find were prohibitively expensive: “I contacted the company through which I’d originally had a private policy. Their commercial department quoted me $8,000 a year for coverage. Most of the competing bids were in the same ballpark.” Premiums eventually forced Anzaldua out of the business.

What You Can Do to Protect Yourself

Short of a commercial policy, there are no perfect solutions for ride-sharing drivers at this point. That said, companies have beefed up their coverage in response to driver complaints. The between-ride, collision, and comprehensive policies are relatively new for Lyft and Uber, and because of them, Anzaldua adds, “I have referred friends to work for both.”

Lyft has also partnered with Metlife to improve its existing policies, and insurers like Progressive are researching programs to benefit ride-share operators. But in the meantime, you’ll have to navigate your own way between company and insurance regulations.

 

Your browser, Internet Explorer 8 or below, is out of date. It has known security flaws and may not display all features of this and other websites.

Learn how to update your browser