SUZE ORMAN. The Ultimate Protection Portfolio. Auto/RV/Boat Records

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1 SUZE ORMAN The Ultimate Protection Portfolio Auto/RV/Boat Records This product provides information and general advice about the law. But laws and procedures change frequently, and they can be interpreted differently by different people. For specific advice geared to your specific situation, consult an expert. No book, software, or other published material is a substitute for personalized advice from a knowledgeable lawyer licensed to practice law in your state. HAY HOUSE, INC. Carlsbad, California New York City London Sydney Johannesburg Vancouver Hong Kong

2 Copyright 2003 by Suze Orman Media, Inc. All rights reserved. Suze Orman is a registered trademark of Suze Orman. Suze Orman The Ultimate Protection Portfolio is a trademark of Suze Orman. People First, Then Money, Then Things is a registered trademark of Suze Orman. Published and distributed in the United States by Hay House, Inc., P.O. Box 5100, Carlsbad, CA Phone: (760) or (800) Fax: (760) or (800) All rights reserved. No part of this guidebook may be reproduced by any mechanical, photographic, or electronic process, or in the form of a phonographic recording; nor may it be stored in a retrieval system, transmitted, or otherwise be copied for public or private use other than for fair use as brief quotations embodied in articles and reviews without prior written permission of the publisher. The author of this guidebook does not dispense legal advice. The intent of the author is only to offer information of a general nature. In the event you use any of the information in this guidebook for yourself, which is your constitutional right, the author and the publisher assume no responsibility for your actions. ISBN 13: ISBN st printing, November th printing, March 2016

3 Auto/RV/ Boat Records Just as it s important to keep safe the deed and mortgage to your home, it s also important to protect the ownership and loan records of your cars, trucks, recreational vehicles, boats even your airplane, if you own one! By putting these documents in your Protection Portfolio, you and your loved ones will have one less thing to worry about. I ve divided this booklet into four sections: First, I ve outlined the information that everyone needs to know before buying an automobile, recreational vehicle, or boat. Then, for each one of these purchases, there s a special section dedicated to the concerns unique to them including a checklist of the vital documents to be stored in your Protection Portfolio and valuable information that every car, RV, and boat owner should know. Before You Make a Purchase, Determine How Much You Can Afford In the home-ownership booklet, I asked you to play house before you purchased a new home. Playing house is a way of 1

4 2 S u z e O r m a n T h e U l t i m a t e P r o t e c t i o n P o r t f o l i o trying on new financial situations for size. Now I want you to do the same thing before you purchase a new or more expensive automobile, boat, RV, or other luxury item. Here s how to do it: Open up a brand-new savings account. This is something I want you to do well before you re really serious about buying a vehicle or boat. Set a date once a month for instance, the 15th. For the next six months, on that date, I want you to deposit into your new account the exact difference between what your current vehicle or boat costs (total payments you re making on the vehicle or boat you currently own) and the amount you project you ll have to pay on your new vehicle or boat. For example, let s say that you have a $300 car payment. The car you want to buy will cost you $600 a month. You must deposit the difference between the two ($600 - $300, or $300 a month) into the new savings account, no later than the date you set. (If you don t currently own a vehicle or boat, or you own one but don t have a monthly payment, you d deposit the entire amount into the new savings account.) To really do a thorough job with this exercise, you should also factor in the estimated cost for all the extra fees expenses such as maintenance, gas, parking-garage fees, and boat-dockage fees. After playing like this for six months, it s time to evaluate how stashing away that extra money each month has affected your lifestyle. If you ve made all the payments comfortably and on time, you know that you can truly afford this particular vehicle or boat right now. Better yet, you ve already accumulated funds to put toward increasing your down payment, title costs, or even doing a few small repairs or upgrades on the new purchase! If, on the other hand, you missed payments or were late in making any, then you can t afford the vehicle you were thinking about buying at least not yet. I want you to take a look at your situation and determine what payment amount you would have been comfortable with. Maybe the solution is to consider a

5 A u t o / R V / B o a t R e c o r d s 3 smaller vehicle or a larger down payment, or you may just have to wait until your finances improve. The good news is that you now know how much you can realistically afford at this time without having lost any money finding out. You should also have a nice sum of money in your savings account that will help you achieve your future goals. Know Your FICO Score Before You Apply for Any Loan While you re in the playing stage and long before you apply for a loan be sure to find out your FICO score, if you haven t already done so. Just as with a home mortgage, the higher your FICO score, the lower the interest rate you ll qualify for on your auto, RV, or boat loan (for information on FICO scores, see page 31 of the Credit: Cards, Records, and Debt booklet). Likewise, as your FICO score goes down, the interest rate you may have to pay goes up. For example if you applied for a 36-month auto loan for $25,000 in the spring of 2016, here are the interest rates you d most likely qualify for at each FICO score level. FICO Score Interest Rate (percent) % % % % % % Notice that if your FICO score falls in the range of , it could cost you 3 percentage points more in interest than if your FICO score fell in the best range. Why is this important for you to know? Well, let s say that your FICO score is 680. If

