Personal Finance

Case Study (4):

Auto Insurance Policy

Pull out your personal auto insurance policy. What can you do to lower the premium or have better coverage? Review pages 259-260. Contact your agent and discuss some changes. Find out what is the highest you can raise your deductibles and what are the premium savings. Discuss increasing some areas that might be low. You might be surprised at how little it would cost to double or triple you coverage in certain areas. Should you make some changes?

Finally, go online and get a quote from http://www.progressive.com . Make sure you use the same coverage/deductibles that you now have with your current policy. You can use the Personal Financial Plan sheet #30 at the end of the chapter to help with the format. What are the results?

It was interesting to review the Auto Insurance policy that we have been using for several years. Insurance seems to be one of the items that matches the cliché “out of sight, out of mind”. Once it was decided on, reviewing it was not on the high priorities list. After digging though the insurance policies for the current revision, it was positive to see that it is still meeting our needs.

In looking at what modification could be made to decrease my premiums or increase my coverage, I found two potentials. First, my current policy deductibles are $500 for collision and $100 for comprehensive. I have the option of increasing both to $1000. This change would reduce my premiums by $52 each year. The problem I see with increasing the deductible, is keeping the extra $500-900 in a savings account somewhere waiting for the accident to happen. The only way that this change would pay off is if any deductible payment were not needed for nine and a half years; never more frequent than that. Past experience has shown that my family will avoid paying even the $500 deductible if possible (which explains why we have so many dents and dings on our vehicle).

The second opportunity to make modifications to the policy for added benefit was to increase coverage amounts. Currently the policy has the maximum available for Personal Injury Protection, Uninsured and Underinsured Motorists at $100,000. The only category where there was a potential fro improvement was for Liability. The current limits are 100/300 ($100,000/person and $300,000/occurrence), I have the option to increase that to 250/500. Adding this coverage would add approximately $25 or going with a single sum $500,000 each occurrence total which would add $43 to my current yearly premium. The added coverage seems like a good investment, but I would like to research the real benefit of having the extra coverage. According to the Oregon Insurance Division (2008) the benefits of having higher coverage will be needed if many vehicles, people and property are damaged.

Another addition that I looked into was getting Rental coverage. We have previously not taken rental coverage because we have had two or three vehicles, but recently we have downsized to only one minivan. My commute to work is only a five minute walk from my front door, so having a car sitting in the driveway just doesn't pay. Adding the Rental coverage was only $19, so it seems to make sense if anything does happen.

Looking at Progressive was the next task. I was previously a Progressive customer and had great experience with the company. They gave great rates and had excellent service, however they did not carry homeowners or life insurance. When we purchased Life and homeowners insurance though Country Insurance, we were offered additional discounts if we purchased our Auto policy through them as well, so when the policy came up for renewal we moved over to Country for all of our insurance needs. I was pleased to find that we are still saving money five years later using Country. Our current policy premiums are $308.85 for one vehicle and Progressive quoted $348.

I am very happy with the configuration of our current policy but plan on adding the Rental insurance. This will increase my policy slightly, but with only a single day of renting a vehicle I would spend almost two times the added cost. Most repairs take more than a day and I have experienced a repair job taking almost five weeks so it is worth it.

Resources:

Kapoor, Dlabay, Hughes (2008). Focus on personal finance: an active approach to help develop successful financial skills, 2nded. McGraw Hill Irwin, New York.

Oregon Insurance Division (2008). Consumer guide to auto insurance. Department of consumer and business services, State of Oregon. Retrieved August 8, 2008 from: http://www.cbs.state.or.us/external/ins/publications/consumer/2085.pdf

Progressive.com (2008). Get a quote. Retrieved August 9, 2008 from: https://autoins1.progressivedirect.com/AutoDisplayPage.aspx?Page=RateCoveragePage&ST=OR