Author Topic: New To Forums. Insurance Questions  (Read 6441 times)

StangStache

  • 5 O'Clock Shadow
  • *
  • Posts: 63
New To Forums. Insurance Questions
« on: September 24, 2014, 10:31:58 PM »
Hi All,

I've been a long time lurker here and now finally want to step out of the shadows and ask for advice.  I'm trying to trim down our annual insurance expenses.  Let me start with auto insurance.  Here's the breakdown of my current policy for our two cars, broken down in the following order:

Coverage type - Limits/deductibles - Vehicle 1 Annual Premium - Vehicle 2 Annual Premium

Liability:
Bodily injury - $100k/person, 300k/accident - $90 - $100
Property damage - $100k/accident - $88 - 108

Uninsured motorist:
Uninsured - $100k/person - $8 - $9
Bodily injury - $300k/accident

Underinsured motorists:
Uninsured - $100k/person - $22 - $27
Bodily injury - $300k/accident

Collision/Comprehensive:
Collision - $500 deductible/vehicle - $177 - $166
Other than collision - $250 deductible/vehicle - $50 - $52

First party Benefits:
Medical expense - $5000 (for policyholder I think) - $27 - $22

Extra coverage:
Transportation expenses - $30/day, $900/accident - $22 - $22

I live in a limited tort state and have already selected this option.

Overall, this policy costs about $1000/year.  These high numbers are actually the result of my semimustachian efforts of shopping around.  These rates beat comparable coverage by a good $500/year, and I was happy with that at the time, but it's time to shave off some more.

First off, both vehicles are at least 8 years old.  Vehicle 1 is worth about $3800, and vehicle 2 is worth about $3100.  Given this, I think it's a no-brainer to eliminate all collision and comprehensive, no?

What about the other coverage and/or limits?  Is the medical expense worth it?  I have good health insurance, but I'm not too savvy on what the medical expense would cover that uninsured/underinsured and my own health insurance wouldn't.  I also think I can safely toss transportation expenses, as I (very mustachianly) walk to work and if one car were out, we would get along just fine (eliminating one car might be on our mustache radar later). 

I am very disciplined when it comes to stashing away money to "self insure."  I have a special account where I make monthly deposits on savings that I make to create that self insurance.  For example, I would put away the collision savings each month until it added up to the values of each car.  What I'm really trying to do is sort through what's "self insurable" and what counts as low cost catastrophe that every MMM reader should have.


Further, we also have renter's insurance through the same company, with the following coverages:
Personal property with replacement cost: $30k
Loss of use of insured location: $6k
Personal liability: $100k
Medical payments to others: $1k
Deductible: $250
Total standard annual premium: $120

Additional coverages:
Home computer coverage and Personal property replacement: $5k
Jewelry coverage (wife's ring): #$3k
Total additional premium: $82

After multiline discount, renters checks in at about $170/yr

Any mustachian cuts to make here, too?  Keep in mind I have to come to DW with good reasons, as she's more risk averse than I am. 

Thank you all in advance.  I love this place so much!

StangStache

  • 5 O'Clock Shadow
  • *
  • Posts: 63
Re: New To Forums. Insurance Questions
« Reply #1 on: September 25, 2014, 06:02:18 PM »
Anyone?

MDM

  • Walrus Stache
  • *******
  • Posts: 9494
Re: New To Forums. Insurance Questions
« Reply #2 on: September 25, 2014, 06:25:30 PM »
First off, both vehicles are at least 8 years old.  Vehicle 1 is worth about $3800, and vehicle 2 is worth about $3100.  Given this, I think it's a no-brainer to eliminate all collision and comprehensive, no?

Additional coverages:
Home computer coverage and Personal property replacement: $5k
Jewelry coverage (wife's ring): #$3k
Total additional premium: $82

I'd stop the C&C and the additional coverage.  You already know enough to stop the C&C.  For the additional items, the real losses are likely to be intangible (sentiment, hassle, etc.) so self-insuring the financial part seems correct.