6 4 S u z e O r m a n T h e U l t i m a t e P r o t e c t i o n P o r t f o l i o you were applying for an auto loan and the above interest rates were in effect at that time, you d have to pay an interest rate of 6.7 percent. Given this, you might be better off waiting to apply for a loan while you take the necessary steps to improve your FICO score. Raising your score by just a few points would put you into the next range, where your interest rate would be 4.6 percent. The following chart illustrates how a low FICO score can cost you nearly $100 per month in payments on a 36-month, $25,000 car loan. FICO Score HOW YOUR FICO SCORE AFFECTS A $25,000 AUTO LOAN Interest Rate Monthly Payment % 4.6% 6.7% 9.3% 13.6% 14.8% $730 $745 $768 $799 $850 $864 How to Protect Yourself When You Sell a Car, Boat, or RV The most important thing to remember when transferring ownership of a car, boat, or RV is not to give the buyer physical possession of the vehicle until you ve received a copy of the new registration from the Department of Motor Vehicles showing the new owner on the title. That way, you won t be liable in case of an accident or other mishap after the vehicle leaves your possession. Please check with your state Department of Motor Vehicles to get specific regulations and guidelines regarding transferring of title of your vehicle or boat.

7 Automobiles

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9 AUTOMOBILES Please locate and collect the documents listed in the Automobile Documents Checklist below and file each document in your Protection Portfolio. Please be sure you always have a copy of your auto-insurance policy in your portfolio. In case there s an accident or theft, easy access to this document will spare you much time and trouble. AUTOMOBILE DOCUMENTS CHECKLIST q Titles to any automobiles q Auto leases q Auto-insurance policies q Auto-loan documents Buying a New Car For most people, a new car is second only to a home as the most expensive purchase they ll ever make, so it s important to do your research before you even consider making an offer on a vehicle. Give some careful consideration to the car model and options you want, as well as how much you re willing to spend. Prior to discussing price with any dealer, shop around to compare prices, models, and options in ads, on Websites, and at competitive dealer showrooms so you re educated about the vehicle you re looking to purchase. Make sure you know both the invoice price and the sticker price for the vehicle and all the options you re considering, and plan to negotiate on price. In most cases, dealers will be willing to reduce their profit margin between 10 and 20 percent. Usually this is the difference between the invoice price and the manufacturer s suggested retail price (MSRP).

10 8 S u z e O r m a n T h e U l t i m a t e P r o t e c t i o n P o r t f o l i o When negotiating, always negotiate up from the invoice price. For an estimate of the invoice price, you ll need to do some research on the Internet. Two great resources are Edmunds ( and Kelley Blue Book (www. kbb.com). Links to both of these Websites are provided on the Must Have Documents Website. Use the Buying a New Car worksheet on pages to keep track of your findings and compare the various options and pricing (this worksheet can also be found on the Must Have Documents Website). By being an informed shopper, you ll be less likely to feel pressured into making a hasty or expensive decision at the showroom, and more likely to get a better deal. Buying Terms Negotiating for a new car requires mastering a unique vocabulary. Here are some terms you may hear at the dealership: Invoice Price. This is the manufacturer s initial charge to the dealer. It s important for you to know that dealers receive rebates, allowances, discounts, and incentive awards, so the invoice price is usually significantly higher than the dealer s final cost. The invoice price should include destination and delivery or freight. If you re buying a car based on invoice price (for example, at invoice, $100 below invoice, 2 percent above invoice ), and if freight is already included in the invoice price, make sure freight isn t added again to the sales contract. Base Price. The base price is the cost of the car

11 A u t o / R V / B o a t R e c o r d s 9 without options, but including standard equipment and factory warranty. The base price is printed on the sticker displayed in the car window. Manufacturer s Suggested Retail Price (MSRP), or Monroney Sticker Price. The MSRP lists the base price, the manufacturer s installed options with the manufacturer s suggested retail price, the manufacturer s transportation charge, and the fuel economy (mileage). The Monroney sticker (or label), which lists the MSRP, is required by federal law to be affixed to the car window, and may be only removed by the purchaser. Dealer Sticker Price. The MSRP listed on the Monroney sticker plus the suggested retail price of dealer-installed options, such as additional dealer markup (ADM) or additional dealer profit (ADP), dealer preparation, and undercoating adds up to the dealer sticker price. It s usually listed on a supplemental sticker that s affixed next to the Monroney sticker.

