How do you decide on car insurance coverage?

In My Humble Opinion
1

So I probably have too much insurance coverage. When I first got my car (it’s a 2004 Pontiac Grand Prix with just under 80K miles on it) I just got what I had on my last car, and I probably got that because it’s what my parents had. So we’re looking at our budgets and I’m thinking, you know, I probably have too much insurance on my car. Considering it isn’t really worth that much (although, you know, I’d hate to be carless!)

How do you know what you need, though?

The blue book value of my car is around 8K. Frankly I’m just kind of confused by exactly what coverage I have and what I really need and why I need what. I’m kind of scared to reduce anything because OMG WHAT IF I ACCIDENTALLY DRIVE INTO A SCHOOLBUS FULL OF NUNS?

Here’s what I evidently currently have, which costs me $425 every six months with discounts for being accident free, multiple vehicles, and also having my homeowner’s insurance with State Farm. (This is in South Carolina, if it makes a difference.)

Coverage Coverage Details Premium
Liability - Bodily Injury / Property Damage: $250,000 each person / $500,000 each accident $100,000 each accident $170.48

Uninsured Motor Vehicle: $250,000 each person / $500,000 each accident / $100,000 each accident $14.93

Underinsured Motor Vehicle: $250,000 each person / $500,000 each accident / $100,000 each accident $77.52

Comprehensive Deductible: $250 $66.27

Collision Deductible: $250 $85.65

Emergency Road Service No Coverage $0.00

Car Rental and Travel Expenses 80% of Cost Max $500 $9.80

Total Premium

(total premium includes your discounts) $425.65

So, I mean, that’s gotta be too much for an 8K car, right? But what do I need and how do I decide? Obviously part of it is “how easy would it be to come up with the cash if I needed it for repairs or replacement”, and, I mean, I don’t know. I could always get a loan from First National Bank of Dad, I suppose, but right now we’re trying to get rid of our debt before we feel we can really start socking away a lot in savings. So if we suddenly had to get a new car we’d have to scramble, but we’d make it work one way or another.

Please advise.

2

… nobody?

3

You might see what it would cost to switch over to a $500 deductible, provided you are in a place in your life where $500 on short notice is pretty reasonable.

But I wouldn’t cancel comprehensive/collision on a car that you may well be able to drive for another five or ten years.

4

I just played around with my car insurance options. At least in my case, dropping all coverage from middle-of-the-road to the absolute minimum only reduced the premium by 20%. You probably won’t save much, but if you have to you can shave a few bucks off the premium.

If you have no substantial assets, reducing liability coverage might not be a bad idea. Are you wealthy enough to be worth suing for damages above your liability coverage?

ETA: Really, the $8k care you drive isn’t what you should be worrying about. Most of the coverage is about medical payments for yourself, your passengers, or anyone you run into.

5

Well, I own a house and, you know, stuff. I guess it depends on what “wealthy” is.

6

If you have an agent, sit your butt down in the office and see how different changes will affect your premium. Over 6 months you might see some savings, but if you pay monthly the difference will be minimal. As a claims guy, I love your coverages and don’t think you’re under/overinsured.

Comprehensive & collision cover YOUR car when something happens to it. It’s basically what you need to pay in order to get your car fixed. You reduce the cost of that coverage by increasing the deductible. If you can remember a time recently where you’d have trouble coming up with $500 at the drop of a hat, do NOT increase your deductible or you will be screwed. You could hit a deer or miss a stop sign tomorrow and the shop will happily repair your car, the insurance company will happily pay for the cost of the repairs–all but your deductible that is. So the shop will hang on to your repaired car until you can pay them your chunk.

Two schools of thought about liability coverage. One says just get state minimum. If you cause more injury than that will cover, probably nobody’s going to garnish your wages and it’s unusual (if not damn near impossible) to take your house from you. So who cares? I hate that view because it screws badly injured victims right up the ass, but it is nevertheless a valid point. The other way to look at it is, how much is usually enough to cover injuries I might cause? Really? 95% or so of the cases I see are settled handily with a 100/300/100 policy. I’ll tell you right now, do NOT go lower than /100 on property damage liability. That’s 2, maybe 3 nice-ish cars you can total when you run a stop sign, and maybe enough to pay for the bus you total (dude, it happens. I buy at least one bus and one Kenworth tractor every year).

Also, most (all?) states restrict your UIM coverage to no more than your liability coverage. So if you want to [del]be a selfish prick[/del] who makes sure you’re taking care of yourself, you can’t get 25/50 liability coverage and 250/500 underinsured motorist liability. So, thinking a little deeper, how will you fare if you get demolished by someone with a 25/50 policy? will their $25k and your $25k take care of you? Are you happy with those odds?

Insurance guy carries 250/500/100 with UIM 250/500, and also a liability umbrella policy for an additional $1million (which also pays UIM). So I can cause a nasty wreck and pay for it, or I can survive one someone else causes and both ways I’m not in any appreciable financial risk. I also can’t come up with $500 at the drop of a hat so I have the lower deductibles. I pay more for insurance I suppose than some people, but it’s a predictable amount. And frankly I’d rather receive a monthly slap in the face than a devastating kick to the 'nads.

7

Interesting thread, thanks for starting it, Zsofia.

8

TL/DR: talk to your agent, find coverage that suits your pucker factor. And take a really good look at how much you’ll “save” and how much more exposure you have if you make changes.

