Author Topic: How To Insure My New (Used) Car  (Read 5067 times)

RusticBohemian

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How To Insure My New (Used) Car
« on: March 12, 2013, 04:44:06 AM »
Hi.

More than three years ago I sold my car (newly purchased) and started using my bike only. 

But recently I decided to buy an old 1995 Geo Metro in excellent shape for under $1k. Replacement of the car in the event of it being damaged wouldn't be a big deal, so I figure I only need liability.

I'm a single guy, don't have tons of cash, I don't have an health insurance at the moment, and am looking to save money.

How much liability, and what type, do I need?

What about if I'm injured in an accident? I don't have health insurance, so should I buy some sort of coverage?

Any advice you have on insuring my new car would be welcome.

Thanks.

the fixer

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Re: How To Insure My New (Used) Car
« Reply #1 on: March 12, 2013, 09:36:05 AM »
I think this is how it works, but this is not my forte and it varies between states...

If you are injured in an accident, who's insurance pays depends on who is at fault. If you're at fault, your insurance has to pay out property damage and bodily injury liability above your deductibles and up to the policy limits. The reverse holds true if another driver is at fault for an accident involving you. In no-fault accidents, I'm not sure what happens; I'm guessing the companies split it up somehow.

Uninsured motorist protection involves accidents with drivers who do not have insurance, or in cases where there was a driver at fault but they cannot be identified (hit-and-run). I'm not sure what it pays for, though; it seems like it would be limited to your own expenses.

I'm pretty sure that your insurance will pay for your own medical costs if you are injured in a car accident that's no-fault or you're at fault. But you should also look into Personal Injury Protection (PIP). States which have this mandate that policyholders be offered to pay into this fund that pays claims for auto injuries regardless of fault and even regardless of whether or not you were driving. So even if you're a pedestrian/cyclist and hit by a car, and the police/insurance refuse to find the driver at fault, you can file a PIP claim with the state to at least get some money (a few thousand dollars per claim). It's possible to opt out of this coverage so make sure you make the right choice for what you want.

[I'm sure I got at least one thing wrong above. I'm hoping someone comes along and corrects me so I can learn what I don't know!]

Your health can be permanently impacted by a car accident, leading to chronic conditions that never go away, and it may be difficult to get your car insurance to cover tangentially related medical bills years later. My Dad messed up his back and cracked a tooth when he got rear-ended years ago. He still sees a chiropractor for the back, and the tooth damage wasn't discovered until years after the incident. My Mom was also in a separate moderate accident due to a teenage driver who failed to yield while turning left. I have more stories involving friends. So in my experience these things happen roughly once per lifetime if you drive often, a not-insignificant frequency. OTOH, Obamacare is going to eliminate pre-existing condition exclusions for health insurance, so you could just insure up after-the-fact if something bad like this happens to you.

wakkowarner

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Re: How To Insure My New (Used) Car
« Reply #2 on: March 14, 2013, 10:01:35 AM »
This isn't really an answer, more of an addendum to the question.

How should we insure ourselves?  How much insurance is too much?  I mean, if we do have health insurance, is it too much to get the PIP insurance also?  Would it be best to get minimum insurance in every area, but then get  an umbrella policy up to our net worth?  Would an umbrella policy take care of this sort of thing (or house insurance type stuff, I mean, is it a catch-all)? 

I don't drive an expensive car (worth < $1000), but that's not to say I couldn't slide in the snow into someone's $80k automobile.  Would that mean I should carry damage up to $100k?  Since there are cars that are that expensive out there?  Not worried about replacing my own for cheap (so no comprehensive), but what about replacing others vehicles?  I mean, as mustachians we don't like to pay too much for a car.  How would you like to pay $80k to fix a car you don't get to keep.  I've got a good driving record, but accidents happen.

