To wrap up our “Assessing your Own Auto Insurance” series, we are asking all your answered questions. Our hope is that you now feel confident in understanding your auto policy! If you feel like we have missed some, please drop your questions in the comments section below!
In case you missed it or want to refer back, here are all the parts to the series!
Part 1: Bodily Injury Liability
Part 2: Property Damage Liability
Part 3: Uninsured and Underinsured Motorist
Part 4: Vehicle Protection Coverages
If I rent a car, should I purchase the insurance offered by the rental company?
This is one of our most common questions. Most preferred insurance companies cover you when you rent a car. Essentially, they provide you with the coverage you have on your personal auto policy and extend that to the rental car. Therefore, if you don’t have certain coverages on your personal auto policy, you will not have them for the rental. Some insurance companies also limit the coverage to certain situations.
For example, if you are renting a car on vacation or on a business trip, that may not be covered; if you rent a car while your car is in the shop after a covered loss, that would be covered. Additionally, most insurance companies do not provide coverage for the rental company’s lost income while the rental car is being repaired after a covered loss.
What is the best car to buy for my teenage driver?
When you add a licensed teenage driver to your policy, the rate increase can be significant. This is partially due to your company assigning your teenage driver to the most expensive vehicle. Even if your teenager is only assigned as a part-time driver, your premium will still be significantly impacted. If you do not already have as many cars as drivers, we recommend considering another vehicle specifically rated for your teenager. If you can find a safe and reliable car that is several model years old, so that you do not need to insure it for Comprehensive or Collision, you may find that insuring the extra car on your policy is lower than the premium before adding the extra car. This is because insuring a teenager full-time on a car without Comprehensive and Collision coverage is less than insuring the teenager part-time on a more valuable car with Comprehensive and Collision coverage.
While this approach works for some insurance companies, it does not work for all companies. We recommend that you find a vehicle ID number for the car you are considering and ask your insurance company to give you a quote if you added that car for your teenager.
My car is getting older, yet my rates keep going up. Why is that?
Cars are getting more technical and have more computerized and electronic features, thereby making them more complicated to work on. As an example, consider the claim if you accidentally damaged your sideview mirror in a parking lot. Years ago, it might have been a $300 to $400 claim for a body shop to order a new mirror and attach it to your car. Today, with the built-in sensors and alarms in a side view mirror, that same claim may be closer to $1,500.
While your car may be aging, auto and body repair shops have had to invest in new diagnostic and repair equipment and in training for their people to work on the newer cars. That investment leads to higher repair costs which are passed to the insurance companies as they repair their clients’ cars. Additionally, the labor cost to repair and repaint a vehicle is similar, regardless if the vehicle is older or newer.
Your auto insurance policy is also a medical insurance policy to pay for the injuries you may cause to someone else. As we have seen our regular medical/health insurance costs increase, these same pressures are also driving the auto insurance rates higher. Given the higher costs the insurance companies pay, they raise their rates (with the Department of Insurance approval).
Should I insure my car for Comprehensive and Collision?
As your car gets older or it is paid off, you may consider dropping Comprehensive and Collision to save some money. These are the coverages that pay for damage to your car. Before you drop these coverages, you need to ask yourself if you have the financial means to buy another car if your car is totaled in an accident. If you do have the financial means, it makes sense to determine your “breakeven” point, essentially how many years of premium would you need to pay before it adds up to the value of your car. This is easily determined and shown in the example below.
For example: if the car is worth $3,000, you have a $500 deductible, and the Comprehensive and Collision premiums total $450 annually, the calculation looks like:
$3,000 (value of car) minus your $500 (deductible) divided by $450 (Comprehensive and Collision premium). In this example, your breakeven would be 5.5 years. Meaning, if you paid the $450 premium for 5.5 years, you would have already paid the value of the car. Depending on your financial situation, if the breakeven is less than 3-4 years, it may make sense to drop this coverage. If the breakeven is longer than 4-5 years, it may make more sense to keep the coverage. We can help you evaluate what makes sense for you.
We offer complimentary policy reviews and are willing to answer any questions you may have.