Drivers Passing on Insurance Coverage?

This article was first published November 5th, 2010. Some of the laws may have changed since this that date.

In Down Economy, Drivers Increasingly Passing on Insurance Coverage

As the economy in Florida and across America continues to struggle, those facing layoffs or reduced work hours are forced to make tough spending decisions. Increasingly, Florida drivers are cutting costs by letting their car insurance lapse — a decision that could put all Florida drivers at financial risk.

According to the Insurance Research Council (IRC), the nationwide percentage of uninsured motorists — which was 13.8 percent in 2007 — could rise as high as 16.1 percent by 2010. The problem is especially troubling in Florida, as Florida already stands as one of the top five states in the nation in terms of uninsured motorists. In fact, an estimated 23 percent of Florida drivers are already driving without sufficient insurance, and some researchers believe that, based on rising unemployment rates, that number could increase by as much as 15 percent over the next year, alone.

How closely are uninsured motorist numbers tied to unemployment rates? Data from the IRC indicates that every increase of a single percentage point in unemployment figures correlates to a half-point increase in the number of drivers without insurance. With Florida’s rising unemployment rate — already as high as it has been since 1992 — that equates to a large number of uninsured motorists.

Serious Problem, Serious Consequences

For those who make the decision to take to the streets without insurance coverage, the risk is not negligible: Those caught driving without insurance could face stiff fines or a possible a suspension of their driving privileges. If they are unfortunate enough to be involved in an accident while driving without coverage, they may find themselves personally liable for the damages caused to the other involved driver or drivers — a liability that could cost them whatever assets they own.

Unfortunately, the consequences of drivers making the decision to forego insurance coverage can also extend to others. Unlike some states, Florida does not require that its drivers carry uninsured or underinsured motorist coverage. Drivers that elect to purchase this are covered by their own insurance company — up to the limits of their policy — if they are involved in an accident caused by an uninsured motorist.

Protect Yourself 

As the falling economy and rising unemployment numbers leads to an increase in uninsured drivers, several states and insurance industry leaders are taking steps to reverse the trend. Across the nation, some states are also working to address the problem. Several states have announced plans for or passed laws expanding the role of insurance companies in verifying the compliance of their covered drivers with local insurance requirements.

Insurance companies themselves are also getting into the act, introducing new products designed to make automobile coverage more easily attainable for cash-strapped drivers, or beefing up already existing discount programs geared toward good students, safe drivers or those with car alarms or other anti-theft devices installed on their automobiles. Other companies are initiating procedures to contact customers directly to explain their coverages and strategies for cutting costs while minimizing financial risk.

What can you do to protect yourself? First and foremost, if you are considering dropping your insurance coverage, think again. If your insurance payments are simply too high to maintain, shop around for better rates. Reducing deductible rates and foregoing collision coverage can also lower insurance premiums, but these steps carry the risk of greater financial liability if you are involved in an accident.

For those that do carry insurance, if you don’t already have uninsured/underinsured motorist coverage, strongly consider adding it to your policy. While this will boost your premiums — uninsured/underinsured motorist coverage adds roughly 7% to 9% to an average auto premium, according to industry experts — with the increasing number of uninsured drivers that extra cost could pay great dividends in the long run.

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