Is My Car Insurance Plan Enough? - the Bogle way!

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BundyBundy
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Is My Car Insurance Plan Enough? - the Bogle way!

Post by BundyBundy » Tue Sep 09, 2014 1:32 am

Hello folks,

I am wondering if my plan is currently sufficient or I have too much coverage for my car insurance. I feel like I am randomly picking the plan rather than analyzing what I need and what is worth it.

I am currently with Geico. I am 27 years old with no debt, about 200k in assets (mainly stocks). I owned the car and paid all cash - 2014 Hyundai Limited Turbo 2.0. Hyundai supposedly have great warranty and I don't foresee any major mechnical problems in the future as I also dont drive aggressiely. I am not sure if the coverage is too little or too much. I am a safe driver, no tickets and been driving since 16. I live in SoCal so I'll do a good amount of driving around the area. Lastly, this is my first car purchase! I am paying about 600$ for 6month coverage. I also have great health insurance (not sure if that helps)

Details
Bodily Injury Liability: 20k per person/40k per occurrence
Property Damage Liability:25k per occurrence
Uninsured Motorist & Underinsured Motorist: 20k per person/40k per occurrence
Comprehensive Deductible: $500
Collision Deductible: $500
Rental Reimbursement: $50 per day

Questions
1) Should I increase my deductible?
2) Do I really need rental reimbursement? Reason I signed up for this was because I wont be able to get anywhere in SoCal without a car.
3) Should I increase any of the liability/coverage?
4) Do I need emergency assistance insurance or should I look elsewhere - AAA?
5) I read somewhere on boglehead, in which one of the reader suggested to always to get windshield protection since that is a high occurence event but very low cost to insured. I believe my collision deductible covers this. Are there any other suggestions?
6) Am I paying too much for insurance? ANy other car insurance suggestions would be appreciated.

I am trying to minimize cost but MAXIMIZE value (boglehead style) and obviously hedge against any future risks. I am basically looking for a "bang for my bucks" type of policy/insurance. Thank you so much in advance!

RosieQ
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Re: Is My Car Insurance Plan Enough? - the Bogle way!

Post by RosieQ » Tue Sep 09, 2014 3:10 am

Sounds like you are a little light on coverage. There are lots of expensive cars on the road, in fact, most new cars these days seem to be over 30k and lots of luxury cars are in the 50-70k range. Your property damage liability of 25k will leave your personally on the hook if you total almost any new car on the road. I carry $100,000 in property damage liability just to cover all the Teslas etc I see driving around everyday in the SF Bay Area and wasn't much more expensive than 50k coverage, about $8 per 6 months if fact if I remember correctly.

Also, I happen to work in Emergency Medicine at a trauma hospital, so I see a lot of car accident victims. Medical care, especially high acuity medical care, is atrociously expensive these days. What happens if you hit a pedestrian in the crosswalk sometime? You can be a very safe driver and these things happen. Speaking in generalities, the Emergency Department trauma activation would run in the 3-5k range, a CT pan scan with radiologist reads can reach into the 30k range and this happens often in a moderate to high mechanism of injury accident, then those people are likely to have broken bones which might need surgery (15-50k to go to the OR), and if bad enough need to spend the night in the hospital ($4k per night for a floor bed, $12-15k per night for ICU). So basically a simple pedestrian accident with a badly broken leg that spends the night and then needs to have an operation to fix the bones will likely cost you at least 50k and up to 150k when that person personally, or their insurance comes after you. Now imagine you hit a car with 3 occupants who all have injuries...

Enough to make you want to get an umbrella policy yet? With my Geico policy I have 300k per person/300k per occurrence bodily injury liability and was actually able to add a 1 million umbrella policy and the extra policy discount made it just about free with the reduction in my primary auto policy. No brainer for about $20 extra per year. Little stuff like car rental coverage and towing is relatively cheap but is less important. Insurance is to protect you and your assets against catastrophic loss. You are already building a nice nest egg so far. Renting a car for 5 days wouldn't break the bank, nor would towing to a nearby garage. But a legal judgement costing you hundreds of thousands, or more, isn't at all unfathomable and can be insured against for probably just about 20-30 dollars more per month. Go for it!

Hope that helps.

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interplanetjanet
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Re: Is My Car Insurance Plan Enough? - the Bogle way!

Post by interplanetjanet » Tue Sep 09, 2014 3:25 am

Your first, absolute first step should be to increase your liability coverages. It is shockingly easy for damages to exceed your current limits in a car accident, and increasing them to, say, $100k property damage coverage and $300k/$300k liability will be fairly cheap if you have a good driving record. With your net worth I would not want to go significantly lower.

