Last year, ten days before his 21st birthday, Bradley
Dreyer was skateboarding against traffic alongside a row of parked cars
in Sonoma, Calif. when a drunk, uninsured motorcyclist crossed the
double yellow line and hit him from behind. Dreyer, who had been
studying to be an ER nurse, sustained a severe brain injury.
With the help of lawyer Guy Kornblum, Dreyer’s
parents got their own insurer, State Farm, to pay out both the full
$100,000 of uninsured motorist coverage on their auto policy and their
$1 million in umbrella coverage. But given Bradley’s continuing needs,
they now wish they’d carried even more coverage. “We have to face
difficult decisions,” says Bradley’s mom, Mary Kate Dreyer. “We don’t
want to rob him of treatment now, but we need to preserve his estate for
the future, what could be lifetime care.”
Pull out your policy now. There may be smart ways you
can cut your premiums, such as raising your deductibles, dropping
collision insurance on an older car, demanding special discounts or
consolidating your policies with one insurer. But you might also need to
pay for more protection from uninsured drivers and catastrophic
injuries, warns Kornblum, who’s dealt with the fallout from severe auto
accidents for 44 years.
1. Raise your deductibles
The easiest way to save is by increasing both the
collision and comprehensive (damage due to vandalism, fire, flood)
deductibles for damage to your auto. As a practical matter, if you have a
$500 deductible and $700 of damage to your car, would you even put in a
claim? Many folks wouldn’t for fear it would raise their rates. That’s
one reason it makes more sense to have a $1,000 deductible, says Mark
McConnell, a claims officer in Roanoke, Va. with ACE Private Risk
Services. Consider “full glass” coverage if you’re worried about a ding
to your windshield; it’s cheaper than a lower comprehensive deductible.
2. Get uninsured motorist coverage
This protects you and family members living with you
should you be hit by a negligent driver who is uninsured or
“underinsured,” even if you’re walking, bicycling or skateboarding at
the time. According to the Insurance Research Council, at least 16% of
drivers, and about a quarter of those in New Mexico, Mississippi,
Alabama, Oklahoma and Florida, are uninsured. Underinsured? In
California an “insured” motorist in the assigned risk pool can carry as
little as $15,000 in bodily injury coverage per person and $30,000 per
accident.
In many states uninsured motorist protection isn’t
mandatory coverage, warns Diane Giles, a vice president at Marsh, a
broker representing several high-end insurance carriers. That means you
could have a policy without it, particularly if you shopped on price.
The amount of uninsured/underinsured motorist coverage you carry should
match your auto policy’s primary liability limits–meaning the maximum
amount your insurer will pay the other guy if you cause an accident.
Typically, that amount is $100,000 per individual and $300,000 per
accident on a primary auto policy. That limit, in turn, should be where
your umbrella kicks in. (Some umbrellas require your auto policy to
cover as much as $500,000 per accident. Make sure there’s no gap in
coverage between the two policies.)
3. Carry a big umbrella
An umbrella, or “excess,” policy kicks in where your
liability coverage for your auto and home ends and is a necessity if you
have any assets to protect. A $1 million umbrella is common, but $2
million is more realistic these days. “The more assets a person has, the
bigger target they are” for lawsuits, says ACE’s McConnell. Recent jury
verdict data show that 14% of personal injury liability cases result in
awards in excess of $1 million, he notes. If you have teenagers
driving, consider increasing your umbrella. The second million is
cheaper than the first.
Warning: Although uninsured motorist coverage was
included in the Dreyers’ old umbrella policy, many insurers now either
don’t offer it or charge extra for it. Expect to pay $125 to $250 a year
extra for $1 million of such coverage. “You need it,” insists Kornblum,
who personally carries a $10 million
Chubb
umbrella with $5 million in uninsured/underinsured motorist coverage.
You can often save on an umbrella by buying it
through the same insurer you get your auto policy from; go to an
independent agent and ask for combined quotes from several carriers. Be
sure to compare what each umbrella covers.
4. Hunt out obscure discounts
Certain discounts–say, for a good driving record–are
usually applied automatically. But other credits require action on your
part. For example, as you age, taking a defensive driving course (even
one online) could earn you a credit. If you start telecommuting two days
a week, call your insurer and ask for a discount. You may also be able
to save by buying through a workplace discount program. If you have a
teen driver, ask for the good student discount. (If the kid’s grades
aren’t high enough, make him take the bus.)
5. Don’t buy a teen his own car
It’s usually cheaper not to add a third car when
you’re adding a teen driver to a two-parent, two-car family, because
insurers rightly assume the kid will drive less without his own car.
(Even without a third car the average annual premium goes up 58% with a
teen added, according to a recent Insurance.com study.)
The exception: If you and your spouse both drive new
luxury cars with collision coverage, then you might reduce both premiums
and family conflict by getting your kid a clunker without collision
insurance. Warning: Some insurers charge as if the kid is driving the
fanciest car in the garage, even if you swear he won’t. So you may have
to sell your midlife-crisis Corvette or get a different insurer.
6. Avoid limited tort insurance
In some states, including Pennsylvania and New
Jersey, you can buy “limited tort” coverage at a discount, but be wary
of what you’re giving up. Limited tort means that, even if the other guy
is at fault, you generally cannot collect payment for your “pain and
suffering”–extra money that may be needed, say to get help around the
house if you’re laid up. “We recommend clients select full tort,” says
Giles.
7. Insure for a total wreck
If you’ve got a paid-up car older than five years or
so (depending on the model) it may make sense to drop collision and
comprehensive. That’s because if you wreck your car or it’s stolen, most
insurers will pay out the depreciated value, which could be less than
it takes to replace your older car. That’s also true if it would cost
more to repair your car than it’s worth.
On the other hand, if you have a car loan outstanding or are leasing a car, consider topping up your coverage.
MetLife
Auto & Home, for example, offers “gap” insurance, which pays
the difference between the depreciated value and the amount needed to
pay off the loan or lease, and raises comprehensive/collision costs an
average of 7%.
High-end carriers like Chubb and ACE offer the option
of setting an “agreed value” at the start of each premium year for the
amount you’ll receive if your car is totaled. It paid off for one of
Giles’ adult daughters, whose VW Jetta was destroyed in a flood. The
payout covered the remaining lease and left her with $4,000 for a
deposit on a new lease.