Fun and Just Because

Is cheaper insurance worth the risk?

We all see the TV ads taunting us with cheaper auto insurance rates. However, you might not be getting what you think you’re paying for. In the end, we all want the same thing. I want my car fixed back to like it was prior to the accident, you want your car fixed back to the way it was and we all want our injuries paid for if any were sustained. This doesn’t include any other property damages that might have occurred during the course of the accident. (the telephone pole you need to pay to replace, a fence you took out when you hit it)

Let’s take a look at the required minimum insurance limits that the state of Pennsylvania requires: (according to

  • Bodily injury liability coverage: $15,000 per person, $30,000 per accident
  • Property damage liability coverage: $5,000
  • Uninsured motorist coverage: $15,000 per person, $30,000 per accident*
  • Underinsured motorist coverage: $15,000 per person, $30,000 per accident*
  • First party benefits medical payments: $5,000

*Note: In Pennsylvania you may request to reject the uninsured and underinsured motorist coverages.

So, looking at these limits you need to ask yourself a few questions:

  • If I’m in a very serious accident and myself, a passenger, a pedestrian or occupants in another vehicle are injured is this enough to pay the bills that will be generated? I can tell you from my experience with my own doctor or hospital visits that the answer is no. $15,000 per person/$30,000 per accident is not going to go that far.

The next limit I’d like you to take a look at is the uninsured and underinsured motorist coverages. These limits are there for when someone either is “uninsured” as it states or “underinsured” meaning that the person at fault doesn’t have enough insurance so guess what? They will look to your policy to pay one of these coverages. So this is my first area that really upsets me because as a consumer, because the hard reality is you chose to save a buck, and now the true cost is being placed on me and other motorists to pay through our insurance.

Oh, and guess what happens next? If you said that the insurance companies raise their rates, you would be correct. Insurance companies make money by keeping claim costs low and revenue above the losses. This is called a “loss ratio”. You want to have a loss ratio of less than 1.00 (the lower the better) to operate at a profit. Over time, in order to correct these figures they need to increase not just your individual rates but the rates overall. Be mad at the insurance company if you want, but it’s part of doing business and without doing this they eventually would become insolvent (which that’s a whole other conversation). If you sell pizza and the company that you get cheese from increases the price of cheese, well you’re going to have to pass that increase onto the customer. Otherwise, you’ll operate at a loss. Right?! So while there are companies out there offering cheap coverage so you are legal seems like a brilliant idea, in the end it’s upsetting the balance of everyone paying their fair share.

Don’t get me wrong, I completely understand not everyone can afford high limits, extra coverage and the “rolls royce” of insurance policies. I just urge you to have a valuable conversation with a local, licensed insurance agent about your situation, concerns and a price you can afford. They may have options they can offer to you or suggestions that could help with the cost. Your local insurance agent is on your side to make sure that you are covered and educate you properly.

I am NOT a licensed insurance agent any longer, but have worked in insurance for over 26 plus years. I’m only speaking as one consumer to another to please educate yourself. If you wait to learn after an accident or incident, it could be too late and end up costing you more than thought. People don’t understand this, then get upset with the insurance companies for “not paying”. Unfortunately they are paying based on the coverage you decided to pay for at the time. Who’s fault is that? Educate yourselves and talk to your local insurance agent. If you don’t have one, get one…


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