Good luck!

StangStache

  • 5 O'Clock Shadow
  • *
  • Posts: 63
Re: New To Forums. Insurance Questions
« Reply #3 on: September 26, 2014, 03:08:02 PM »
Thanks for the reply!

What are your thoughts on the first party medical benefit.  I know little of this and do not know what benefit this provides beyond my own medical coverage through my employer and the uninsured/underinsured I already pay for.

StangStache

  • 5 O'Clock Shadow
  • *
  • Posts: 63
Re: New To Forums. Insurance Questions
« Reply #4 on: September 28, 2014, 09:14:24 AM »
Alright, DW is definitely on board with cutting out comprehensive.  I'm having trouble convincing her that it's worth cutting the extra renter's coverage on her ring and our electronics devices.  Computers/ring cost $82/year to insure.  Ring (with diamond) is worth around $3k.  Computers maybe about that much as well. 

Any pointers on how to sell the math to her?

Calvawt

  • Bristles
  • ***
  • Posts: 332
  • Location: Central CA
Re: New To Forums. Insurance Questions
« Reply #5 on: September 28, 2014, 10:14:40 AM »
the computer is not worth it to insure given how quickly its value declines (parts just get cheaper so fast these days).  As for the ring, if its worth $3k, I would not insure it.  It might be a peace of mind thing for her, so my advice might be to pick your battles!

usmarine1975

  • Guest
Re: New To Forums. Insurance Questions
« Reply #6 on: September 28, 2014, 10:27:50 AM »
We have kept comp mainly because we live in a small city and theft etc is a problem. Its probably something to reconsider. The medical we have kept.  Its paying for our chiropractic work from our last accident. Not sure healthcare would cover that.  At least you are looking at your policy in my experience selling insurance most clients have no clue what coverages they do or do not have.  When they have a loss and its not covered they blame the insurance company.

usmarine1975

  • Guest
Re: New To Forums. Insurance Questions
« Reply #7 on: September 28, 2014, 10:33:05 AM »
The biggest added expense to a rental policy is added items. Such as ring etc.  Check your set policy and its limits.  For me if I can replace the item in a few years with the premium the insurance doesn't make sense.

I joined the NRA to insure my firearms. They have the best and most inexpensive policy for firearms. Insuring them through your homeowners is to costly.  And the NRA policy covers them even while you transport them. Homeowners will only cover them at your home. 

Look for other ways to cover the ring.  Savings account with the premium directed there maybe throw in the once we have enough to cover your ring you can use the excess to buy another ring ear rings or whatever.

StangStache

  • 5 O'Clock Shadow
  • *
  • Posts: 63
Re: New To Forums. Insurance Questions
« Reply #8 on: September 28, 2014, 01:33:04 PM »
Thanks again for the replies.

The computers were originally written into the policy because we have 2 laptops, 1 desktop, and a home theater pc, and we live in a city where theft *probably* won't be an issue, but you never know.   I agree about the depreciation.  If all 4 were stolen, I would probably be looking at $2000 to replace them all (3 of them are macs - don't ask.  I got a few through work).

Regarding the medical - usmarine1975, thanks for pointing out the chiropractic coverage.  I hadn't thought of that.  I do have a $5000 max on the medical, though.  Still worth it?


ragnathor

  • 5 O'Clock Shadow
  • *
  • Posts: 33
Re: New To Forums. Insurance Questions
« Reply #9 on: September 28, 2014, 01:43:23 PM »
I would drop the medical coverage. This is superfluous if you have health insurance. I personally wouldn't go to a chiropractor, and I think keeping medical coverage just in the event your health insurance doesn't cover a chiropractor is a waste.