9

Do not skimp on UIM. get more (through umbrella policy) if you can. So many drivers are ininsured or underinsured. If one hits you, it is your UIM that saves you.

10

This part covers other people. You pick how much of this based on how large of assets you are protecting. Generally if you have a positive net worth, $100k/$300k Bodily Injury (BI) - Covers their hospital bills and $100k Property Damage (PD) - covers their car - are recommended. If you have a net worth over a few hundred thousand maybe you want more. Edit to add: with negative net worth, stick to state minimums as you are “judgement proof”.

These all cover you, or your car. You base these on how much your car is worth, and how good your health insurance is. For an $8k car with good health insurance you probably can drop your UM/UIM coverage significantly, if that is allowed in your state/with your company (I think in some states it must match Liability if you have it at all). Edit to add: and you don’t drive with passengers not in your family, such as carpooling, etc. Collision/Comprehensive are based on how much risk you can take and what your Loan requires (if applicable). Generally $500 should be the minimum deductible and you should think about $1000. You should basically never get Road service or Rental car coverage as an add on, so drop those.

11

I pay $7/year for road service. If I need a tow once in a decade I’m in the black. Not a lot of people know, however, the cost of a tow from a crash site and resulting storage charges is part of your collision/comprehensive coverage. Road service is only for ‘breakdown’ situations. So as long as you know you’re not going to get a flat, snap a throttle cable, or that your new car’s computer won’t decide sensor X must be malfunctioning so we’re going to go anywhere (this is my life in the last 4 years) you don’t need it.

But yeah, if you’ve got a spare car then drop the rental. EXCEPT on the road trip car. Last thing I need when my minivan full of kids smacks a deer while were a thousand miles from home is to have to pay for a rental when I’ve run over a deer or something. That car I keep rental on. It’s a whopping $30/year.

12

I’m a AAA member, so I avoid duplicating what they offer. We have three cars, so I don’t need rental coverage. Then I look at what Pennsylvania requires legally and I pretty much go with that.

13

I also have AAA (just used it yesterday).

So I’ve got one set of advice telling me to drop the UIM and one set telling me to get as much as humanly possible. ?

(I do think I can raise the deductable. We can come up with $500 in a pinch. We CAN come up with $1000 but it would be a pinch.)

14

UIM insurance is cheap. You’re paying $14 for $250,000/500,000.

I represent people with catastrophic injuries caused by other drivers, believe me, heath insurance is good to have, but it doesn’t compensate for 20 years of lost earnings or years of pain and suffering. Many drivers have the minimum limits, or no insurance at all (or even a license). Some are hit and runs, and can’t be found. I’ve talked to too many families and had to say, “I’m sorry, the driver who hit you didn’t even have enough insurance to cover you ER visit.”

15

Last I’ll say about it (I don’t want to dominate a thread, but insurance is my personal geek). UIM pays for bodily injury to you and resident relatives in the event you are injured when someone else causes an accident. You can be driving or riding in your car, driving or riding in someone else’s car, you can even be a pedestrian and get run over. As long as you are injured by a motor vehicle licensed for road use (and the driver is at fault!), your UIM is protecting you.

It is protecting you from from hit & run drivers, people who drive with no insurance, or with the state minimum, or with millions of dollars of insurance but they just happened to really wreck you. What’s it costing you for 250/500 UIM? $15/month? What’s a pizza cost (including $5+ tip dammit!)?

Just to give you an idea of what injury claims (Injuries to you by others, or to others by you) are going for: Easily 80% of the injury cases I see are settled well below $25,000. Maybe 95% of cases get done for less than $100,000. The rest? $250k gets it done, but the injured party is almost never fully compensated. The problem is, everything I see is an accident–nobody knew it was coming 5 seconds earlier. And you never know what the injuries will be. Might be killed–that’s worth a lot of money, or you might get made mostly dead for a long time–that’s worth a LOT of money.

We can debate all day long about how much you should want your policy to pay when YOU cause an accident, but I think the debate will be rather more one sided and very brief when it comes to whether or not you should trust others to keep your welfare in mind when they are making that decision. Trust your financial well-being to no one–keep the UIM.
ETA: Ninja’d by an attorney. Sneaky bastards. :slight_smile:

16

You would have beat me if I stopped to proofread and fix typos. I guess I’m more careless than sneaky.

17

The answer probably varies depending a lot on what assets you have that could be seized to satisfy a judgment against you, which is different for every state. My state is particularly restrictive, the equity in my house and my salary are both immune, my only expose is my antique collections (a couple of thousand dollars each) and a few thousand dollars of equity in my car, so I go with state minimum coverage and don’t have a balloon policy.

18

Only the collision and comprehensive actually matter to your car. The rest protect you if you are sued following an accident. You could waive this insurance to cut your premium by a third, but then you would have to buy a new car or pay for repairs out of pocket.

Your premiums and coverage are in line with mine for a car in similar condition. You could perhaps get quotes from different companies to see if you could get a better offer. Surprisingly, by adding my parents, my rates dropped dramatically (I live with them, so this might not apply to you).

Loyalty to a company a company is sometimes rewarded in the long run, so be wary of switching to save just a few bucks.

19

Yes, carrying adequate insurances protects everybody. Under-insured people actually raise everyone else’s rates.

20

Could be worse . . . a schoolbus full of lawyers.