12 10 S u z e O r m a n T h e U l t i m a t e P r o t e c t i o n P o r t f o l i o WORKSHEET FOR BUYING A NEW CAR Year: Make: Model: Base Price: Feature Drive train: Two-wheel Four-wheel All-wheel Transmission: Automatic Manual Engine: Size Doors: Two-door Four-door Brakes: Two-wheel antilock Four-wheel antilock Power-assisted Power features: Power locks Power windows Doors (van) Mirrors Seats: Power Heated Leather Wheels and tires: Alloy wheels All-season tires Mirrors and lights: Illuminated dual vanity mirrors Map lights Exterior power mirrors Invoice Price* Sticker Price Difference

13 A u t o / R V / B o a t R e c o r d s 11 Feature Audio system: AM/FM Cassette Single CD Multiple CD Additional features: Alarm system TV VCR DVD Remote keyless entry Sunroof/moonroof Other: Invoice Price* Sticker Price Difference * You can obtain the invoice price by looking at the dealer s invoice, reviewing car publications, or visiting Websites such as or Cash Back or Zero Percent APR? These days, almost every major car dealer is offering either zero percent financing or cash-back deals. But before you start figuring out how you ll spend the money you ve saved, read the fine print. To qualify for the zero percent APR offer, your credit record must meet certain standards set by the manufacturer. Usually, the decision on whether or not to approve is based on your FICO score as well as your income. Unless you have an above-average income and a FICO score in the upper ranges, you won t likely qualify for the zero percent APR offer. Experts estimate that only a third of car buyers who apply for zero percent APR actually qualify. Even if you do qualify, you may discover that a cash rebate is a better deal. It will depend on a number of factors, including how long you plan on keeping the car and the interest rate you ll be charged if you take the rebate. Generally speaking, if you only plan on keeping the car for a few years, say two or three, the

14 12 S u z e O r m a n T h e U l t i m a t e P r o t e c t i o n P o r t f o l i o rebate will most likely be the better deal, since you ll only be paying interest for a short amount of time. If you don t qualify for the zero percent offer, I don t want you to automatically sign a deal for a cash rebate from the dealer. It s important to shop around for the best loan deal. Check out what your credit union or bank will offer you before you look into dealer financing. Another place to comparison shop for the best auto loan is on the Internet at or Links to both of these Websites are provided on the Must Have Documents Website. Now just because you re getting a zero percent APR or cash back, don t forget to negotiate. The zero percent APR or cash back is subsidized by the manufacturer, so remember to start with the price the dealer is paying the manufacturer also known as the invoice price and negotiate up. Trading in Your Old Car If you re considering trading in your old car, don t bring this up in negotiations until after you ve negotiated the best possible price for your new or used vehicle. Prior to entering the dealership, make sure you ve researched the market value of your old car (you can find the market value of used cars at the Kelley Blue Book Website, or the Edmunds Website, If your car is a popular model in good condition and you re sticking with the same brand, you might get a great deal from the car dealer as a trade-in. But if the car dealer offers you significantly less than the market value of your car, consider selling it yourself or take it to the usedcar lot or other dealer for a price quote. Please know that you can typically get more money for your car if you sell it yourself, rather than trading it in. But you also

15 A u t o / R V / B o a t R e c o r d s 13 need to ask yourself whether you d have the time to sell the car on your own. Refinancing Auto Loans Refinancing an auto loan is similar to a refinancing a mortgage, but the process is much simpler and less expensive. Typically, the only fees associated with an auto refinance loan are fairly standard transfer of lien holder fees (usually $5 to $10) and state re -registration fees (usually $5 to $75). These estimated fees may vary by lender and state of residence. Also, be sure to check if your existing lender has any prepayment fees: While these fees are uncommon, they could eliminate the advantages of refinancing. How much you save by refinancing your auto loan depends on factors such as the remaining balance of your existing loan, the difference between your old interest rate and the new interest rate, and the length of the term of your new loan. You can visit the Website and use the loan calculator there to get an estimate on how much you could save. A link to this Website is provided on the Must Have Documents Website. Extended Warranties and Service Contracts Are extended warranties warranted? The answer is: It depends. Extended warranties, also known as service contracts, are usually better deals for the dealer than the consumer. The extended-warranty providers figure out the average repair cost for the vehicle, then they add a percentage to that amount to cover their operating expenses and their profit. Let s say the average repair cost for your car, less any deductibles, is $1,200 over the next five years. The extended warranty company might

16 14 S u z e O r m a n T h e U l t i m a t e P r o t e c t i o n P o r t f o l i o charge you $1,500. Like most types of insurance, an extended warranty exists because the consumer doesn t want to risk costly repairs in case a major component (such as a transmission) breaks down. When shopping for an extended warranty, you have two options: a factory-backed warranty or an independent contract. Factory-backed warranties tend to be a bit more expensive, but they re generally more accepted by dealers because they come from the manufacturer there s more of an incentive to keep customers satisfied. Extended warranties from independent contractors may be less expensive, but they tend to have restrictions, and dealers are often hesitant to accept them if they re not familiar with the company. If you decide you want an extended warranty, make sure you shop around to get the best deal. Once you have a few quotes, ask your dealer to match the price. Warranties are usually negotiable. Before deciding to purchase a service contract, read it carefully and consider these factors: The difference between the coverage under the normal warranty and the coverage under the extended warranty What repairs are covered, and what repairs aren t covered Whether or not routine maintenance is covered Who pays for the labor and parts Who performs the repairs (that is, can you have repairs made outside the dealership)

