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INSURANCE
Keep Covered
by Kimberly Lankford

After serving more than a year in Iraq building bridges, fortifications and base camps, two engineering units of the North Dakota National Guard came home in March. But several returning soldiers had a rude homecoming when they tried to reactivate their auto-insurance policies.

Many of the unmarried soldiers had decided to store their cars and drop their coverage while they were deployed. But instead of saving money, they were threatened with penalties because they had not maintained continuous coverage. Some found it tough to get auto insurance at all; others were treated as new customers -- losing long-term-customer and good-driver discounts.

Insurers are permitted in some states to penalize people who don't have uninterrupted coverage. The reasoning, the insurers explain, is that the break in coverage may be evidence that the car owners had been driving without insurance. But these men and women were away at war.

"It's insensitive that insurers would do this," says Jim Poolman, North Dakota's insurance commissioner. Poolman did more than complain. He challenged insurers to treat returning National Guard soldiers as if they had no break in coverage. After some bad publicity, most of the companies promised special dispensations for those who dropped coverage while they were deployed abroad.

But the soldiers' experience is a warning to anyone who plans to drop their coverage for any reason while away from home. Saving money by dropping a policy can backfire if the company raises your rates or turns you down when you try to reinstate your coverage. There are, however, ways to save money and avoid future problems.

Keep minimal coverage

Even if you aren't driving your car, keep some coverage. That's what Robert Dean, an Army surgeon from Washington, D.C., did while he was stationed at a combat-support hospital in Iraq. Before he left, Dean called his insurer, USAA, to report that he'd be storing his BMW convertible in a garage. "They recommended not stopping the coverage because the car could still be damaged," he says. Keeping the policy active would protect him in case the car was stolen, vandalized, destroyed in a fire, crushed by a fallen tree or damaged in some other way.

Because nobody would be driving the convertible while Dean was in the desert, though, USAA slashed the mileage limits, which lowered the premium by about $150 every six months. And there was no issue about his resuming full coverage at the regular rate when he returned.

You may be able to lower your premium even further with "lay-up coverage." That eliminates all coverage except comprehensive, which protects against theft, fire and other damage even when the car isn't being driven. Ratcheting down to just comprehensive coverage can cut your premium by about 75%, says Diane Cottingham, an insurance agent in Underwood, N.D., who worked with many of the Guard members. But this isn't an option for everyone: Some states require that you keep liability insurance unless you turn in your tags. And even if state law doesn't demand it, some lenders do until your loan is paid off. In that case, you can at least reduce your premium by cutting your liability limit to the bone and raising your deductible while your car is being stored.

If you have dropped coverage, be sure to explain your situation when you apply for a new policy. Say, for example, that you canceled a policy and left your car in a garage during a six-month assignment in New York City, or dropped your insurance for several months while you were recuperating from surgery and unable to drive. "I would strongly recommend that you share these details with the company because it could very well make a difference," says Bruce Maynard, senior assistant vice-president for Amica Insurance. "That differentiates you from an individual who has been operating a vehicle regularly without insurance."

And be sure to shop around. If your original automobile-insurance company tries to raise your rate when you attempt to restart a policy, see what other insurers will offer you. Companies vary widely in the way they treat a break in coverage.

--Reporter: Christine M. Varner