Author Topic: Auto Insurance Question - Limits  (Read 4460 times)

TheThirstyStag

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Auto Insurance Question - Limits
« on: August 12, 2015, 01:24:09 PM »
I'm in the middle of my annual/biannual shopping around for auto and homeowner's insurances.  This time around I contacted an independent agent representing 8+ companies to get me the lowest quote, and got a really good one via Maine Mutual Group.   I'd like to ask here for advice regarding limits.

Following my request, the agent obtained quotes using the same policy limits as my current policy, which are $100,000 per person, $300,000 per accident for liability, uninsured, and underinsured.  However, the agent also offered another quote with their "recommended" limits of $250,000/$500,000.  The difference in quotes is $35 on the annual premium. 

Is $35 with the change in limits?  I always thought $100,000/300,000 was pretty standard.  Just curious to see what everyone else thinks.

Thanks!

Blonde Lawyer

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Re: Auto Insurance Question - Limits
« Reply #1 on: August 12, 2015, 02:02:50 PM »
We do the $250/500.  The difference in price is so small for such a big benefit.  Any accident were you get really injured, your medical bills alone can exceed $100k.  I'm not as concerned about protecting myself from liability as I am about having the underinsurance if the person who hits me only has a $25k policy.  I don't want all that money going back to my health insurance.  I want my pain and suffering covered too.

Also, med-pay is important if your state has it.  It is money to cover your medicals.  You can use it just for your out of pockets (copays/deductibles) or use it instead of health insurance.  Unlike health insurance, it doesn't get paid back from any settlement/judgment so it reduces your lien amounts. 

The different in price in my policy to go from 1000 medpay to 10,000 medpay was minuscule.

lbmustache

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Re: Auto Insurance Question - Limits
« Reply #2 on: August 12, 2015, 04:16:06 PM »
We do the $250/500.  The difference in price is so small for such a big benefit.  Any accident were you get really injured, your medical bills alone can exceed $100k.  I'm not as concerned about protecting myself from liability as I am about having the underinsurance if the person who hits me only has a $25k policy.  I don't want all that money going back to my health insurance.  I want my pain and suffering covered too.

Also, med-pay is important if your state has it.  It is money to cover your medicals.  You can use it just for your out of pockets (copays/deductibles) or use it instead of health insurance.  Unlike health insurance, it doesn't get paid back from any settlement/judgment so it reduces your lien amounts. 

The different in price in my policy to go from 1000 medpay to 10,000 medpay was minuscule.

I was thinking to drop med completely for myself, since I have health insurance. If my health insurance has a $6k OOP max, doesn't it NOT matter what my injuries are, because health insurance will pay for all of it?

Timely post OP, as I was just trying to figure out a new policy as well.

seattlecyclone

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Re: Auto Insurance Question - Limits
« Reply #3 on: August 12, 2015, 05:12:44 PM »
Also, med-pay is important if your state has it.  It is money to cover your medicals.  You can use it just for your out of pockets (copays/deductibles) or use it instead of health insurance.  Unlike health insurance, it doesn't get paid back from any settlement/judgment so it reduces your lien amounts. 

The different in price in my policy to go from 1000 medpay to 10,000 medpay was minuscule.

I have to disagree with this. The number one rule of insurance is that the insurance company will make a profit. Therefore you should only buy coverage for things you wouldn't be able to pay for out of pocket. I already buy medical insurance to pay my medical bills. I chose a medical plan with a deductible that I'm willing and able to pay if something bad happens. A car crash is one of dozens of reasonably likely things that could cause me to use up my medical deductible. Why should I pay extra for an insurance that pays this cost in the case of a car crash, when I'm able to pay this cost myself in the case of cancer, heart attack, injuries related to athletic or home improvement activities, etc.?

TheThirstyStag

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Re: Auto Insurance Question - Limits
« Reply #4 on: August 12, 2015, 06:50:20 PM »
Thanks for the great comments.  Keep them coming.