17 A u t o / R V / B o a t R e c o r d s 15 When the extended warranty goes into effect, and how long it lasts Cancellation and refund policies Buying a Used Car When buying a used car, it s essential that you do your homework. Check out the car s market value, repair record ( is a good resource), maintenance costs, and safety and mileage ratings in consumer magazines or online. If you re purchasing from a dealer, you have the following rights under the federal regulation called the Used Car Rule: You have the right to see a copy of the dealer s warranty before you buy. Warranties are included in the price of the product; service contracts cost extra and are sold separately. You can check out the dealer with local consumer protection officials. You have the right to ask for the car s maintenance record from the owner, dealer, or repair shop. You can test-drive the car on hills, highways, and in stop-and-go traffic, and have the car inspected by a mechanic you hire. Keep in mind that if you buy a car as is, you ll have to pay for anything that goes wrong after the sale, and the Used

18 16 S u z e O r m a n T h e U l t i m a t e P r o t e c t i o n P o r t f o l i o Car Rule generally doesn t apply to private sales. (For more information about the Used Car Rule, visit the Federal Trade Commission Website: A link to this Website is provided on the Must Have Documents Website.) Make sure all oral promises are written into the Buyers Guide. Repairs One of the reasons we don t like to keep our cars for very long is that we don t like to pay for repairs. But this doesn t make good financial sense. Would you rather pay $1,000 a year in repairs on a car, or $3,000 a year on finance payments? If you do buy a reasonably priced used car and it starts to need repairs, you can use the money you ve saved by not buying a new car even a new used car to pay for those repairs in a pinch. In the long run, it s a far better use of your funds to keep a car as long as you can. Your insurance will cost less and registration fees may be lower. In addition, because older cars invariably show signs of wear and tear, you may be less concerned every time yours gets a scratch and thus be less inclined to spend money repairing every little scrape or dent. Leasing vs. Buying As I stated previously, apart from a mortgage payment, financing your car is one of your biggest financial undertakings. A car serves not only as transportation, but it also sometimes serves as a status symbol one way you may choose to show the world who you are or want to be financially. And sometimes the only way you can afford to get behind the wheel of this status symbol is by leasing, rather than buying. That said, I ve never liked leasing, and I will never like it, and no one will ever convince me that it s an intelligent thing to

19 A u t o / R V / B o a t R e c o r d s 17 do with money. Buying is preferable to leasing if your goal is to be debt-free, even if it means you have to pay for your car over time. Why? Because at any time, if you find that you can t afford a payment to a bank or other lender, you can sell the car. As long as you ve made a good deal initially and have treated the auto well, you can usually get close to what it s worth. And when it s time to acquire a new or used vehicle, a car dealer will almost always give you a trade-in value in order to get your business. When you lease a car, you take on a monthly expense that, in most circumstances, you ll continue to have to pay for the rest of your life. Here s why: With leasing, you don t own the car you re driving you re paying a monthly fee merely to use that automobile for a few years. At the end of the leasing period, you either have to give it back or purchase it for a predetermined price a price that s usually set in such a way that it may make no sense for you to go ahead and make that purchase. That s because these days the leasing companies entice you with a lower monthly fee to draw you in and then make up their profits with an inflated residual price (the price you d have to pay to buy the car outright) at the end of the lease. So what most people do after their lease period expires is turn in their auto to the dealer and lease another. And then what happens a few years later? They do it again... and then again for the rest of their lives. How to Get Out of a Lease Let s say that you re leasing a car when an unforeseen crisis hits, and you find you can no longer make your lease payments. What are you going to do? Even if you give the car back, you re not off the financial hook; you still owe the remaining money on your lease. On top of that, the leasing company sometimes even charges you additional penalties and fees, such as recapture of depreciation.

20 18 S u z e O r m a n T h e U l t i m a t e P r o t e c t i o n P o r t f o l i o To get out of your lease, you have three options. You can: 1. Buy the car outright or finance it. 2. Sell the car for as much as possible and pay that amount plus any additional amount you may still owe to the lease company. 3. Try to find someone to assume the lease obligations. If you can t sell your car outright, you may want to try to find someone who will assume your lease payments. However, keep in mind that when a person assumes a lease from you, it still doesn t mean you re off the hook! If the new leaser doesn t make the payments, the lending company will come after you. So be careful with whom you make your agreement to assume the lease. If you decide to sell the car on your own, you ll have to come up with the difference between what you owe the lease company and what you sold the car for. And what happens if you don t have the money? You re in trouble again. Therefore, to make sure you don t find yourself short, you need to prepare for this unknown when you first consider leasing. Signature Loans When you lease a car, see if you can also get approved for a signature loan. Try to get a $10,000 loan. If you ve been approved for a car lease, you can usually qualify for this other loan, and it will give you a backup income source if you hit a rough patch. Here s how: Let s say you ve leased a car and an unforeseen problem happens and you can no longer make the payments. Before you

