Effects of Changing Coverages on Premiums

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Last week I played around with my personal details on Kanetix and we learned how the various characteristics affected the premiums you could expect to pay on auto insurance. Today, I played with the numbers some more, this time changing the various coverages and they behaved just as you’d expect.

One thing that was interesting was that when I played this game at the end of August, the companies listed weren’t the same ones that were listed today. The four companies I saw most often were Unitrin Direct, Travelers, MetLife Auto, and Electric Insurance Company (Drive Insurance from Progressive made an appearance too).

  • When I took away the towing and/or rental coverage, the quotes from some companies didn’t change. That’s not to say that the coverage is free but when they’re trying to capture business, the $3 (towing) or $5 (rental) is small potatoes.
  • The values in the row for bodily injury/property damage coverage for $25k/$50k/$25k is not a typo, it really only differed by a quarter! Also, $20k/$40k/$15k was also not that big. I suspect it’s because many states have minimums on how much insurance you must carry and these values are far lower than the ones at least in Maryland.
  • What’s interesting is the curve that the prices take when plotted against the coverages. For example, the increase going from a $1000 deductible to a $500 deductible was only $66.88 per six months. If you go from $1000 to $250 you’re talking a price difference of $125.00. I expected the the curve would be steeper.

As a reminder, here were the baseline characteristics I input:

Benchmark – One car with one driver garaged in the zip code where I live in what can be classified as suburbia. I’m male, 26, single, own a home, Master degree, engineer, with current employer for 3 years, licensed since 16, never suspended or revoked, not been ordered to carry an SR-22, 0 violations, residential insurance policy, no defensive driving-type course. I own my 2003 Toyota Celica, I drive it to and from work (~10 miles, 5 days), putting on approximately 12k miles/yr.

The coverages I selected are $100k/$300k/$100k for Bodily Injury and Property Damage and the same for Uninsured/Underinsured Motorists and UM/UIM Property Damage. Personal Injury Protection-Medical (and Funeral) Expenses set at $2500 Basic (everyone covered). $1000 deductible on both Comprehensive and Collision, yes to Towing and Rental coverages.

Benchmark Rates: 4 results, Average rate of $617.25. The quote at the end of August was for $628.70, but I’m pretty sure the difference was because of the different companies and because I probably entered in some of my information different (not every question is covered in the benchmark information I listed above). Regardless, it shouldn’t affect the analysis, you just can’t compare the numbers today with the ones in August (not that you would anyway).

Rental and Towing Service Coverages:

Changed Average
$ Diff % Diff
No Rental $607.25 -$10.00 -1.62%
No Towing $613.75 -$3.50 -0.56%

Collision and Comprehensive (C/C) Coverage: (baseline $1000k deductible)
Collision and Comprehensive Coverage are usually connected, the deductible you select on one is the what you will use for the other.

Changed Average
$ Diff % Diff
$500 Deductible C/C $684.13 +$66.88 +10.83%
$250 Deductible C/C $742.25 +$125.00 +20.25%
$100 Deductible C/C $794.25 +$177.00 +28.67%
No C/C Coverage ** $364.50 -$252.75 -40.94%

** If you don’t elect collision or comprehensive insurance, you can’t have rental or towing coverage. The value in the table wasn’t changed to reflect the $8 difference, but if it were included then the price for coverage would be $372.50, a drop of 39.65%.

Bodily Injury, Property Damage Coverage (plus Uninsured/Underinsured) (baseline $100k/$300k/$100k)
Your uninsured/underinsured motorist coverage can’t exceed your regular bodily injury and property damage coverage so the two match in both instances below. So, if it says $250k/$500k/$100k then you get $250,000 personal injury, $500,000 accident coverage, and $100,000 property damage coverage. Normally, you can elect to have lower uninsured/underinsured but we didn’t in our analysis.

Changed Average
$ Diff % Diff
$250k/$500k/$100k $646.38 +$29.13 +4.71%
$100k/$300k/$50k $613.13 -$4.12 -0.67%
$50k/$100k/$50k $594.88 -$22.37 -3.62%
$25k/$50k/$25k $617.50 +$0.25 negligible
$20k/$40k/$15k $607.23 -$10.02 -1.65%

Personal Injury Protection-Medical (and Funeral) Expenses – includes reimbursement for Lost Wages
This is called PIP, or no-fault coverage, and legally required in Maryland. The baseline had it set at $2500 Basic which covers everyone, the one listed in the table below is the Limited version which covers only persons under 16.

Changed Average
$ Diff % Diff
Limited $599.50 -$17.75 -2.87%
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