This is the most important coverage you have, it will keep you from being wiped out if you are found to have injured someone badly in an accident - and it will also help to ensure that they are made as whole as is possible.

Under/uninsured motorist coverage is something to seriously consider if you cannot get adequate disability coverage (I'm assuming for the moment that you have adequate medical coverage).

mhalley
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Re: Is My Car Insurance Plan Enough? - the Bogle way!

Post by mhalley » Tue Sep 09, 2014 3:32 am

You might be able to get cheaper insurance, you will just have to get some quotes. I would recommend that you increase the deductible, assuming you have your emergency fund in place so that if there is an accident you will be able to pay out of pocket expenses.
I would not recommend getting roadside assistance through your auto insurance, If you really want it go with something like AAA. I have heard Clark Howard talk to people on the radio who had it, and when they used it they got dinged on their auto insurance, causing increased rates.
You will have to decide how much insurance to carry. Looks like you have the bare minimum right now.
http://www.bankrate.com/finance/insuran ... -need.aspx
As far as quality of insurance, AMICA and USAA usually get the best customer service rating, but you will have to check their quotes to see if there is much price differential.
Mike

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wander
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Re: Is My Car Insurance Plan Enough? - the Bogle way!

Post by wander » Tue Sep 09, 2014 6:34 am

I agree with above that your liability coverage is too low.

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hand
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Re: Is My Car Insurance Plan Enough? - the Bogle way!

Post by hand » Tue Sep 09, 2014 7:26 am

Why are you paying for rental insurance - would a couple days / weeks of paying for a rental if accident your fault be an undue hardship?
Why are your deductibles so low, would an extra $500 or $1000 out of pocket be an undue hardship?

I also agree liability coverage is too low, and suggest you consider an umbrella policy plus raising your liability coverage to at least the umbrella policy limits.

jlawrence01
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Re: Is My Car Insurance Plan Enough? - the Bogle way!

Post by jlawrence01 » Tue Sep 09, 2014 11:42 am

The liability limits are ridiculously low. I think that you should carry 100/300/50 at a minimum and perhaps twice that.

One of the problems with using GEICO is that they are there to sell you a policy at the price point that they think that you will spend. I have received quotes from them approximately 15 times (for market research) and I have never been asked questions necessary to really determine the coverage I need to protect my asset base. I could easily say that they are the worst of the Big 4 (Allstate, Progressive, State Farm, and GEICO.) in terms of getting an understanding of what you need.

Personally, I prefer using an independent agent who represents 5-10 different insurers. They will generally interview you to determine what coverage you need. Then they will see which company will best meet your needs.

IMHO, you have way too little liability and that is the most critical insurance you can have. If you have a small 5-10 mph fender bender where the other driver heads to the hospital, the minimum you can expect to pay is about $10k if you are at fault. The maximum is unlimited.

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FelixTheCat
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Re: Is My Car Insurance Plan Enough? - the Bogle way!

Post by FelixTheCat » Tue Sep 09, 2014 12:05 pm

Insurance is to protect you against the accidents in life.

You are under insured. Let's say you get into a major accident where people and property are damaged. Attorneys will evaluate your insurance, assets and earnings. It's possible your assets can be used and your income could be garnished.

I would start thinking about increasing your insurance so you could qualify for an umbrella policy. Then get an umbrella policy.
Felix is a wonderful, wonderful cat.

rec7
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Re: Is My Car Insurance Plan Enough? - the Bogle way!

Post by rec7 » Tue Sep 09, 2014 1:40 pm

Looks like you need 200/200 in Liability. I have always heard you should insure up to your asset level. Property Damage Liability:25k per occurrence that might work in some parts of the country. When you pull up to a stop light in your neighborhood what do the cars around you cost? Look at several stop lights to get a good feel. What if you bang up two or three cars? The average new car today is around 32k. I think most people need 50k and if you live in a swanky area maybe more. No Teslas in my neighborhood. LOL
Last edited by rec7 on Tue Sep 09, 2014 9:24 pm, edited 6 times in total.

NorCalDad
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Re: Is My Car Insurance Plan Enough? - the Bogle way!

Post by NorCalDad » Tue Sep 09, 2014 2:00 pm

Agree with everyone here - I cringed when I saw how low your liability is. Liability, not comprehensive/collision, is the most important part of your auto insurance policy. Especially for someone who has assets such as you and decades of wealth accumulation ahead of you. I'd carry at least $250,000/$250,000 and consider going higher each year.

I always advocate increasing deductibles for people who have an emergency fund large enough that they can just cut a check for the deductible amount without a second thought. If you are able to write a check for $1,000 without much pain, and it seems like you are, I'd at least double your deductible.