I would drop the computer rental insurance. Keep in mind they insure the depreciated value, so you might only get 30% of the cost to replace them if they are actually stolen.

usmarine1975

  • Guest
Re: New To Forums. Insurance Questions
« Reply #10 on: September 28, 2014, 03:17:31 PM »
My back feels much better thanks to a Chiropractor a medical Dr would have given me drugs that wouldn't have re aligned it. After a few adjustments my back is good. Some medical insurance may not cover health issues that exist because of an accident. Simply know what coverage you have and make the appropriate decision.

ragnathor

  • 5 O'Clock Shadow
  • *
  • Posts: 33
Re: New To Forums. Insurance Questions
« Reply #11 on: September 28, 2014, 03:32:40 PM »
Simply know what coverage you have and make the appropriate decision.

Agreed. Counting aside my personal bias in not going to a chiropractor, I agree with this point about knowing your coverage. I think for most people it would be unlikely for the medical coverage of a car accident to cover a chiropractor and for their regular health insurance not to provide that coverage. And even if so, you are basically paying only for the coverage in the event you wanted a chiropractor since everything else (doctor, hospital, physical therapy) would be covered.

StangStache

  • 5 O'Clock Shadow
  • *
  • Posts: 63
Re: New To Forums. Insurance Questions
« Reply #12 on: October 08, 2014, 12:41:03 PM »
I spoke with the agent to change the coverages.  It turns out the extra medical coverage is a state minimum, so I have no other option but to carry it. 

More importantly, something odd happened that I hope to better understand.  When we removed collision, comprehensive, and car rental, the annual premium did not drop by $177 + 166 + 50 + 52 +22 + 22 = $489, as you would expect by looking at the itemized coverage I wrote in my original post.  The premiums for liability increased by roughly 50%.  In the end, the annual premium only dropped by about $260 instead of the expected $489.   I pressed for more answers about this, and the agent said this happens whenever someone drops other coverage and he's just reading the new rates off a computer program.  After convincing him that this is an unsatisfactory answer, and that this completely undermines the reason for itemizing your premiums, he said he would look into getting a better answer.

What gives?  Why would my liability rates increase just because I dropped collision and comprehensive?  Is it the insurance company recouping the loss of a cash cow coverage by making up for it elsewhere?  Or am I somehow viewed as a greater risk in liability because I do not have comprehensive and collision?   The latter would make no sense, unless I'm somehow now viewed as a penny saver and that changes my profile in underwriting (still makes little sense to me).

Thoughts?  I still went ahead and dropped comprehensive/collision/rental, but I'm bummed out that I'm saving almost half of what I planned to. 

Angie55

  • Guest
Re: New To Forums. Insurance Questions
« Reply #13 on: October 08, 2014, 01:27:51 PM »
I've found that most insurance companies charge more for lower limits. I'm suspecting this is what is happening when you are dropping collision and comprehensive. For instance, the last time I quoted auto insurance it was more expensive to buy a policy with 25k/50k limits than one with 100k/300k. They figure more responsible people choose higher limits and therefore give you a discount. Yes, its backwards but that's what actuaries/computer programs are using to establish risk and therefore rates.


StangStache

  • 5 O'Clock Shadow
  • *
  • Posts: 63
Re: New To Forums. Insurance Questions
« Reply #14 on: October 08, 2014, 02:59:09 PM »
I've found that most insurance companies charge more for lower limits. I'm suspecting this is what is happening when you are dropping collision and comprehensive. For instance, the last time I quoted auto insurance it was more expensive to buy a policy with 25k/50k limits than one with 100k/300k. They figure more responsible people choose higher limits and therefore give you a discount. Yes, its backwards but that's what actuaries/computer programs are using to establish risk and therefore rates.

That's interesting.  I still don't understand the point of itemizing the premium of each type of coverage if those figures are dependent on having other coverage. 

