Do you need to check your math on car insurance? – II
Yesterday, we spent some time discussing how many of us don’t give a second thought to paying our car insurance premiums, absent-mindedly writing checks or clicking “submit payment” every six months or once per year, and how this inattention can prove costly.
We also spent some time conducting what amounted to a Car Insurance 101, examining the several different types of insurance that comprise a comprehensive policy — liability, uninsured motorist, first-party benefit. Now that this is accomplished, today’s post will examine some of the ways in which certain coverage adjustments could potentially help consumers save hundreds per year.
Adjustments to first-party benefit coverage
In general, first-party benefit coverage can be further subdivided into two elements: collision and comprehensive insurance, and personal injury protection and/or medical payments insurance.
Collision and comprehensive insurance
Collision and comprehensive insurance covers damage to your automobile that you alone are responsible for causing and you alone would be responsible for covering out of pocket absent coverage.
Experts indicate that potential savings may be realized if a person is able to drop this coverage, but that this move depends on the value of the automobile. As a baseline, they indicate that if the value of the car, truck or SUV is over $2,000 than it would be a wise idea to keep collision and comprehensive coverage.
As to why $2,000 is used as a baseline, experts indicate that it’s the amount that the typical driver will pay in collision and comprehensive insurance premiums over a period of three to five years.
Accordingly, if the vehicle in question is worth less than this amount, it means the insurance costs more than the vehicle, meaning it’s essentially throwing away good money. This is where it pays to do some research.
Personal injury protection/medical payments insurance
These two forms of insurance coverage are designed to cover medical expenses in the event of a car accident, with one or both mandatory for motorists in 15 states. The remaining 35 states, including California, allow motorists to make their own decisions concerning this coverage.
Experts indicate that motorists can consider jettisoning either type of coverage if they determine that their current health insurance policy would cover any and all injuries in the unfortunate event of a car crash.
While eliminating potentially redundant PIP and/or MedPay insurance could result in substantial savings, experts urge consumers to always retain one of both if their health insurance expressly prohibits accident coverage, as the prospect of relying on another person’s policy to cover injuries is simply too risky.
We’ll conclude this discussion later this week, exploring how even a cursory examination of liability insurance could result in substantial savings.
Source: Nasdaq, “Making sure you are getting the right amount of car insurance,” Dec. 6, 2016