Auto insurance is a necessary evil, even if you are a safe driver.
Speaking of safe drivers, I love all the stats about how confident we are behind the wheel – you know – the ones where 80% of drivers think they are above average drivers, or 40% of drivers think they are the best driver they know.
There is a name for this type of behavior called the Dunning-Kruger effect, but that’s another topic for another day. Auto insurance is so much fun to talk about that I have been sidetracked into to speaking about cognitive biases.
To try and stay on track, be sure to review the following 5 items when renewing your auto insurance policies.
1) Know your definitions
- Comprehensive: This covers damages NOT caused by another vehicle or damage to someone else’s property. Think vandalism, fire, hail, or animals.
- Property Damage Liability: Coverage if you crash into someone’s fence, house, mailbox.
- Collision: Car on car contact coverage.
- Bodily injury: Coverage if you injure someone else in an accident where you are at fault.
- Uninsured Motorist Bodily Injury: Coverage for you and your passengers if you are NOT at-fault and the at-fault driver doesn’t have insurance.
- Personal Injury Protection: Coverage for you and your passengers regardless of fault.
2) Know your exposure:
In simple terms, wrecks happen and the amount of coverage you need depends on your level of assets. The goal is to have coverage at/around your net worth (assets – liabilities) for bodily injury, uninsured bodily injury, and property damage liability.
3) Have multiple cars?
Consider “stacking”: This can be an efficient way to increase your uninsured motorist coverage. It multiplies your coverage limit by the number of vehicles on the policy (thus “stacked”). So, if you have a $100k per person/$200k per accident and two vehicles, your stacked coverage would be $200k/$400k.
4) Check for all discounts:
Did you move recently? Does your home now have a garage, or do you live in a gated community? Are you working from home and driving less? Keep these items in mind and be sure to capture any cost savings here. Same goes for using an app to track your driving. If you think you are an above average driver, put it to the test!
5) Always remember the reason you have the coverage:
Insurance is one of the things you pay for that you never want to use. Who wants to get in a car accident? At the end of the day, insurance is a transfer of risk, and you want to make sure the counterparty (aka insurance company) is reputable enough to carry the burden of the risk you are putting on their shoulders and that your coverage is adequate. In short – picking the lowest cost provider that has a name you are not familiar with might not be a prudent choice.
Want to review your auto policy? Schedule a meeting with us!
Disclosure:
This material has been prepared for informational purposes only and should not be used as investment, tax, legal or accounting advice. All investing involves risk. Past performance is no guarantee of future results. Diversification does not ensure a profit or guarantee against a loss. You should consult your own tax, legal and accounting advisors.
Frankly Finances is a registered investment advisor with the state of Florida and only transacts business in states where it is properly registered or is excluded or exempted from registration requirements. Registration does not imply a certain level of skill or training. Please refer to our Form ADV Part 2A disclosure brochure for additional information regarding the qualifications and business practices of Frankly Finances.
