How Living Abroad Can Increase Your Insurance Premiums
The exposure to different styles, foods, trends and ideas can make living abroad a truly illuminating experience. And while moving back to America can bring pleasures of its own - like reuniting with friends and family members, not to mention hamburgers and hot dogs - it also carries with it a set of headaches as you seek to get re-established. (For more on traveling, check out Travel Tips For Keeping You And Your Money Safe.)
TUTORIAL: Introduction to Insurance
One challenge that might not be top-of-mind to the homeward-bound expat is car insurance. Carriers like to see three-plus years of "continuous" auto insurance coverage. Any interruption during that period can cause an increase in premiums. In almost all cases, if you were insured in the foreign country in which you were temporarily living, it will not count toward the continuity of your coverage here in the United States.
Why Continuity Matters
Continuity is important because, upon returning to America, the driver with discontinuous car insurance coverage will lose his/her "tenure" and will get a quote as if he/she never had any car insurance before. Drivers build up tenure through their carrier and their insurance record at-large. Losing tenure on either front can be costly because of increased premiums, the loss of an existing "persistency discount," and/or the loss of an existing loyalty discount with a carrier.
Anything less than 36 months of continuous coverage sets off red flags for most insurers, though there are a few exceptions. Carriers that cater to higher-risk drivers often don't offer persistency discounts. In California, insurers can't offer such discounts to new customers who are switching over from a different carrier. Additionally, for those living abroad for more than one month, but fewer than six, there is the option of getting a suspension, which keeps the policy active but suspends the coverage so the client retains his/her persistency and loyalty discount while abroad.
Another big (and worthy) group exempt from this practice is American servicepeople returning home from duty after serving our country overseas. Members of the military and their families are privy to a handful of helpful car insurance benefits including forgiveness of a lapse in continuous coverage due to a deployment.
For the rest of us, the heavy cost of trans-continental relocation makes it extremely difficult to bring our vehicles along when moving abroad. But the money that drivers abroad spend paying full insurance for cars left behind in an American garage almost certainly outpaces the penalty cost of becoming discontinuous upon moving back to the States. (To help you reduce your car insurance cost, check out 5 Car Insurance Add-Ons You Don't (Always) Need.)
Nevertheless, the price of discontinuity can be great. Persistency discounts save drivers 5.7% on average, while loyalty discounts (staying with the same carrier for an extended period of time, usually three years) can save a driver up to 20%. Combined, those two discounts can approach up to a quarter of your car insurance premiums - not an insignificant sum of money.
What's the best course of action? Luckily, we live in the land of opportunity, where we can purchase lower gradations of insurance that will keep our coverage continuous. Consumers can get a stripped-down version of comprehensive coverage that only protects against vandals and natural disasters, i.e. non-road related incidents. This means that you can pay as little as $15/month for a liability-only policy that will keep your car insurance continuous while living abroad. Interested consumers should feel free to shop around for an inexpensive option. Carriers are generally open to providing such insurance, as it's never risky to insure a car that will sit on a driveway for years. But this option is usually available only to those who own their cars outright. If a vehicle is financed, then its driver is required to maintain comprehensive and collision coverage as a condition of the loan. If there's a lapse in coverage, the lender could charge the owner for insurance at a much higher rate.
Non-Owner's Policy An Option
Depending on the company they are insured with and state in which they drive, consumers might find a non-owner's policy to be a better option when looking to keep their insurance continuous. These policies cost about $200 per year and will often keep your insurance track record continuous - just make sure to confirm this with the carrier during the sign-up process. Some people might think it superfluous to pay $200 annually to insure driving in America while they're not even in the country; others might see it as a small price to pay for car insurance savings in the future.
A last, and certainly more folksy, option would be to lend the car to a family member or close friend. This is especially attractive for people who don't want their cars sitting idly for extended periods of time. New drivers can be added to the existing policy, preventing any lapse. And while it's clearly a personal decision, the new driver can start paying for the policy. But note that if he/she fails to make payments you will indeed suffer a discontinuity in your coverage.
The Bottom Line
The bottom line is that expats need to keep their car insurance continuous while living abroad in order to keep costs down when they return. There are a handful of accessible options, though all of them are far from perfect. However, it might be a small price to pay compared to all the joys of traveling and living abroad. (For more, read 10 Tips For A Cheaper, Better Vacation.)