Given this diminished savings figure, I think it's still worth it for me to drop coll/comp, but I also welcome further thoughts. 

usmarine1975

  • Guest
Re: New To Forums. Insurance Questions
« Reply #15 on: October 09, 2014, 10:31:45 AM »
There are a couple of factors possibly at play.  I am not an actuary for an Insurance company so please take what I say with a grain of salt.  I sold Home and Auto for a time. 

A couple of things I learned in that process.

Being with a substandard insurance company lowers your insurance credit rating with a standard company.

Lower limits can increase your premium, just because you have lower limits doesn't mean the insurance company won't have to pay out more.  (thank you lawsuits)

Insurance companies want clients that pay on time, have few claim's, and properly cover their risk.  State Minimums in the insurance world says, I am a low informed, bad deal for the insurance company.  Getting the cheapest is not always the best.

My opinion take it for what it's worth.  You need to decide the appropriate coverage for you based on your circumstances & not just on getting the lowest premium.  Think of it this way, you are making a contract with an insurance company.  Part of that contract is for them to cover area's that you are at risk.  Or to make you whole in the case of a loss.  For them to be able to do so they need to be profitable.  Would you expect a good carpenter to work for the lowest price.  You shouldn't expect a good insurance company to do the same.  THAT is not to say that paying more is better.  It's saying get the coverage you need at a fair price.  I would tell my clients that every 3 years they should shop their coverage.  But compare apples to apples and know the coverage you are getting.  A lower price doesn't necessarily mean you have the same coverage or that you are appropriately covered. 

A person with substantial assets should not be getting state minimum insurance.  Self insuring is not always the best practice.  But again pick what's right for you and learn whatever you can about it.  If you need a good agent get one. 

Angie55

  • Guest
Re: New To Forums. Insurance Questions
« Reply #16 on: October 09, 2014, 12:00:42 PM »
IMHO quoting auto insurance every 3 years is way too sparse.  I check mine before every 6-month renewal. Sometimes in between. Yes, I'm probably on the "switch companies a lot list" but I think the savings in premium is worth it. I can't stand how my insurance company raises rates automatically when renewing my premium so I always check around. Spending time every 6-months is totally worth it when you could be overpaying by $100+. The worst that can happen is you spend 15-20 minutes of your time for no reason.

It may just be my situation over the past few years where I'm still in the stage that rates can drop. Aging from late 20's to 30's. Having a ticket drop off the 3-year mark. Having 2007 cars that were once considered in the "newish" stage are likely now "old" by whatever threshold they use.

usmarine1975

  • Guest
Re: New To Forums. Insurance Questions
« Reply #17 on: October 09, 2014, 12:19:35 PM »
I was telling the 3 year rule to clients who had not looked at their own coverage or had it shopped in over 10 years.  One situation just re evaluating the replacement cost of the home dropped the premium to a third of what they were paying.  Telling them to do it every 6 months would have been a futile discussion.  For me I try to touch base with my current agent at least once a year and will have it shopped when I feel it's necessary.  I am also in my late 30's so the premium swings are behind me to a degree.  I do know that most carriers do not like clients that switch companies often.  Some will raise your quotes because of it.  One of the questions on most applications is how long you were with previous company.

StangStache

  • 5 O'Clock Shadow
  • *
  • Posts: 63
Re: New To Forums. Insurance Questions
« Reply #18 on: October 10, 2014, 11:30:12 AM »
Thanks again for the great thoughts.

I haven't been with a substandard company.  I have jumped between some of the majors (State Farm, Allstate, Liberty Mutual, etc.)

Regarding the "low limit, cheapest coverage I can get" type of customer, I would think that I'm not labeled as that in their underwriting because my liability and uninsured/underinsured limits are higher than the legal minimums.  I'm surprised that removing coll/comp on 2 aging vehicles would label me as somewhat uninformed.  If anything, it's a responsible move that should label me as a more highly educated, financially savvy customer (and maybe less likely to drive like an asshat).   Then again, I'm not an actuary, and I know there are LOTS of factors that play into the underwriting.