How much is too much?  How little is not enough?  Obviously the insurance company is out to make money, and you don't want to pay more than necessary, but is spending an extra $20 a year worth an extra $20k in coverage?  What about an extra $200 a year?  Where do you draw the line?  If one doesn't have health insurance, but later gets coverage, does that mean you should go in and reduce your coverage on your car insurance?  What if you have Accidental Death and Dismemberment insurance?  I know the standard answers people give about it being "up to you" and "how well you can sleep at night", but I'm talking more about having too much insurance not from just simply having more coverage than necessary.  I mean that one policy (like health insurance) covers you so you don't need the same thing from another policy (like car PIP, or an umbrella policy).

wakkowarner

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Re: How To Insure My New (Used) Car
« Reply #3 on: March 15, 2013, 11:51:27 AM »
Ok, was doing a little bit of research and re-reading of my policy.

What "the fixer" posted seems accurate from what I can tell.  Your health insurance (or lack thereof in your case) covers your medical expenses.  Liability coverage covers property damage (fixing their vehicle/house/fence) and bodily injury covers their expenses, up to to whatever limit you have paid for.  This limit is per person and per accident.  So if you have 100K/300K coverage, it covers 100K per person in medical expenses, up to 300K in total expenses for that one accident.  So basically it covers for up to 3 people (though it could cover 4 people or more, as long as their total expenses didn't exceed $300K). 

Uninsured/underinsured motorist seems to be covering your own bodily injury claims, if the other person doesn't have insurance or doesn't have enough.  If they do have insurance then your claims are reimbursed from that.  Not sure how "no fault" might affect this. 

If you are injured, and have no health insurance, you will be paying out of pocket (at least until you get your claim check, if you get your claim check).  You will make claims against their insurance (if they are at fault) or your own (if they are uninsured and at fault).  If you are at fault and are injured, I think the only thing that covers you is your health insurance, or if you personal injury protection (PIP) fixer mentioned.  I've never had to make this claim, and it may vary depending on your contract.  I'd contact your insurance provider with any scenarios you may be worried about and ask them what would be the worst case scenario for your expenses.

As far as the umbrella policy question I opened up before, and insurance overlap... the intent of umbrella policies is to pick up where your other insurance leaves off.  So in the example above for bodily injury for $100K per person and $300K per accident, if the medical expenses of a person you injured were > $100K you could be sued for the remaining portion.  Umbrella policies might be for $1 million, or $10 million, depending on how much you want to pay (and how much insurance you want).  But they generally minimums where they will kick in.  So they might only kick in after $100K of payments for bodily injury you caused to someone else.  This means that if you injure someone and they have $800K in medical expenses, and you have the liability coverage of $100K/$300K and an umbrella policy up to $1 million, you won't be paying anything (besides your premiums). If you have lesser liability coverage (say $50K per person) and the umbrella policy, then your car insurance would cover the first $50K, you would have to pay another $50K out of pocket, and then the umbrella policy would kick in at $100K.  Though depending on your policy they might just require you to up your auto policy before they will agree to cover you.

How much is enough?  Don't know.  Depends partially on your assets.  However even if you don't have a lot of assets yet, don't forget that you can be sued for future earnings.  So you may end up working the rest of your life paying for someone else's injuries.  Umbrella insurance can be relatively cheap compared to the amount covered, mostly because it doesn't kick in until you reach a very high claim amount.  I think looking into the umbrella insurance is sort of like the high deductible plans MMM recommends.  You pay for all the smaller expenses you think you can handle, but it covers you for catastrophic situations that you wouldn't be able to recover from.  How much you need depends on how much you could lose (i.e. how big your assets + earning potential is) and how likely it is that you are to need to make a claim (if you own a lot of rental property, much more likely someone will take a spill on your property and sue you).  If you rent and ride a bike most of the time, and don't have much in your stash yet, you don't need much.

the fixer

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Re: How To Insure My New (Used) Car
« Reply #4 on: March 18, 2013, 02:16:17 PM »
The liability provisions of insurance should be enough to negotiate a settlement with an injured party to keep them from trying to sue you. They would only decide to sue if your coverage wasn't nearly enough and they found out you have deep pockets. They won't sue you if you don't have a lot of assets, it would cost them a lot of time and upfront legal costs for little to no short-term return.

