This year, you probably won’t be in an auto accident that leaves you or your kids seriously injured, you probably won’t be sued for negligence in an auto accident and your house probably won’t burn down. Given these probabilities, it’s reasonable to consider buying less insurance and taking a chance on paying more out of pocket in a claim situation in exchange for decreased insurance costs.
Raising deductibles is the typical place to start and the easiest because it doesn’t change the insurance coverages and limits you currently have. And most of us could afford to pay the higher deductible in a claim situation. Other things to consider include not having collision coverage on an older auto. Financing another auto wouldn’t likely create a life-long financial impact for you. Towing coverage is also a candidate for an expense you could cover yourself. Some of us have gotten used to insuring things that would be inconvenient to pay for ourselves, but we could pay for if we had to.
Be careful about putting yourself in a situation where you couldn’t afford the extra out of pocket costs, which is what could happen if you lower liability coverage or cancel your umbrella liability policy. Liability coverage, referred to as “lawsuit protection” is what provides financial protection if you get sued. Dollar for dollar, liability protection is perhaps the least expensive insurance to buy. Although the probability of being sued is low (it’s lower than the probability of wrecking your auto) the impact of being sued can have a lifelong negative impact on your finances and quality of life.
The other big risk that can be underestimated is the financial impact of medical costs from a serious auto accident. Especially if you have children. Our state’s Unlimited Personal Injury Protection (PIP) is the best insurance for auto accident medical costs in the entire country. Personal health plans don’t address these costs nearly as well as PIP! Giving up Unlimited PIP is riskier (in my opinion) than giving up your umbrella policy.
Please don’t make these decisions based on a fireside chat with your brother-in-law who was bragging about how much he saved by lowering his insurance coverage. Have a good conversation with your licensed insurance agent and make good decisions!