21 A u t o / R V / B o a t R e c o r d s 19 return the car to the dealer or lender, see if you can sell it on your own. The way you can do this is to run an ad to sell your car for the payoff only don t try to increase the price to make money, because it won t happen (you want to attract buyers who can solve your problem, not scare them away). When a potential buyer makes an offer on your car, negotiate the best price you can in a nice manner. Hopefully, you ll arrive at a sum that will help you pay off the lender with what you ve negotiated plus your signature loan. If you have any portion of the signature loan left over, pay it back to the bank immediately. You have now eliminated a large car payment for 48 to 60 months and the lease is closed, or, more important, paid as agreed upon according to the lease s terms. If you decide to return the leased car to the leasing company without trying to repay, be aware that there s a big downside: After you return the car, the company may try to sell the car at an auction. Yet even if the car sells at auction, you ll still owe the difference between the balance on your lease at that time and the auction proceeds for the car. Again, the company may even charge you more for penalties and recapture of depreciation. It s likely that your lease company also owns a used-car lot, and the person who runs that used-car lot can go to the auction and buy your car for, say, $4,000. The problem is that you owed $12,000 on the car at the time you had to give it back. So even with the $4,000 from the sale of the car at auction, you ll still own $8,000 to the lease company, and now you have no wheels to get around. In the meantime, the lease company has your car back on its used-car lot, and the car is up for sale. The company can probably sell it quickly for $10,000. Between the $8,000 you still owe and the profit the company is collecting on the sale of the car, someone is making out like a bandit and it isn t you. You re still paying for a car that you don t even have. Now this is what s known as a bummer.

22 20 S u z e O r m a n T h e U l t i m a t e P r o t e c t i o n P o r t f o l i o Tax Write-Offs of Leasing? I know that some financial experts want you to ignore all the dangers of leasing. They ll show you the tax advantages of leasing over buying, and why, in your case, you should lease. I don t care about the tax advantages for most people. They re not significant compared to your overriding need to know how you re going to handle any unforeseen financial crisis in your life. Many people who lease just love getting those great tax write-offs for the first year, and they also love how they look driving a fancy car. However, I ve seen these same folks become absolutely depressed after their car is carted away because they can no longer make their lease payments, and yet they re still responsible for those payments. If for some reason you still want to lease rather than buy, please know that the Federal Reserve, which oversees leasing, forces dealers to disclose all the terms of their leases in a onepage document. Please make sure you read this document thoroughly so you understand what you re getting into. How Much Car Insurance You Need If you own a car or truck, you re required to carry certain types of coverage by the state you live in and if you borrowed money to buy your car by the lending institution that gave you your loan. Standard car insurance includes four types of protection: auto liability, medical payments, collision, and comprehensive coverage. Auto liability coverage protects you in case you cause an accident. It has two parts: The first is bodily injury liability, which pays your medical expenses and those of anyone else injured in the accident. There s no deductible for this portion

23 A u t o / R V / B o a t R e c o r d s 21 of the coverage. Most states require you to have a minimum amount of liability coverage, but bear in mind that the minimum may not be adequate if, for example, you cause a serious accident and get sued for pain and suffering. You can also buy medical-payments coverage, which will pay your expenses and those of your passengers if you experience a serious injury in a car crash, whether you caused the accident or not. Note, though, that car-insurance medical benefits won t pay all medical expenses there are limits. The second part of the standard liability policy pays the repair expenses if you accidentally damage somebody else s property (like another person s vehicle or house) with your car. Collision insurance is an option, and it s not typically required by the state. But among other things, it protects your car in the event of an accident, whether you caused the accident or not. If your car is valuable, it might make sense to purchase this type of insurance. You can choose whether or not to have a deductible. Comprehensive insurance, which is also optional, pays for the repair or replacement of your car if a fire, falling object, earthquake, flood, theft, vandalism, or another type of nonautomotive accident damages it. No-Fault Auto Insurance Most states use a no-fault auto-insurance system, while others use traditional third-party systems to settle claims. Nofault states require drivers and their insurance companies to pay their own costs after a car accident, whether they were responsible or not. But you still may need liability insurance, because if you cause an accident and the costs to the other injured people are above a certain threshold, they can sue you. If they win a judgment against you and you don t have sufficient

24 22 S u z e O r m a n T h e U l t i m a t e P r o t e c t i o n P o r t f o l i o liability coverage, the difference may have to come out of your own pocket. In a state with a traditional third-party system, or a fault state, your insurance company pays your claim only if you can prove that you didn t cause the accident. No-fault states typically require you to buy medical-payments coverage, while fault states don t. But you may want to consider buying this type of coverage anyway, as it pays no matter who caused the accident. Replacement-Cost Policies Premiums for replacement-cost coverage may be more expensive, but they can also be worthwhile, because such coverage will replace or repair your car without deducting for its depreciation. Actual cash-value policies only pay you for the value of the car at the time it s stolen or damaged, which is reduced to account for depreciation. Uninsured and Underinsured Motorist Insurance Uninsured motorist coverage protects you if a driver with no insurance damages your car in an accident. (There is also uninsured motorist property damage and a collision deductible waiver.) Some states require you to have this coverage; it kicks in if an uninsured driver hits your car and you have medical bills. There s also something called underinsured motorist coverage, which makes up some of the difference if a driver hits you and has some, but not adequate, insurance. In other words, you can make a claim on your own insurance policy if the person who hits you doesn t have any insurance for you to make a claim on. However, note that all of these policies have benefit limits.