I don't quite understand how the medical side works.  I do have quality health insurance but am unsure of the degree to which it covers medical complications due to an auto accident. 

I also carry a $5000 first party medical expense benefit on my auto insurance.  I believe this is the state (PA) minimum.

regulator

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Re: Auto Insurance Question - Limits
« Reply #5 on: August 12, 2015, 07:21:49 PM »
I usually just buy whatever is required in the way of home and auto limits to make sure I meet the requirements of the umbrella policy.  You do have an umbrella, don't you?

TheThirstyStag

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Re: Auto Insurance Question - Limits
« Reply #6 on: August 12, 2015, 07:45:09 PM »
I usually just buy whatever is required in the way of home and auto limits to make sure I meet the requirements of the umbrella policy.  You do have an umbrella, don't you?

I do not.  Should I?  School me.

rulesofacquisition

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Re: Auto Insurance Question - Limits
« Reply #7 on: August 12, 2015, 09:53:03 PM »
I don't have an umbrella policy because my son is 19 and lives with me, even though he has his own car in his name only, and his own car insurance, State Farm said no dice. So I increased the car and homeowners liability amounts but they've not where I want them. Anyone else have this problem?

Blonde Lawyer

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Re: Auto Insurance Question - Limits
« Reply #8 on: August 13, 2015, 08:57:24 AM »
Also, med-pay is important if your state has it.  It is money to cover your medicals.  You can use it just for your out of pockets (copays/deductibles) or use it instead of health insurance.  Unlike health insurance, it doesn't get paid back from any settlement/judgment so it reduces your lien amounts. 

The different in price in my policy to go from 1000 medpay to 10,000 medpay was minuscule.

I have to disagree with this. The number one rule of insurance is that the insurance company will make a profit. Therefore you should only buy coverage for things you wouldn't be able to pay for out of pocket. I already buy medical insurance to pay my medical bills. I chose a medical plan with a deductible that I'm willing and able to pay if something bad happens. A car crash is one of dozens of reasonably likely things that could cause me to use up my medical deductible. Why should I pay extra for an insurance that pays this cost in the case of a car crash, when I'm able to pay this cost myself in the case of cancer, heart attack, injuries related to athletic or home improvement activities, etc.?

First, I also want to mention that in many states, your car insurance covers you while you are biking or a pedestrian too so if you get hit by someone under or uninsured you have coverage.

On the medpay issue, let me give you an example.  The issue isn't that your health insurance won't cover you but rather that they would have to be paid back out of any judgment or settlement.  Medpay would not have to be paid back.  Also, the cost of adding it is generally very low for the benefit.  As to whether you would rather self-insure that risk, you can look at the cost and decide. 

Here's the example.  You get in a car crash and have $10,000 of medical bills.  With your health insurance's contracted rates, they pay $6,000.  You also pay $1,000 in copay/deductibles.  You have some pain and suffering but no lost wages.  Your claim settles for $30,000.  $10,000 goes to your lawyer.  $6,000 goes back to your health insurance.  You get $14,000.  Since you already paid $1,000 in copays you are only getting $13,000 new money in your pocket.

Let's say you had $10,000 in medpay.  Medpay covers all $10,000 of your medicals.  Claim settles for $30,000.  Your lawyer gets $10,000.  You get $20,000 in your pocket since you don't have to pay back any health insurance company and you had no out of pocket loss.

seattlecyclone

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Re: Auto Insurance Question - Limits
« Reply #9 on: August 13, 2015, 02:19:43 PM »
I understand how the insurance works. I realize that, in the event of a car crash, I will be better off if I have the insurance than if I don't. The same can be said about all insurances: if something bad happens, you will be better off if you bought the insurance for that situation than if you didn't. However if something bad doesn't happen (which is a lot more likely), you will be better off if you didn't buy the insurance.

