It is no secret that car insurance rates are rising. Between inflation, sky-high auto repair costs, supply chain delays, and labor & parts shortages, consumers are paying more for insurance. When you are on a budget, it can be tempting to choose the cheap car insurance option. Some may even consider taking their chances and skipping car insurance entirely. Of course, that is not a good idea. Here are some things to look for when you review car insurance proposals:
Focus on the Proposal not the Quote
What is the difference? Proposals focus on the value of the total package (price, value/coverage, and service) vs. car insurance quotes which are solely focused on price. All of us want the lowest price. However, if that price comes at the expense of proper coverage, many would pay a little more to be properly insured. Or, if paying a lower price does not give you access to a person when you need to talk to someone about a question or issue, many would pay a little more to speak directly to an agent and receive service. Finding that perfect proposal package recipe of price, value/coverage, and service for your insurance needs is what your agent should be able to present to you at the initial issuance of your policy and at review with you every year at renewal.
All insurance policies are not created equal
Understanding the coverages you are buying with your policy is key to determining if the insurance is a “good price”. Here is a quick list of some things to know as you determine the value of the insurance proposal you are reviewing:
- Deductibles – one way to bring down the price of insurance is to increase the deductibles. The deductible is the amount that is your cost when settling an insurance claim (i.e. – a covered auto repair from an accident will cost $5,750. If you have a $500 deductible, you pay the first $500 and the insurance company pays the balance). Increasing that deductible to $1,000, $1,500, $2,500 or more will lower the cost of the insurance but will also mean that a greater amount will come out of your pocket should there be a claim. If an increased deductible lowers the cost enough, and you are not prone to accidents, it may be worth it. Make sure you know what deductibles are being used in your quote, how they affect your insurance cost, and what that means for you financially should you have a claim or two during the year.
- Standard Collision vs. Broad Form Collision – collision insurance is an optional coverage that will help pay your repair costs for accident-related car or truck damage. The main difference between the type of collision coverage is how the deductible is handled. Standard collision insurance coverage requires that the deductible must be paid whether or not you and your damaged insured vehicle was “at fault.” Whereas Broad Form Coverage pays all of the costs relating to the repair of the vehicle damage and the deductible is waived if you are not at fault in causing the accident. Of course, the cost of insurance is less for Standard Collision. Make sure you know what Collision coverage is being offered in your insurance quote.
- Bodily Injury liability (BI) – Each state has different minimum requirements for bodily injury liability coverage. This is coverage that covers claims made against you for injuries or death to others if you are at fault in an auto accident (auto accident you cause – 3 car pileup). In Michigan, you may choose the minimum required limit of $50,000 per person/$100,000 per accident (MCL 500.3009(5)). Of course, lower limits will lower the price of the insurance. However, should expenses to those people you injure or kill be greater than the coverage amount on your policy, you may be sued and liable for the uncovered balance. Make sure you know what Bodily Injury liability coverage is being offered in your insurance quote.
- Personal Injury Protection (PIP) – PIP benefits will pay for your medical bills and lost wages after you have been injured in a car accident. The coverage limits you can choose range from $0.00 to unlimited. The cost of this coverage is inexpensive compared to the benefits provided should a tragedy strike. Some car insurance quotes will reduce the cost of the insurance by providing less than the unlimited PIP option. This is an area where the saying “Penny wise and pound foolish” applies in most cases. Make sure to review your PIP coverage that is being offered in your quote.
- Un/Under Insured – One in seven drivers do not have auto insurance, according to the Insurance Information Institute. If they do have auto insurance, the other driver may not have enough insurance to cover your loss. If you are hit by an uninsured or underinsured driver, who pays for the bodily injury and property damage? Likely you in whole or in part. If you have uninsured/underinsured motorist coverage, your insurance policy pays the cost of the claim. It steps in if you are involved in a collision with another driver who is at fault but lacks insurance or does not have enough to cover the damages. Make sure the auto insurance quote you are reviewing contemplates Un/Under insured coverage.
In Part 2 of this article, we will discuss other coverages that may not be included in a car insurance quote vs. a value package proposal & will discuss Discounts.
Ask your agent about what auto coverage fits your needs
Creating an insurance proposal package is like creating a recipe with the proper amount of ingredients that fit your tastes. Everybody has different risks they need covered, and they also have different financial statuses that allow the ingredients to be different. Looking at insurance quotes and the lowest pricing is short-sighted and could set-up future financial and legal disasters. The right type of coverage for you depends on various factors. When you review your next insurance package proposal with your agent, look for the proper balance between price, value/coverage, and service to meet your insurance needs.