25 A u t o / R V / B o a t R e c o r d s 23 How Much Insurance You Need To determine the level of coverage you need, answer the following questions and think about what will make you feel safe. Is your car brand new or a few years old? How much would it cost you to replace your car? Do you have the resources to pay for medical bills and car repairs? Do you have valuable assets you want to protect? After answering these questions, if you feel you don t have adequate insurance, contact your insurance provider and discuss increasing your coverage. Standard minimum recommendations for homeowners and people with significant assets are at least $100,000 in bodily injury coverage per person, $300,000 in bodily injury coverage per accident, and $50,000 in property-damage liability. Those with fewer assets should consider $15,000 in bodily injury coverage per person, $30,000 in bodily injury coverage per accident, and $10,000 in property-damage liability. Finding a Good Auto-Insurance Policy Car-insurance premiums have been increasing even for those who maintain a clean driving record and drive safe and reliable cars. The insurance industry claims that the increases are necessary due to rising medical and car-repair costs, as well as increasing jury awards and insurance fraud. So it s essential, more than ever, that when your auto-insurance premium is up

26 24 S u z e O r m a n T h e U l t i m a t e P r o t e c t i o n P o r t f o l i o for renewal that you shop around to get the best deal. Finding a good deal on an auto-insurance policy can be even more difficult if you live in a high-cost state like New Jersey, New York, or California. One of the best resources to comparison shop is the Internet. Among sites you may want to check out are as well as insurer Websites including and Before signing up with any company, though, make sure they have a good financial safety credit rating. The website of an insurer you are considering should prominently list its financial credit. How to Reduce Auto-Insurance Costs Premiums on your car insurance are based on your age, sex, where you live, the type of car you drive, and your driving record, among other things. There are a number of actions you can take to reduce your insurance costs. Increase your deductible. By increasing your deductible, you can cut your premium dramatically. Insurance was meant to cover the major expenses, not smaller ones. Drop some coverage. If you have an older car one that s worth less than ten times the amount you d pay for coverage you may want to consider dropping collision and comprehensive coverage. Strive to have a high FICO score and a good credit rating. Insurance companies look at an insurance score to determine whether or not they should

27 A u t o / R V / B o a t R e c o r d s 25 insure you and what they should charge. This score, similar to your FICO score, is based on information found in your credit file. Take advantage of discounts. Most policies give discounts for the following: A clean driving record, with no points on your license Preferred age, sex, and marital status (typically, single women over age 25, single men over age 30, and married women of any age) Good grades in high school, college, or even graduate school A car supplied with air bags, antilock brakes, or an alarm system Defensive-driving classes Multiple cars in your household insured by the same company Insuring your home and car with the same company These discounts may seem arbitrary, but they aren t the qualifications mentioned are statistically correlated with drivers who have fewer accidents. Make it a point to see if your family qualifies for any of these discounts with your insurance provider.

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29 Recreational Vehicles

30 28 S u z e O r m a n T h e U l t i m a t e P r o t e c t i o n P o r t f o l i o RECREATIONAL VEHICLES Please locate and collect the documents listed in the RV Documents Checklist below and file each document in your Protection Portfolio. Please be sure you always have a copy of your insurance policy in your portfolio in case there s an accident or theft, easy access to this document will spare you much time and trouble. RV DOCUMENTS CHECKLIST q Titles to any RVs q RV-insurance policies q RV-loan documents The term recreational vehicle (RV) can be used to describe just about any vehicle that s used for recreational purposes, but it generally refers to a transportable, motorized, or non motorized vehicle that contains, at the very minimum, a bed for sleeping. Most RVs also contain a kitchen, bathroom, dinette, and a sitting area. Not to be confused with mobile homes, which are generally pulled once to a location where they will serve as a home, recreational vehicles are made to travel. RVs are generally between 10 and 45 feet long, with most in the 15- to 35-foot range. Rent Before You Buy Renting is a great way to take an RV on an extended test drive to see if purchasing is right for you. Hundreds of national rental outlets and local RV dealerships offer rentals, and driving an RV requires no special license. For an additional fee, some rental companies offer housekeeping packages that include