I wouldn't pay for rental reimbursement - I'd rather "self-insure" and just pay for a rental in the off chance I need one. In 20+ years of driving, I have never needed a rental.

Looking at the Hyundai website, it appears Hyundai already provides roadside assistance for five years. I'd look at that perk and see whether it's enough for you: https://www.hyundaiusa.com/assurance/ro ... tance.aspx

Windshield protection? Don't do it. Insurance companies are not stupid. They wouldn't offer it if they lost money on the coverage because it was such a high recurrence event. Also, reconsider how you look at insurance. I like to think of insurance as disaster protection, like if I get in a big wreck with a totaled car and injuries. Not for things like window replacement. I've paid out of pocket for window replacement/repairs before. It's not worth a claim or the impact on your future insurance rates.

Yossarian
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Re: Is My Car Insurance Plan Enough? - the Bogle way!

Post by Yossarian » Tue Sep 09, 2014 2:01 pm

Keep it simple. Car insurance is protection against catastrophic events, not temporary inconveniences. Go with the highest deductible and highest coverage you can get. Drop all the extra stuff. Paying a few hundred for a rental car will not break you. Getting sued for someone's medical costs and loss of future income for >$1 million just may. Get an umbrella policy. It's dirt cheap but will require higher liability coverage on your car/home/rental policies.

ralph124cf
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Re: Is My Car Insurance Plan Enough? - the Bogle way!

Post by ralph124cf » Tue Sep 09, 2014 2:10 pm

One thing that has not been mentioned is homeowners or renters insurance. This is normally needed to qualify for umbrella insurance. Be sure to get homeowners or renters liability limits high enough to qualify for the umbrella coverage.

Ralph

BundyBundy
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Re: Is My Car Insurance Plan Enough? - the Bogle way!

Post by BundyBundy » Tue Sep 09, 2014 9:03 pm

THANK YOU ALL FOR YOUR HELP and for your honest opinion! it seems that my liability coverage is too little. this is my first auto insurance policy, thus i wasn't sure what was enough for my needs. The reason i asked the question was because i saw a middle age driver accidentally hit a person on the street few months ago in downtown LA. the dude was KNOCKED OUT and the first thing i thought to myself was "her life is about to change". so i thought about my policy and what if i accidentally hit someone.

i always tried to minimize my costs and maximize my gains, thus the low liability coverage. its funny how being frugal sometime can cloud your judgment! i didn't realize i was not protecting myself to any unforeseen future events which is quite stupid on my part.

1) what are the steps needed for umbrella coverage? do i need to get house/renter insurance? do i really need umbrella insurance as I dont own any properties?
2) do i need uninsured motorist bodily harm? i have great health insurance and wondering if i am overlapping by paying this. (i know my priority is increasing my liability coverage, but would like to know if this is required?)

THANK YOU SO MUCH FOR ALL YOUR HELP

Grt2bOutdoors
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Re: Is My Car Insurance Plan Enough? - the Bogle way!

Post by Grt2bOutdoors » Wed Sep 10, 2014 10:50 am

BundyBundy wrote:THANK YOU ALL FOR YOUR HELP and for your honest opinion! it seems that my liability coverage is too little. this is my first auto insurance policy, thus i wasn't sure what was enough for my needs. The reason i asked the question was because i saw a middle age driver accidentally hit a person on the street few months ago in downtown LA. the dude was KNOCKED OUT and the first thing i thought to myself was "her life is about to change". so i thought about my policy and what if i accidentally hit someone.

i always tried to minimize my costs and maximize my gains, thus the low liability coverage. its funny how being frugal sometime can cloud your judgment! i didn't realize i was not protecting myself to any unforeseen future events which is quite stupid on my part.

1) what are the steps needed for umbrella coverage? do i need to get house/renter insurance? do i really need umbrella insurance as I dont own any properties?
2) do i need uninsured motorist bodily harm? i have great health insurance and wondering if i am overlapping by paying this. (i know my priority is increasing my liability coverage, but would like to know if this is required?)

THANK YOU SO MUCH FOR ALL YOUR HELP
Your liability insurance should be at least equal to the amount of assets you own, otherwise you are just inviting the plaintiffs attorneys to take everything you worked for. Have you ever seen a 5 mph fender bender? The damage to the cars can be in the low thousands, now just imagine the damage to soft tissue of a person that is hit by a car, your low $40K liability coverage may be just enough to pay for a months stay in the hospital, but it would not be enough for physical therapy, suffering and pain, work disability, property damage, etc. Seriously, up your limits to a minimum of $250K/$500K per occurrence and see about that umbrella policy - if you have a lifetime of work ahead, your future wages can be garnished if you lose a lawsuit. Yes! you need unisured motorist coverage to cover you in the event that guy you see driving down the block blows the red light and T-Bones you at 30 mph - how healthy do you think you'll be in an event like that? Let's say the guy only has a low limits policy, no assets to speak of and your medical bills are $100K, not to mention as a result of the accident you have to be out of work for 3 months, don't have disability insurance, who's going to pay your bills? Get the uninsured motorist coverage for the same limits, otherwise someone else's poor choices could wind up costing you plenty.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

avalpert
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Re: Is My Car Insurance Plan Enough? - the Bogle way!

