How Much Car Insurance Do You Really Need?

I've been with Unitrin Direct auto insurance for the past year. They were the cheapest quoted when I went to www.insurance.com and when I switched to them from Mercury insurance I saved about $40 a month. I've never had any really problems with them...until now.

I received my renewal package in the mail and was looking through it to make sure they hadn't raised my premium and was even hoping they would decrease my premium. Neither really happened but what they did do was slap on a $40.00 "policy set up fee" to the total bill. What? A policy set up fee? Nothing on my policy had changed, nothing fancy is required of them. And to make things worse, they decided that they are no longer doing annual policies but instead are now only offering 6-month policies so in another 6 months when my policy renews I will have to pay another $ "policy set up fee." What BS!

Their policy set up fees will end up costing me another $80/year or about $6.60/month. I hate when companies nickel and dime you so that they can lure you in as customers and then try to squeeze as much money out of you as possible. It's more than principle of the matter more than anything. Why not include their expense costs in the premium instead of making it seem as if they are doing you a favor or providing you some additional service by renewing your policy? Isn't that exactly what their business is?

I called them and told them "NO THANK YOU" to the additional fees and they said "TOUGH LUCK." So I started shopping around for auto insurance.

I went back to www.insurance.com and got back a few different quotes, only 1 of which was less expensive than the quote at Unitrin. Annoying but the quote that was less was $108 cheaper for a 6 month policy than at Unitrin. All of the other quotes were

The quote was from Esurance so I decided to do a quick search to see what they were all about. I was so glad I did because I read numerous complaints from the Consumer Affairs website about them claiming that they gave them the run around when they submitted a claim or that they ended up raising their rates during the policy period for no good reason. I think I'll take a pass on them.

Here is what I don't get. I'm 24, never been in an accident, never had a ticket, have a good credit rating and only drive 4 miles one way to work. My car is pretty reasonable; it's about 3 or 4 years old, I own it and it is probably worth about $13,000. But for some reason I end up with ridiculously high quotes from insurance companies. AIG gave me a quote of something like $1,100 for 6 months or $183/month. That could be another car payment!

Maybe its time to reevaluate my coverages. There could be other ways to trim down my auto insurance cost which is my biggest expense after rent, credit card payment and student loans.

I found a good article on this subject at Smart Money. Here it is in paraphrase form with some of my own comments. I recommend checking out the full article as well.

Bodily Injury Liability
This will compensate the driver of the car and its passengers and passengers in your car when you get into an accident. The amount of coverage you need should be determined by the amount of assets you need to protect. This was news to me. I had bodily injury liability coverages of $100,000/$300,000 and I don't even have any assets besides my car. Unless they want to take me to court to win a portion of my credit card debt, I should really lower my coverages here. Smart Money recommends using their Net Worth calculator to determine the amount of assets you need to protect.

Property Damage Liability

This will help pay for the cost of damage to the other party's car. If you live in Orange County like me where too many people buy ridiculously expensive cars, you should have enough to cover the cost of that Mercedes or Porsche.

Personal Injury Protection

This will cover medical and funeral costs of you are passengers in your car regardless of whose fault it is. If you already have medical & life insurance you can be fairly safe in skipping on this coverage.

Uninsured or Underinsured Motorist

This will cover medical and funeral cost for you and your family if you get hit by a hit and run driver or with someone without any or enough auto insurance. A definite because of the number of people driving without insurance. It will make up for anything your medical insurance does not cover.

Collision and Comprehensive

Collision will reimburse you for the cost of replacing or fixing your car after an accident. Comprehensive will reimburse you for the cost of replacing or fixing your car in the event of a natural disaster, theft, or vandalism. It's best to choose the highest deductible available (usually $1,000) so that you can save on the amount your policy premium will cost you. In the long run, you'll only be paying more than $500 to reduce the amount of deductible you have. This is only of course, if you'll be able to pay the $1,000 deductible if you are in an accident.

If you have an older car it may make more sense to drop collision and comprehensive all together as these coverages can make up 30-40% of your total policy cost. If you get into an accident the amount of money you receive to replace or fix the car may not be more than you have already paid in insurance.

Car Rental and Roadside Assistance

The likelihood that you will need to use them are pretty slim. You'd be better off paying for them out of pocket if you do need them instead of paying a monthly fee just in case you might need them.

Unfortunately, even taking into account some of these changes, I still can't find a price that beats Unitrin and isn't shady like Esurance. It would be nice to move to a more reputable company like Geico or 21st Century but I would have to pay at least $40 more per month. In the end I just don't feel it is worth it. I guess I'll have to keep crossing my fingers and hope I don't get into an accident. And it gives me a reason to look forward to getting older...maybe when I turn 25 I'll start getting lower auto insurance rates!