31 A u t o / R V / B o a t R e c o r d s 29 linens, cookware, and other necessities for life on the road. RV-rental rates vary by season, region, and unit size. Larger dealerships operate an extensive emergency repair network and a toll-free renter s assistance and information phone service. Vacationers interested in renting an RV locally can search online or consult their yellow pages under Recreation Vehicles Renting and Leasing. Buying an RV As with buying an automobile, before walking onto any dealer s lot, it s essential that you do your homework. Give careful consideration to the model and options you want, as well as how much you re willing to spend. Prior to discussing price with any dealer, shop around to compare prices, models, and options in ads, on Websites, and at dealer showrooms so you re educated about the vehicle you re looking to purchase. Before you purchase an RV, you ll also want to make sure you ve done everything possible to increase your FICO score. RV financing is credit-score drive similar to automobile and mortgage financing. In mid 2016, the best interest rates on RV loans were under 5 percent or so. Since an RV is considered a luxury item, applying for a RV loan is more complex than an auto loan, and you ll be required to fill out a personal financial statement. For many RV owners, the interest on their loan is tax deductible as second-home mortgage interest. To qualify, the RV must be used as security for the loan, and it must have basic sleeping, toilet, and cooking facilities. For more information on the tax deductibility of RV-loan interest, visit the IRS Website at (a link to this Website is provided on the Must Have Documents Website).

32 30 S u z e O r m a n T h e U l t i m a t e P r o t e c t i o n P o r t f o l i o Insurance for Recreational Vehicles Insurance for RVs isn t the same as standard auto insurance. The value of the vehicle and the potential for damage in the event of an accident means that ordinary auto-insurance minimums are too low. You may be able to get a policy with higher limits from your regular auto-insurance provider, but probably not most auto-insurance providers don t cover RVs. So if you re planning to buy an RV, you ll need to do some homework to find an insurance provider. When shopping for an RV policy, you ll want to consider the following specialized coverage that you won t find in a standard auto policy: Replacement Cost (Total Loss Replacement): This type of coverage ensures that you get a comparable new RV if you have a total loss in the first five model years. Replacement Cost Personal Effects: With this coverage, items carried onboard the RV such as clothing, dishes, computers, cameras, and sporting equipment will be covered at their replacement cost. Purchase Price: In the event of total loss, this policy pays your purchase price. Coverage begins at the beginning of the sixth model year and continues as long as the premium is paid. Note: This type of policy is only available to owners of manufactured RVs less than ten years old.

33 A u t o / R V / B o a t R e c o r d s 31 Disappearing Deductibles: Under this policy, your comprehensive and collision deductibles are reduced by 25 percent for each year that you remain claim free. In other words, if a loss occurs after four claim-free years, you pay no deductible. After a comprehensive or collision loss occurs, however, deductibles return to original amounts, and the disappearing deducible feature resumes all over again. Towing/Roadside Assistance: With this coverage, towing and roadside assistance are provided in the U.S. and Canada by means of a toll-free number. The service usually includes fuel delivery, flat-tire changes, lockout service, jump starts for batteries, and towing in case of mechanical or electrical breakdown. Emergency Expense: If your vehicle isn t drivable or livable due to a covered loss, this policy will pay for emergency lodging and transportation expenses. Full-Timer: This type of coverage provides personal liability similar to a standard homeowners policy. Coverage for personal effects and emergency expenses is usually available as well. Agreed Value: If there s no established market value on your RV, under this policy an insurance provider will pay the agreed-upon value (based on a professional appraisal) in the event of a total loss.

34 32 S u z e O r m a n T h e U l t i m a t e P r o t e c t i o n P o r t f o l i o Campsite Liability: This policy pays for bodily injury or property damage to others occurring at your campsite. How to Reduce RV-Insurance Costs The premiums on your RV insurance are based on your age, sex, where you live, the type of RV you drive, and your driving record, among other things. There are a number of actions you can take to reduce your insurance costs: Increase deductibles to whatever you can afford. You can cut your premium dramatically by increasing your deductible. Remember: Insurance was meant to cover the major expenses. Don t duplicate roadside assistance. Check your other insurance policies to see if you re already paying for roadside assistance. If so, see if that coverage extends to your RV. Strive to have a high FICO score and a good credit rating. Insurance companies look at an insurance score to determine whether or not they should insure you, and at what rate. Like a FICO score, an insurance score is based on information found in your credit file. Take advantage of discounts. Most policies give discounts for: A clean driving record, with no points on

35 A u t o / R V / B o a t R e c o r d s 33 your license Completion of a safe driving course Preventive and antitheft features, such as antilock-brake systems and alarm systems Check the Credit Rating of RV-Insurance Providers Before signing up with any RV-insurance provider, make sure they have a good credit rating. Every insurer you are considering should provide their credit-rating information on their website. Refinancing an RV Loan Refinancing an RV isn t as simple as refinancing other auto loans. One of the main reasons is that RV loans are upside down meaning that most people owe more on their RV than it s currently worth. In the first year of ownership, the value of a new RV can drop by as much as 40 percent. When an RV loan is refinanced, the financial institution bases the loan on the current value of the RV not how much is owed. Many RVs are purchased with less than 20 percent down, so if you owe several thousand dollars more than your RV is worth, in most cases refinancing doesn t make sense. If you have significant equity in your RV and you plan on keeping it for a few more years, refinancing may make sense for you especially with the current low interest rates. The rate on your RV loan will be determined by the finance amount, length of loan, and your credit quality.