@usmarine1975, I am not trying to just get the cheapest coverage.  If so, then my limits would be minimal and I wouldn't even carry underinsured/uninsured.  On the contrary, by bringing this up on the forums, I am doing exactly what you suggested:  trying to find out the right amount of coverage in my unique situation.  Given my discipline to earmark money for claims, it made sense to drop comp/coll.  I just wasn't expecting my liability premiums to increase by 50% as a result. 

I do tend to shop around every year.  Perhaps it's time to do that, again.  I do have a pretty good group rate with my current insurer through my employer and they were by far the most reasonable last time I shopped around.  I just still can't believe my liability premiums jumped so much as a result of dropping comp/coll. 

How do most of you all shop around for quotes?  Last time, I just walked into 4 offices and chatted with an agent in person, showed them my current policy, and asked for a quote with comparable coverage.  I know most companies offer online quotes, but I like to deal with a real local agent.  Does anyone email them info and ask for a quote?   What's the protocol?

Thanks again!

usmarine1975

  • Guest
Re: New To Forums. Insurance Questions
« Reply #19 on: October 10, 2014, 11:42:48 AM »
I was speaking to the crowd in my post overall.  I don't know the OP's circumstances and can only make generalized comments regarding the whole process.  I didn't mean to imply that you or anyone for that matter is looking for the cheapest insurance.  Again generalizing in my comments.

In regards to shopping, you can have your current carrier re shop it, and call or stop in at others.  My last shopping I took it to a friend who just opened an office.  He wasn't able to beat what I currently have.  It may be time to look once again.  I may also call my current agent and just tell him to re value the homes.  Many companies are now adding a 5%increase to replacement cost every year.  And that will increase your cost exponentially over time.  Simply re valuing the property will bring it back down.

Good luck.

alaskacobalt

  • 5 O'Clock Shadow
  • *
  • Posts: 31
Re: New To Forums. Insurance Questions
« Reply #20 on: November 30, 2014, 10:57:31 AM »
There are a couple of options you have here.  Obviously, I would need to know what state you are in to better understand exactly your situation, but since you mentioned limited tort, I can assume you are either in NJ or PA, I hold a license in both states so my assumptions will be somewhat based on those.  Remember every state is COMPETELY different, so asking a forum their thoughts on changes is difficult because everyone has a different concept of what is a reasonable rate for insurance.  What is reasonable in Michigan for example is outrageous to someone in Idaho. 

In your situation, since you have health insurance, the key question is whether or not you normally meet your annual deductible.  If so, I would consider dropping medical payments.  THis coverage is most often used to cover that deductible but if you meet it anyway, it doesn't help much.  It does provide additional benefits, but with higher levels of coverage like yours you have so many layers of protection that the added benefit is negligable at best.  I see that your agent said that is the minimum limit... but depending upon the state this should be a waiverable coverage, so again... goes back to what state you are in. Usually an agent is getting a commission so they are going to use clever wording to avoid reducing their own paycheck.  If he said that is the minimum, he never said you couldn't waive it, he was simply saying that is the lowest option to still carry it.  Wording is how agents get away with forcing you to carry higher coverages than you need.  Unfortunately there is a big conflict of interests when dealing with a traditional agent because you are fighting a battle between cost savings and their own paycheck.  They are going to play on what you don't know in order to win that battle. 

Now in regards to the itemized changes.  Keep in mind, that discounting/tiering exist heavily in insurance.  By removing one coverage, you may lose a package discount/rating factor that helped out another coverage.  So, I wouldn't focus as much on the itemized costs as much as the overall picture because of that.  Removing a $20 coverage, may only save you $10, because it is creating a $10 rating benefit by having it.  This prevents rate shopping by giving a greater perceived value as it tends to encourage you to carry more coverage.  For example towing/rental only costs a few dollars a month on a policy, but the perceived value is considerable when compared to the same policy without it.  An agent knows the more options that exist on the policy, the more you think you are getting for your money.  Meaning it is easier to talk down a policy from a competitor that is trying to beat you on price alone.  Works the same with cars, tvs, etc.  Benefits can trump price even if it isn't always logical. 

