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Picking up the tab: How alcohol abuse drives up costs for health, life and auto insurance

Before you belly up to the bar for another beer or martini, consider this sobering news.

In the United States, the overall cost of excessive drinking is estimated at $223.5 billion, according to a study published in the American Journal of Preventive Medicine. That amounts to $746 per person, with the bulk of the cost attributed to binge drinking. Seventy-two percent of this tab came from lost productivity and 11 percent from increased health care costs. Here’s a breakdown of costs related to alcohol consumption when it comes to health, life and comprehensive auto insurance.

Health insurance

Of the $24.6 billion in health care expenditures attributed to alcohol, 43 percent came from specialty treatment for alcohol abuse and dependence, according to the study. Another 21 percent resulted from hospitalizations for other medical conditions stemming from excessive drinking.

If you are struggling with alcoholism or have a history of alcohol abuse, follow these guidelines for health insurance and treatment:

1. Talk to an agent. If you apply for individual health coverage on your own and you have a history of alcoholism, you may get denied. In this case, a health insurance agent or broker can check with three to five health insurers on your behalf without divulging your identity. Together, you can compare options to find the best plan.

2. Know your coverage. Most major insurance companies cover alcohol addiction rehab, says Dr. Moshe Lewis, a pain management specialist in Redwood City, Calif. The amount of coverage can vary, depending on your plan and medical history. Check with your insurance provider to make sure you understand exactly where you stand regarding outpatient or inpatient visits in addition to other rehab costs.

3. Consider other options. Some nonprofit recovery programs have sliding fee scales and flexible payment plans, Lewis says. Additionally, the county or city where you live may offer a program for free or at a low cost.

Life insurance

As noted in the American Journal of Preventive Medicine study, excessive alcohol consumption is responsible for an average of 79,000 deaths and 2.3 million years of potential lost life in the United States each year, making it the third-leading preventable cause of death in the country.

Accordingly, alcohol can play a minor – or major – role in buying a life insurance policy. “At a minimum, you’ll be paying higher premiums,” says Kevin Lynch, a certified financial planner and assistant professor of insurance at The American College. “The maximum effect is that you’ll be denied coverage.”

When filling out an application for life insurance, you’ll be asked questions related to alcohol consumption. Be honest when filling out an application, Lynch says.

A life insurance company usually will compare the information you provide on the application with your medical records. If the company notices a discrepancy – such as a history of alcohol abuse when you reported none – it most likely will ask you to change the information on your application. The company then could issue you a policy without any changes — the same amount for premiums and the same amount of coverage that you were offered before sharing information regarding alcohol abuse. It could charge you higher rates, offer less coverage or deny your application altogether.

Insurance companies often check motor vehicle records during the life insurance application process. If you’ve had a DUI, it will be used to determine how much you pay for life insurance.

Auto insurance

Of the costs related to excessive drinking, $13.7 billion came from crash-related costs from drunken driving, according to the study. So it’s not surprising that it can also take its toll on the average amount you pay for car insurance.

If you cause an alcohol-related crash and you harm a person, another car or a structure, your policy will provide coverage up to the limit you’ve selected, says Michelle O’Connor, president of O’Connor Insurance Associates Inc. in Charlotte, N.C.

Here are three additional insurance costs to be aware of when it comes to drinking and driving:

1. Liability issues. If you have an insurance policy with low limits, such as the state minimum for auto coverage, and the damage you cause in an alcohol-related crash exceeds those limits, you likely will be sued, O’Connor says. Higher limits will cover more damage and will reduce the chance that your other assets will be in danger. If you have optional collision coverage on your policy, any damage done to your car would be covered after your deductible has been met.

2. DUI drop. If you’re charged with drinking under the influence, some auto insurance companies will cancel your policy — regardless of whether you’re convicted, O’Connor says.

3. Rate increases. If you’re convicted of DUI and your insurance company does not drop you, brace yourself for a big hike in your premiums. The exact amount of the rate increase will depend on factors such as the type of car you drive, your credit history (a better history can result in a lower rate even with a DUI conviction) and any other driving convictions you already have, O’Connor says. “It’s hard to say how much the insurance will increase, but I can guarantee a cab would have been cheaper,” she says.

If you need help finding an affordable insurance policy, iQ has licensed agents who can help walk you through your options in any situation.

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