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37 Boats

38 BOATS Please locate and collect the documents listed in the Boat Documents Checklist below and file each document in your Protection Portfolio. Please be sure you always have a copy of your insurance policy in your portfolio in case there s an accident or theft, easy access to this document will spare you much time and trouble. BOAT DOCUMENTS CHECKLIST q Titles to any boats q Boat-insurance policies q Boat-loan documents Boat Leasing or Renting Before purchasing a boat, you may want to try one on for size to make sure that the boat and the boating lifestyle is right for you and your family. There are renting opportunities at almost any port that has a marina or dock. Before renting, please thoroughly research licensing, fees, and any applicable seasonal restrictions. Another option is to lease a boat. As you know, I m not a big fan of leasing and never will be, because at the end of your lease you ll have neither equity nor a boat to sell should you desire to purchase a different boat. One popular type of boat leasing is called timesharing. Timesharing allows you to use a boat for specified periods of time during the year essentially as an extended, reserved rental.

39 A u t o / R V / B o a t R e c o r d s 37 Purchasing a Boat Purchasing a boat can be an expensive proposition. You can generally expect to pay around $1,000 per foot, depending on features and locale. So before discussing price with any dealer, shop around to compare prices, models, and options in ads, on Websites, and at dealer showrooms so you ll be educated about the boat you re looking to purchase. Don t forget to negotiate! Due to the high cost of purchasing a boat, you ll probably need to consider financing options from a boat dealer or financial institution. Boat loans are typically simple interest loans of up to 15 years, with percent down and generally no prepayment penalty. Similar to auto loans, if you don t have a good credit report or FICO score, you may pay a higher interest rate or be asked to contribute a larger down payment. If your FICO score is in the lower ranges, you may have a difficult time getting a loan, so it s to your advantage to work on improving your score prior to applying for a boat loan especially since boat loans aren t as easy to qualify for as car loans. The IRS has expanded the meaning of a second home to include boats and motor homes. For tax purposes, the interest paid on a second home is tax deductible. So if the boat you purchase has sleeping, bathroom, and cooking facilities, the interest paid is tax deductible. For more information on the tax deductibility of boat-loan interest, visit the IRS Website: (a link to the IRS Website is provided on the Must Have Documents Website). Insurance for Boats Your homeowners insurance may include coverage for watercraft, but such coverage is typically very limited. Usually

40 38 S u z e O r m a n T h e U l t i m a t e P r o t e c t i o n P o r t f o l i o the coverage on a homeowners policy is only about $1,000 in damages for the boat, the engine or outboards, the trailer, and accessories. Other restrictions also apply for example, the boat must be housed on your primary residence, there may be rules on where you can use your boat, and there are usually low limits on theft coverage. If you re a prospective boat owner and plan on docking your boat in a marina, you ll probably be required to have a separate watercraft policy or rider with your insurance provider. The insurance industry separates watercrafts into the following categories: Boats (usually 16' to 25'11" long) Yachts (26' or longer) Personal watercraft (Jet Skis, Wave Runners, and other personal watercraft) The cost of your policy will be dictated by the type of boat, its size, age, where it will be used, and the skill level and age of the operator. Boat Insurance Vessels that fall under the category of boat are smaller powerboats and sailboats that are less than 26 feet long. Boat insurance typically covers physical damage and liability to the boat itself, outboard motors, the boat s trailer, and personal property kept aboard the boat that s part of normal operation (such as boat furniture, deck chairs, and seats). The physical damage coverage pays to repair or replace your boat if it s damaged or destroyed by hurricanes, tornadoes fire, theft,

41 A u t o / R V / B o a t R e c o r d s 39 lightning, vandalism, or windstorms, and the liability coverage protects you if your boat damages property or a person is injured on or by your boat. Liability coverage is usually offered in increments of $100,000, up to $1 million. However, personal property that isn t part of the normal operation (such as cameras, clothing, and portable TVs) generally aren t covered. Some policy providers will allow you to purchase additional coverage either as an add-on or as a separate policy to cover fishing equipment, cell phones, and computers that you use aboard the boat. Yacht Insurance A yacht is typically a boat that s 26 feet in length or longer. Sport-fishing boats, larger sailboats, and cruisers normally fall into the category of yachts. Similar to boat insurance, yacht insurance offers two main types of coverage: property damage, called hull coverage ; and liability, referred to as property and indemnity coverage. Hull coverage is for the entire yacht. It covers any items used to operate or maintain the yacht, such as sails, furniture, and outboard motors. Dinghies and trailers generally aren t covered under hull coverage, but can be added as a separate policy. Hull coverage pays for damage due to fire, theft, windstorms, lightning, or vandalism. Protection and indemnity coverage protects you if your yacht damages property, or a person is injured on or by your yacht. Similar to boat liability coverage, it s usually offered in increments of $100,000, up to $1 million. Yacht owners also have the option to purchase a hurricane protection endorsement. A hurricane protection endorsement pays to haul your yacht out of the water if a hurricane watch or warning is issued, and it also pays to place the yacht back in the