Insurance Buying Tips–Protect Yourself And Save Money

Here at Aitken * Aitken * Cohn, dealing with auto insurers after an accident is a common part of our practice. Based on this experience, we have made some observations we would like to share that can help you save money on your automobile insurance costs while at the same time better protecting you and your family.

One effective way to lower your insurance costs is to raise the deductible on your property damage losses (also known as collision and comprehensive coverage). Since your overall insurance rates are often based on the number of claims submitted (without regard to the amount), it often makes sense to pay for minor property damage out of pocket so as to keep the insured loss history with your insurance carrier as low as possible. Since low dollar claims will not be made anyway, significant savings can be achieved by increasing your deductible for comprehensive and collision coverage to $1,000 or more. By doing so, all major losses will be covered, but the cost of insurance premiums will be lowered.

For those that drive older cars that have been totally paid for, it may make sense to drop comprehensive and collision coverage altogether. For example, if you drive a car with high mileage that is more than five years old, the amount you receive from your insurance company after a significant accident may well be less than the cost to replace the vehicle you were driving. This is so because the automobile insurance carrier is only required to pay “the fair market value” of the vehicle, which limits the amount it will pay to repair the vehicle and could be much less than the cost of replacing the vehicle with a similar, although newer model. Given those limitations, there may not be much “value” in fully insuring an older automobile given the insurance cost to do so.

Also, insurance companies typically offer a host of discounts. These discounts will not find you, however, so you have to seek them out and apply for them. Some discounts are obvious–such as “good driver’s discounts” or discounts given to those who buy both their automobile and home insurance policies from the same company–while others are less so. For example, some automobile insurers offer a discount after the insured driver completes a defensive driver course. Be sure to discuss with your agent or scan your insurance company’s website to discover the discounts for which you may qualify.

Taking the money saved from the steps discussed above, you can increase the protection that insurance provides. For example, we recommend that you carry liability limits of at least $100,000 per person and $300,000 per incident. While the legal insurance limits in California are much lower (only $15,000 per person and $30,000 per incident), we recommend the higher $100,000/$300,000 limits for two primary reasons. First, injuries that stem from even “moderate” collisions can lead to injury claims that have a value in excess of $15,000. Therefore, these higher limits better protect your financial well-being. Second, insurance carriers will only write underinsured motorist coverage to the limits of the liability protection; therefore, increasing your liability limits also allows you to have underinsured motorist coverage at the $100,000/$300,000 level. Since it is the underinsured coverage that protects you and your family in the event you are injured due to another’s poor driving, higher underinsured limits provide protection and peace of mind should the worst occur.

Also, for those that already have higher liability limits, make sure your underinsured limits are as high as they can be. We have often seen our client’s carry liability limits of $100,000/$300,000 or more, but only have the minimum $30,000/$60,000 underinsured limits. As a result, many of our clients who were injured due to the fault of an uninsured or minimally insured driver have lost substantial recoveries by failing to have their underinsured limits match those of their liability coverage. Underinsured motorist coverage is relatively inexpensive, but it is the best protection you can have to avoid a devastating personal loss if injured due to another’s carelessness.

Finally, and for the same reasons discussed above, consider purchasing an “excess” or “umbrella” policy over your primary automobile insurance coverage. These high limit umbrella policies provide an even greater degree of protection over your assets, and also allow you to increase your underinsured motorist coverage to better protect you and your family should a serious collision occur.

The financial and personal protections that higher limit automobile policies provide are well worth their cost. By following some of the cost saving tips discussed above, this added protection can be obtained with little, or even no, additional expense. It is an investment well worth making.

Darren O. Aitken, Esq.