Insurance companies have armies of actuaries whose job is to assess the cost and likelihood of bad things that might happen, so they can set a price for the policy that is likely to cause the insurance company to make a profit overall. Because insurance companies make a profit off of their average customer, after including all of their costs above and beyond direct payouts to policyholders, having insurance will likely cost you more money in the long run than not having it. That doesn't mean you should avoid all insurance! You should certainly buy insurance to cover events that would cause great harm to your finances. If you don't already have tens of millions, these events would include auto liability, house fires, major medical expenses, and other things.

The medical payments policy bundled with auto insurance just doesn't seem to fall into that category for those of us who have any savings cushion at all. Medical insurance will already pay your medical expenses, minus a deductible that you have already decided you can afford if something bad does happen. Losing out on $7k of a personal injury settlement (as in your example), would hardly cause me undue financial hardship. Therefore buying the insurance doesn't make sense unless you have some reason to believe the armies of actuaries have massively underestimated the cost and/or likelihood of your needing to use the insurance.

Blonde Lawyer

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Re: Auto Insurance Question - Limits
« Reply #10 on: August 14, 2015, 09:02:17 AM »
Therefore buying the insurance doesn't make sense unless you have some reason to believe the armies of actuaries have massively underestimated the cost and/or likelihood of your needing to use the insurance.

This is actually what I think when it comes to medpay in my state.  Most consumers don't even know what it is and just select the state mandated minimum of $1000.  I just checked my policy, I pay $30 per person per year to have $10,000 in medpay on my policy.  That is less than 1 dinner out.  If I went with the state mandated minimum, I would still have a portion of my premium dedicated to that.

When I was adjusting my coverage I got quotes for various scenarios.  The difference between the state mandated minimum for 2 people ($1000 each) and $10,000 per person was $21/year combined.  In other words, my premium was adjusted $21 to add $9000 of extra medical coverage for two people.

Often when people decide if insurance coverage is worth it, they think about how much they would have if they set aside the premium each month instead and used that as an emergency fund for the thing against which they were insuring.  I would have to set $21 aside for 428 years before I had $9000. 

I'm totally cool with us disagreeing but I think with those numbers I'm getting a great value.

robartsd

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Re: Auto Insurance Question - Limits
« Reply #11 on: August 14, 2015, 09:44:27 AM »
Medical payment coverage in auto insurance policies us usually "excess" insurance meaning that it will only pay out where your treatment costs more than your "primary" medical insurance will pay. This is a big reason why it is so inexpensive to purchase. In some instances this simply means that the auto policy pays the medical insurance deductable; but it can also mean that the auto policy pays for things that the medical insurance does not cover. You'll want to check the details of your medical insurance coverage for auto related injuries before deciding if you need additional coverage. Also remember that your medical payment coverage also extends to each passenger in your vehicle as well as auto related injuries while you are a pedestrian or cyclist.

TheThirstyStag

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Re: Auto Insurance Question - Limits
« Reply #12 on: August 14, 2015, 11:41:17 AM »
Thanks for all of the great information.  I decided to go with the 250/500k limits, and will explore umbrella insurance when my assets become more substantial.


On a marginally related note:  Does anyone else earmark money for a self-insurance fund?  I do this in lieu of comprehensive and collision by putting the difference in premiums in a capital one 360 account.  For those that do this, where do you park this money?  I've thought about moving it to a taxable vanguard account, but am unsure of how aggressively I should invest a pool of money that needs to stay fairly liquid. 

Paul der Krake

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Re: Auto Insurance Question - Limits
« Reply #13 on: August 14, 2015, 11:57:43 AM »
On a marginally related note:  Does anyone else earmark money for a self-insurance fund?  I do this in lieu of comprehensive and collision by putting the difference in premiums in a capital one 360 account.  For those that do this, where do you park this money?  I've thought about moving it to a taxable vanguard account, but am unsure of how aggressively I should invest a pool of money that needs to stay fairly liquid.
HSA for health (most accounts require you to keep a chunk in cash anyway), a general emergency fund for the rest that's sitting in a high yield savings account (1% APY).