Gin1984

  • Magnum Stache
  • ******
  • Posts: 4730
Re: New To Forums. Insurance Questions
« Reply #21 on: November 30, 2014, 11:01:56 AM »
I'd get rid of "Transportation expenses - $30/day, $900/accident - $22 - $22".  You have two cars, the likelihood of both being out and you needing to rent every single day for a full 30 days seems not very high.  Unless you both have long commutes in opposite directions?

StangStache

  • 5 O'Clock Shadow
  • *
  • Posts: 63
Re: New To Forums. Insurance Questions
« Reply #22 on: December 09, 2014, 12:35:28 PM »
There are a couple of options you have here.  Obviously, I would need to know what state you are in to better understand exactly your situation, but since you mentioned limited tort, I can assume you are either in NJ or PA, I hold a license in both states so my assumptions will be somewhat based on those.  Remember every state is COMPETELY different, so asking a forum their thoughts on changes is difficult because everyone has a different concept of what is a reasonable rate for insurance.  What is reasonable in Michigan for example is outrageous to someone in Idaho. 

In your situation, since you have health insurance, the key question is whether or not you normally meet your annual deductible.  If so, I would consider dropping medical payments.  THis coverage is most often used to cover that deductible but if you meet it anyway, it doesn't help much.  It does provide additional benefits, but with higher levels of coverage like yours you have so many layers of protection that the added benefit is negligable at best.  I see that your agent said that is the minimum limit... but depending upon the state this should be a waiverable coverage, so again... goes back to what state you are in. Usually an agent is getting a commission so they are going to use clever wording to avoid reducing their own paycheck.  If he said that is the minimum, he never said you couldn't waive it, he was simply saying that is the lowest option to still carry it.  Wording is how agents get away with forcing you to carry higher coverages than you need.  Unfortunately there is a big conflict of interests when dealing with a traditional agent because you are fighting a battle between cost savings and their own paycheck.  They are going to play on what you don't know in order to win that battle. 

Now in regards to the itemized changes.  Keep in mind, that discounting/tiering exist heavily in insurance.  By removing one coverage, you may lose a package discount/rating factor that helped out another coverage.  So, I wouldn't focus as much on the itemized costs as much as the overall picture because of that.  Removing a $20 coverage, may only save you $10, because it is creating a $10 rating benefit by having it.  This prevents rate shopping by giving a greater perceived value as it tends to encourage you to carry more coverage.  For example towing/rental only costs a few dollars a month on a policy, but the perceived value is considerable when compared to the same policy without it.  An agent knows the more options that exist on the policy, the more you think you are getting for your money.  Meaning it is easier to talk down a policy from a competitor that is trying to beat you on price alone.  Works the same with cars, tvs, etc.  Benefits can trump price even if it isn't always logical.

Thank you for your detailed, expert response.

Regarding medical:  I am fairly sure the agent said I have no choice but to cover it.  But perhaps I misheard that.  Is there any way I can find out if the state (PA - again spot on) allows this to be waived.  I have never hit my annual medical deductible. 

Regarding itemization: Are you saying that there is an unwritten "package discount" associated with my (now former) comprehensive/collision coverage? 

StangStache

  • 5 O'Clock Shadow
  • *
  • Posts: 63
Re: New To Forums. Insurance Questions
« Reply #23 on: December 09, 2014, 12:36:45 PM »
I'd get rid of "Transportation expenses - $30/day, $900/accident - $22 - $22".  You have two cars, the likelihood of both being out and you needing to rent every single day for a full 30 days seems not very high.  Unless you both have long commutes in opposite directions?

  I still went ahead and dropped comprehensive/collision/rental