I've also heard that courts look favorably upon people with liability coverage and umbrella policies. Judges may award damage only up to the policy limit even though they could theoretically go higher, because you look like a responsible person for having such coverage and they don't want to ruin your life.

As for who pays medical costs upfront, I'm not sure you'd have to pay then wait for a claim check. Doctors' offices usually ask two questions when you come in with an injury: were you injured on the job, and were you injured in a car accident? I think this is so they know who to send the bill to.

I think figuring out how much is "enough" comes down to weighing the risks. Remember that automobile accidents are the #1 cause of premature death in the US. No matter how much insurance you have, you cannot completely eliminate the risks involved with cars except by never going anywhere near a road. You have to decide at what point the costs of extra levels of insurance coverage outweigh their benefits. And don't forget there are non-insurance ways to reduce your driving risks that can be more cost-effective: don't drive in times/places with heavy traffic, slow down, always watch for peds, don't drive if you don't feel comfortable with the weather/conditions.

joseph100

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Re: How To Insure My New (Used) Car
« Reply #5 on: April 03, 2013, 02:47:22 AM »
You probably should, yes. Medical payments or bodily injury liability is something you should look into getting. If you want affordable car insurance, since youre buying an older car, Id probably skip the collision and comprehensive and try to make sure I have enough coverage for everything else.

Paul der Krake

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Re: How To Insure My New (Used) Car
« Reply #6 on: April 03, 2013, 07:48:58 AM »
How would the other party figure out that you have deep pockets and what can you do protect ourselves from prying eyes? I'm assuming that if you rear-ended someone with a 1982 corolla it's less likely they would look into you closely than if you drove, say, a 2013 Lexus. I am worried of a sketchy accident lawyer and how much they could uncover.

trammatic

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Re: How To Insure My New (Used) Car
« Reply #7 on: April 03, 2013, 01:15:32 PM »
I'll chime in with the no-fault (PIP) answer.  No-fault laws were enacted to prevent minor, routine injuries from clogging up the legal system. States with no-fault laws have some sort of threshold, either a monetary amount or seriousness of injury, that determine whether the at-fault BI pays or the individual's PIP pays.

Originally, there were states with limitless no-fault, but insurers had to keep raising prices on it as more lifetime injuries happened.  Even today, insurers are paying hundreds of millions annually for claims that happened in the '70s.  NJ and MI were the last states to ammend their laws.

the fixer

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Re: How To Insure My New (Used) Car
« Reply #8 on: April 03, 2013, 02:57:51 PM »
How would the other party figure out that you have deep pockets and what can you do protect ourselves from prying eyes? I'm assuming that if you rear-ended someone with a 1982 corolla it's less likely they would look into you closely than if you drove, say, a 2013 Lexus. I am worried of a sketchy accident lawyer and how much they could uncover.
I don't know for sure, but I would assume that it's possible to estimate someone's net worth with enough access to public records. For instance, by looking up title deeds of properties you own if you're into rentals (of course if they're owned by an LLC that changes things).

There may also be scenarios that involve accidents with people you know, such as neighbors or roommates. These people are more likely to know about your financial situation than a stranger on the highway would. I don't know how likely these situations actually are, though.

Another possibility is you're in an accident with someone you don't know who then hires a private investigator. In addition to the public records a PI has access to, they could also interview people you know and find out information that way. It's all related to who in your life knows what and if they would be willing to speak to a PI about it (a high risk might be an ex-spouse, for instance).

I have no idea how far-fetched this is and it starts to get into the realm of paranoia pretty quickly. Realistically, you should consider the likelihood of getting into an accident that causes more than $50-100k of property damage or medical claims; it's probably pretty low and not worth worrying about.