Effects of Changing Coverages on Premiums

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%


Effects of Changing Personal Insurance Details on Premiums

Using Kanetix, an auto insurance comparison site, I decided to play around with the various driver characteristics to see what effect each one would have on my premiums. I chose Kanetix because it’ll give you multiple quotes and it had the easiest interface for you to change details about yourself, your plan, your vehicles (I’ve never used it to actually get insurance). This little unscientific study won’t tell you how much to expect your insurance premiums to go up if you do something bad but it should give you a relative idea of how “bad” certain offenses are with respect to premiums. As expected, insurance is all about dollars and percentages and the results, while unscientific, are pretty consistent with generally accepted thoughts.

(Click to continue reading…)


“Historical” Online Savings Interest Rate Comparison

Want to see an interesting comparison of the interest rates of HSBC, ING Direct, Virtual Bank, Emigrant Direct and the Federal Funds rate in a table and easy to understand chart? Me too. That’s why I stumbled onto a thread at Fatwallet Finance documenting the interest rates of all those savings accounts (there are a couple more that I omitted) I thought a graphical representation would be an interesting thing to see. Historical is in quotes because this only goes back to January ’05 so it’s not exactly History Channel type depth but I think it’ll suffice.

(Click to continue reading…)

 Insurance, Personal Finance 

Auto Insurance 25 Year Milestone Analysis Revised

We’ve all heard that the twenty-five year old milestone is the biggest deal in auto insurance. On that day you magically become safer and actuaries have tables and statistics proving this fact, otherwise auto insurance companies wouldn’t be giving you a discount. I invite you to review two posts in which I detail my insurance prices a month before I turned 25 and the insurance prices a month after I turned 25. Essentially I concluded that you can expect somewhere in the realm of ten percent until I opened up my next Geico bill. My six month fee fell even more from $377.10 to $348.30 (7.6%) for a total fall of over 20%.

I didn’t comparison shop with other insurance companies because I felt they may give me the same results, no reason why they wouldn’t, and because it would take a while to compile the data.

Company Coverage Pre-25 Price Post-25 Price + 3 Months % Diff
Geico No C/C $436.60 $348.30 -20.2%
Full $959.50 $745.50 -22.3%

20% drop in auto insurance for turning twenty five (and waiting two months) would fall into the category of “big drop” in my book.


Auto Insurance & The 25 Milestone

About a month ago I quoted auto insurance rates to get a pre-25 year old rate so that I could re-quote and get a post-25 year old rate. Well, the time now has come for me to re-quote and see what the “big 25 year old milestone auto insurance rate quote drop” people always talk about really amounts to…

Given my current plan (Liability only) where I paid $436.60 for six months, my post 25 year old rate dropped -$59.50 to a mere $377.10. Looking back, carrying $1000 deductibles on collision and comprehensive coverage would cost me $959.50 for six months… now, a mere one month later, it only costs me $808.50 (-$151).

As for Progressive, for identical coverage it actually costs more now, $497 – an increase of $49! For full coverage? $816.00, a jump of $79! As for “the rates of other top companies” – this time four companies (one of them Progressive) were listed, including our old friend State Farm Mutual Automobile Insurance Company. Two newcomers to the show are Erie Insurance Exchange and Erie Insurance Company (same company really but two quotes).

For my coverage, the Erie brothers show a rates of $205 to $232 and $230 to $269 (based on credit score) which is ridiculously cheap auto insurance. State Farm came back with a quote of $412 – still more expensive than Geico. For full coverage, State Farm would charge $750 (cheaper than all comers including Geico), and the Erie’s would charge at least $350 and $380 per six months.

(Incidentally, Erie Insurance Exchange is “better” and only accepts folks with at most one violation, all others fall to the Erie Insurance Company, hence the price differences)

To recap, in table form:

Company Coverage Pre-25 Price Post-25 Price % Diff
Geico No C/C $436.60 $377.10 -13.6%
Full $959.50 $808.50 -15.7%
Progressive No C/C $448 $497 +10.9%
Full $737.00 $816 +10.7%
State Farm Full $1,162 $750 -35.5%

So what’s the moral? You can probably expect a rate drop of at least 10% whenever you turn twenty-five. Is it a huge drop? Depends on your perspective but there is definitely a noticeable drop. I think my quoting from Progressive itself may have been flawed either this time or the first time because there is now way the price should’ve increased when all others dropped. What’s interesting is the appearance of Erie Insurance – as if to say they only trust drivers over twenty-five…

What other major auto insurance milestones have you reached and seen a big drop in insurance? I’m curious to see how significant each of these commonly assumed milestones truly are.


Car Insurance – Milestone at Age 25

I’m reaching what is commonly considered the biggest milestone in a driver’s life, turning twenty five years ago. Aging from 24 years 11 months and thirty days to 25 years will probably save you the most amount of money with the least amount of effort in your entire life (getting married helps, but that’ll win you the award for least amount of money with the most amount of effort :)) because it moves you from a most risky class to a less risky class of driver. I’ll be turning twenty five in August (and I’ll be moving) so I wanted to get a benchmark of auto insurance quotes prior to turning twenty five and then comparing them later on. I currently am insured by Geico but I’ll be using Progressive’s quote system for my research.

Current Insurer: GEICO
Vehicle: 2003 Toyota Celica
Premium per 6 Months: $436.60

COMPREHENSIVE Not currently carried
COLLISION Not currently carried
EMERGENCY ROAD SERVICE Not currently carried
RENTAL REIMBURSEMENT Not currently carried

You may notice I carry zero comprehensive and collision insurance (yes, risky) but if I carried $1000 deductibles on both coverage’s, my 6 month premium would be $959.50 (more than double!). I have every possible insurance discount available from Geico (5 Year Good Driver, affiliate organization discount, safety restraint discount, etc). I also have homeowner’s insurance with Geico (Traveler’s really) but there is no discount on my auto insurance policy because of it, only my homeowner’s discount.

What was Progressive’s result for the exact same coverage? $448. If you were to add the $1000 deductible comprehensive and collision insurance? $737.00. So it would be cheaper to go with Progressive if I wanted to tack on the extra coverage’s but I don’t really feel they are worth it. I’m currently being “paid” $1,000 a year to insure myself.

Here is where the power of Progressive comes in, they will show you the rates of their competitors. Unfortunately, the only other rate they told me about was from State Farm Mutual Automobile Company and that was $1,162. Unfortunately, I wish they gave me more information than that… no mention of AllState or Nationwide quotes.

Right now I’m sticking with Geico, check back in a month to see how the rates compare with current rates.

Update 7/11/05: When I was logging into the American Express website I saw that they were offering auto insurance so I submitted some information to them to see what they would quote me. For equal coverage to my current coverage (no collision/comprehensive) would be $445 and for “full” coverage, it would cost $844. It stands to reason that there is a lot of wiggle room with regard to comprehensive and collision coverage cost, but not much with the base coverages. Any thoughts?

Click here for the results of my insurance inquiries after I turned 25 years old.

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