Are you getting good value for auto insurance? 1

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The last post in the Hack Your Auto Insurance series used hundreds of sample price quotes to show that your choice of insurance provider, your driving history, and even your neighborhood can have a big impact on your insurance rate. Shop around. You could save hundreds of dollars a year.

Today’s post will help you understand the various types of policies offered by auto insurance carriers, including the cost of coverage and what happens if you don’t have it.

California requires drivers to carry bodily injury liability insurance covering at least $15,000 per person and $30,000 per accident. If the authorities determine that you’re at fault in a collision, your insurance can cover medical costs for anyone who’s been injured.

The state also requires at least $5,000 of property liability insurance. If you’re the at-fault driver, your insurance can cover damage to other vehicles or other property affected by a collision.

Collision insurance and comprehensive insurance are separate products that insurance carriers offer for an additional price. Collision insurance covers damage to your own vehicle. Comprehensive insurance covers your own vehicle in the event of fire, theft, or vandalism—something other than a collision.

Other insurance products include uninsured motorist coverage, underinsured motorist coverage, and medical expense coverage. These optional policies cover you if you’re involved in a collision and the at-fault driver has no insurance or too little insurance, or if your medical payments exceed the driver’s insurance coverage limits.

National auto insurance trends

We all know how important mobility is in the US, especially in communities where options like public transportation and ridesharing are limited. If you rely on a car as your primary mode of transportation, pay close attention to insurance costs. Insurance represents a big part of your overall cost to own and operate a car, and the cost is going up.

According to a AAA report called Your Driving Costs, published last year, insurance for the average vehicle owner is the second-biggest operating expense after fuel, and the third-biggest expense overall.

Annual costs to own and operate a private vehicle

Depreciation $3,759 44%
Fuel $1,268 15%
Insurance $1,222 14%
Maintenance $792 9%
License, taxes & registration $687 8%
Finance charges $683 8%
Tires $150 2%
Total $8,561

Based on the blended average of costs for small, medium, and large sedans. Assumes driver travels 15,000 miles per year.

Source: AAA

Also, auto insurance costs are climbing. According to the National Association of Insurance Commissioners’ (NAIC) latest Auto Insurance Database Report, published in January, auto insurance has been rising faster than the cost of living as measured by the Consumer Price Index. This means a larger part of the typical household budget is going to auto insurance than it used to.

California trends

The average insurance expenditure in California is $815, according to the latest figures in the NAIC report. The California rate is about 6 percent lower than the countrywide average, but it has been increasing steadily for years. Rising costs are contributing to a historic shift away from vehicle ownership altogether, not only in California but nationwide. According to a University of Michigan transportation study, only 69 percent of 19-year-olds had a driver’s license in 2014, compared with almost 90 percent in 1983. Young drivers are reaching the conclusion that the cost of vehicle ownership, including insurance costs, outweigh the benefits.

Below, we’ll weigh the costs and benefits for various types of insurance.

Liability insurance

When you carry liability insurance, you have some level of protection in case you are the at-fault driver in an auto collision that causes bodily injury or property damage.

Bodily injury and property coverage

The average premium for liability insurance in California is $482, according to the 2017 NAIC report. (All data that you’ll see in the rest of this post come from the 2017 NAIC report.) That’s 9 percent less than the countrywide average. But consider this: Less than 1 percent of policyholders file a claim for bodily injury coverage each year, and less than 4 percent of policyholders file a claim for property coverage each year. The average bodily injury claim is about $17,000. The average property damage claim is about $3,500.

In a hundred years, you’d expect to file one bodily injury claim and four property claims for a total of $31,000. (Nobody will be driving for 100 years, but the hundred-year cost helps you arrive at an annual cost. Just calculate the hundred-year cost and divide by 100.) That means good value for liability insurance would cost about $310 a year. Most Californians pay much more.

Physical damage insurance, other optional plans

Physical damage insurance refers to policies that protect your own vehicle. These include collision coverage and comprehensive coverage.

Collision coverage

The average premium for collision insurance in California is $374. That’s about 18 percent more than the countrywide average. About 6 percent of policyholders file a claim for collision coverage each year, and the average claim is $3,350.

The hundred-year cost for these six collision claims would be $20,100. So if you set aside about $201 in a savings account each year, you might not need collision coverage.

Comprehensive coverage

Here’s the cost of comprehensive insurance by the numbers.

Average premium for comprehensive insurance in California: $99.

HomeAverage premium countrywide: $143

Policyholders with a claim: < 3 percent

Cost of average claim: $1,671

Hundred-year cost: $5,000

Annual self-insurance cost: $50

Value of comprehensive coverage: low

Uninsured / underinsured motorist coverage

You can get separate uninsured and underinsured motorist coverage for collisions causing bodily injury or property damage. The average premium for incidents of bodily injury is $34. For property damage, it’s $1.63. Even so, the value isn’t great. Here’s why.

Fewer than two-tenths a percent of policyholders file a claim each year. That means you can expect to file one claim over a 500-year period. Set aside about 7 cents a year, and you might be able to get by without uninsured motorist coverage.

Medical expense coverage

The average premium for medical expense coverage in California is $27. Less than 1 percent of policyholders file a claim each year, and the average claim is a little under $3,000.

The hundred-year cost for one claim would be $3,000, so you’d have to set aside $30 a year. In this case, the insurance company is providing good value.


If you think you’re spending too much on auto insurance, look at your current rate and get a few price quotes from competing providers in your area. Be sure to ask about available discounts, and make sure you’re not buying more insurance coverage than you need. Sometimes peace of mind is worth spending a little extra, but an informed consumer will always make better choices about spending money.

If you’ve compared price quotes and still think you’re spending more on insurance than you ought to, look into usage-based insurance, a type of coverage that sets insurance costs according to your driving habits, putting more control in the hands of the driver. According to NAIC, about 6 percent of US drivers have usage-based insurance. Many don’t know about it. But when offered usage-based insurance, half of US drivers make the switch.


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Andy Gillin

Andy Gillin received his Bachelor’s Degree from the University of California at Berkeley and his law degree from the University of Chicago. He is the managing partner of GJEL Accident Attorneys and has written and lectured in the field of plaintiffs’ personal injury law for numerous organizations. Andy is a highly recognized wrongful death lawyer in California.