How much can I really save by raising my deductibles, eliminating the bells & whistles or lowering my limits of liability?

So many people nowadays are talking about ways in which they can save money.  Granted, all of our budgets can use some tightening but is insurance really a place to cut back?

Should I lower my Liability Limits?

Most suggestions start with raising your deductibles or eliminating some of the bells & whistles, i.e. rental reimbursement & towing.  A lot of you are smart enough to know that the largest cost of your auto insurance, however, is the liability premium for Bodily Injury (BI).  Therefore, to save the most $$$ you should lower this limit right?  Wrong!

Ask yourself a simple question.  Why do I pay for this car insurance?  Is it because you have to or because it makes you feel good when you go to sleep each night?  I'm guessing most of you are closer to the first reason.  Let's be honest for a minute.  If car insurance wasn't mandated by the state or if your bank didn't care to insure their collateral, how many of you would voluntarily pay for this stuff month after month?  Don't raise your hands all at once now.

But seriously, how many of you know someone that has suffered injuries as a result of a car accident?  How about very severe injuries?  How many of you have caused severe injuries to another because of your negligence?  Buying insurance is about being Financially Responsible.  Since you made the choice to get a drivers license, buy a car, and take that big chunk of metal out on the roads everyday with other drivers and pedestrians, don't you think that you should accept responsibility for your actions?  Therefore, that very first coverage on your auto policy called Bodily Injury Liability is kinda important since it is triggered when you are liable for the bodily injury of another person.

As a minimum, we recommend you carry limits of $100,000 each person and $300,000 each accident for BI.  Ideally, each of you would carry limits of $250,000 each person and $500,000 each accident and a personal liability umbrella of $1,000,000 in case the primary limits aren't enough.  Allow me to ask a ridiculous question.  Can any of you recall a law suit involving car accident injuries that settled for over $250,000?  Of course you have.  Even $250,000 can be used up in a flash.  But, you might ask, won't 2 1/2 times the coverage cost me 2 1/2 times the premium?  It doesn't work that way.  Stepping up to higher limits usually only increases the premium slightly.  Some companies even offer lower premiums as you opt for more coverage, go figure!

How about lowering or dropping UM?

Un/Underinsured Motorist coverage protects you and your passengers against bodily injury caused by an uninsured or underinsured motorist.  How many of these do you think are driving around town?  Just think of how many people just buy the state minimum required liability or $15,000/$30,000.  Chances are if you get hit it may be by one of these people.  You're on your own if your injuries exceed what their policy offers.  And good luck trying to bring a law suit against one of these drivers personally.  Look at how much UM/UIM costs you per 6 or 12 months and you will see just how valuable of coverage it is.

What about dropping Medical?

Medical Payments coverage is designed to cover medical expenses that you incur regardless of fault.  The minimum amount you can buy is $1,000 each person but most people feel better with $5K or $10K each person.  This coverage does not have deductibles, co-pays or co-insurance requirements like traditional health insurance.  It will pay for the ambulance, ER, and future doctor visits that are required for your full recovery.  Since the provider usually just bills your auto insurer you don't have to wait for settlement money.

You see that it's valuable coverage.  Many people, however, do waive this coverage since they feel they are adequately protected by other health insurance.  If you drop or lower this coverage then you will have to sign a waiver acknowledging your decision.

Bottom Line

So, if you're going to look for ways to save on your car insurance start by increasing your collision & comprehensive deductibles.  After that, consider deleting rental reimbursement & towing reimbursement coverages.  Although valuable, these coverages could be deleted without any serious consequences.  But whatever you do, don't lower your limits of liability!  Ask your agent to look around at their other companies.  This is how you are most likely to save and you may even be able to secure better coverage.