Sam was in court the other day, and while waiting for his case to get called, he watched a woman who was cited for driving without insurance talk to the judge.
The judge asked her if she had auto insurance and she said she did. "Did you have insurance on the day you were cited?"
"No," she replied.
"Well," he said, "the law is clear. You have to pay a fine plus court costs." The total came to $275. The judge gave her 30 days to pay it. She meekly asked if she could have more time, or pay over time. The judge extended the payment term to 60 days.
But what was clear to Sam is that she didn't have insurance because she couldn't afford it. Not because she didn't want to have it. It was also clear that this woman had no idea how she would be able to afford the court costs she had just been assessed. Sixty days might have just as well been six minutes.
Almost all states require drivers to carry car insurance that at least covers the person you hit. But states don't generally dictate whether you need homeowners' insurance. If you're buying a home and need a mortgage, the mortgage company will require you to carry a homeowners' policy for at least as much as the mortgage amount.
While you can't close on your mortgage without proof of insurance, many homeowners' (who aren't paying premiums monthly along with their real estate property taxes into a tax and insurance escrow) allow their policies to lapse. It isn't because they don't want to have homeowners' insurance. It's because they either forget to make the payments, or more typically, they can't afford the premiums.
Ilyce recently wrote about Sharon and Vince La Vigna, whose house was torched by a San Jose-based serial arsonist, in the early morning hours of January 11, 2014. Sharon was pulled from the fire by neighbors, just minutes before the roof collapsed.
The family didn't have homeowners' insurance. A few years earlier, Sharon lost her job. Vince is disabled, and they were scraping by on Social Security. Sharon and Vince had been making monthly payments to their insurance company when the company switched to an annual contract.
Sharon contacted her homeowners' insurance company and asked if she could pay in installments. The company said no, dropped her and the house was uninsured. Sharon and Vince had been looking for another affordable policy, hoping for the best.
Instead, an arsonist torched their home, and they lost everything.
Ilyce has received email from many people who want to help, and a fund has been established for those who are interested through YouCaring.com. But there have been plenty of readers who want to know why we aren't tougher on homeowners who let insurance policies lapse. As several emails put it, "Didn't they get what they deserve?"
We think that's a harsh attitude, as the vast majority of Americans struggle to get out from under the worst recession in 80 years. There are still three people unemployed for every job that's available. Many seniors who lost jobs, like Sharon, can't find replacement jobs that pay anything close to what they used to earn.
Paying over time has become the way many Americans afford the everyday costs of life, not even the extras like vacations. Homeowners' insurance, health insurance and auto insurance premiums are paid for monthly, or sometimes bi-weekly -- whatever chunks are affordable.
When your home is paid off, as the La Vigna's home was, homeowners' insurance is especially important. If you can't afford the coverage you have, you can try the following tips to lower your premiums or find an alternative policy that may be more affordable: Insure only the house and contents, not the land on which it sits; ask for a discount if you're a non-smoker, a senior or have home security devices; raise your deductible (even a $10,000 deductible is better than a $300,000 loss); and, bundle your car or life insurance policies together with your homeowners' policy and buy it from the same insurance company.
Sharon and Vince are now living with their son. In the past few days, an arrest was made in the case. It's not like having their house restored, but it's something.
In the case of the uninsured driver, she could reduce her costs by raising her deductible or, if her car was old, by dropping that portion of the insurance coverage relating to her car coverage but keeping the liability portion. Sometimes having that coverage and driving is better than driving without insurance.