Post by avalpert » Wed Sep 10, 2014 3:18 pm

Grt2bOutdoors wrote: Your liability insurance should be at least equal to the amount of assets you own, otherwise you are just inviting the plaintiffs attorneys to take everything you worked for.
I've never understood the connection made between liability and asset level - if you have $100,000 in liability insurance and $100,000 in assets the plaintiffs attorney can still take everything you worked for by demonstrating $200,000 in damages. How is that less inviting for him?

Frankly, you should be thinking in terms of likely damages - not your asset level.

rec7
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Re: Is My Car Insurance Plan Enough? - the Bogle way!

Post by rec7 » Wed Sep 10, 2014 3:51 pm

avalpert wrote:
Grt2bOutdoors wrote: Your liability insurance should be at least equal to the amount of assets you own, otherwise you are just inviting the plaintiffs attorneys to take everything you worked for.
I've never understood the connection made between liability and asset level - if you have $100,000 in liability insurance and $100,000 in assets the plaintiffs attorney can still take everything you worked for by demonstrating $200,000 in damages. How is that less inviting for him?

Frankly, you should be thinking in terms of likely damages - not your asset level.
Maybe because if it is over your assets you are bankrupt or would be if you had no insurance. The funny thing is when a person is involved in a wreck the lawyers sue for you insurance limit many times. Lawyers have access to this information I don't know if they can look up assets other than houses and cars?
Last edited by rec7 on Wed Sep 10, 2014 4:09 pm, edited 2 times in total.

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BolderBoy
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Re: Is My Car Insurance Plan Enough? - the Bogle way!

Post by BolderBoy » Wed Sep 10, 2014 4:05 pm

BundyBundy wrote: Details
Bodily Injury Liability: 20k per person/40k per occurrence
Property Damage Liability:25k per occurrence
Uninsured Motorist & Underinsured Motorist: 20k per person/40k per occurrence
Comprehensive Deductible: $500
Collision Deductible: $500
Rental Reimbursement: $50 per day
Agree with the others - your liability coverages are too low. $100k for property damage at least - you have assets which a lawyer will definitely bleed away if you are at fault and sued. Raise the other liability limits as well. Ditch the rental reimbursement. If you can afford raising the deductible, do so - it will make a significant difference in your premium. (in essence it is your way of partially self-insuring and showing the insurance company you're willing to have significant skin in the game)

Don't be reluctant to shop around. Insurance is a commodity item and the longer an insurer has you as a customer, the more inclined they'll be to gradually raise your rates going forward (I was with State Farm for 30 years and switched to The Hartford, saving 65% in premiums for better coverage.) One bright fellow on the list reported that he routinely changes insurers every two years after rate shopping and never looks back.

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segfault
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Re: Is My Car Insurance Plan Enough? - the Bogle way!

Post by segfault » Wed Sep 10, 2014 4:08 pm

avalpert wrote:I've never understood the connection made between liability and asset level - if you have $100,000 in liability insurance and $100,000 in assets the plaintiffs attorney can still take everything you worked for by demonstrating $200,000 in damages. How is that less inviting for him?

Frankly, you should be thinking in terms of likely damages - not your asset level.
It's slightly less inviting in that the larger the liability insurance policy, the more incentive there is to settle versus attempting to obtain and collect a judgment in excess of the policy limits.

avalpert
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Re: Is My Car Insurance Plan Enough? - the Bogle way!

Post by avalpert » Wed Sep 10, 2014 4:10 pm

segfault wrote:
avalpert wrote:I've never understood the connection made between liability and asset level - if you have $100,000 in liability insurance and $100,000 in assets the plaintiffs attorney can still take everything you worked for by demonstrating $200,000 in damages. How is that less inviting for him?

Frankly, you should be thinking in terms of likely damages - not your asset level.
It's slightly less inviting in that the larger the liability insurance policy, the more incentive there is to settle versus attempting to obtain and collect a judgment in excess of the policy limits.
Ok, but how does that relate to my assets - if I have a $200 liability limit does it make it difference to the incentives whether I have $200k or $1,000k in assets?

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