The Consumer COLLISION COURSE

It’s not all theirfault. We have played a large part ourselves in bringing about today’s high insurance rates. Remember when the Oldsmobile dealer on Ross Ave. would send you across the street to the Pontiac dealer with instructions to ask for a “courtesy estimate,” meaning an estimate guaranteed to be higher than the first one? And how about the mechanic who writes up a $500 estimate for $400 worth of work so you can “net out” on your $100 deductible? But it’s not all our fault either. Restoring a damaged car is expensive. It has been estimated that the replacement of every single part of a $6000 automobile would cost in excess of $25,000.

Auto insurance has become a major item in the family budget. If you have a teenager with a bad driving record, your auto insurance will rival your car payments. So it pays to shop carefully. Here’s a rundown on the essential coverages, the best buys, and the frills you can do without.

Liability. In Texas, liability insurance is described in a three-number sequence. For example, “10/20/5” coverage will pay up to $10,000 for any single bodily injury to another caused by an auto accident which is your fault. It will pay up to $20,000 for all bodily injuries which you inflict in a single incident. And it will pay $5,000 for property damage which you cause in a single wreck.

To be sure, 10/20/5 satisfies your financial responsibility obligations as imposed by Texas law, meaning that if you cause an accident, you won’t lose your driver’s license for lack of adequate insurance coverage. Unfortunately, however, if your liability coverage is limited to 10/20/5, you may find yourself in a tough spot. Civil judgments of $100,000 in wrongful death cases have become commonplace. If you’re socked with one of these, $90,000 would have to come out of your savings – or your hide.

The primary purpose of insurance is to protect you from disaster, which 10/20/5 will not do. Compared to the cost of 10/20/5 coverage, real protection is cheap. For purposes of discussion, let’s say you’re over 25 and have had no wrecks or tickets during the last three years. You drive a ’77 Olds Cutlass Supreme and carry your insurance with Allstate, which is near the median in the rate structure. 10/20/5 will cost you $96 a year. For another $16 you can double your coverage (20/40/10), and for $27 over that you can buy reasonable protection (100/300/50).

Collision. Once again the key is protection against disaster, not nuisance. To cover his ’77 Olds with good old-fashioned $50 deductible, our typical driver will have to shell out $158 a year. But he can buy $250 deductible for $82. With the lower deductible, he’s paying $76 for $200 worth of coverage, rather expensive insurance unless he’s averaging more than one wreck a year. Bear in mind that he can deduct any casualty loss over $100 on his income tax return. If he’s in the 40% bracket, that’s another $60 that he will get back from his $250 pay out, bringing his net coverage for the extra $76 premium down to $140.

Comprehensive; Fire and Theft. Comprehensive insurance covers almost anything that can happen to your car, other than a collision. Zero deductible costs $69; $100 deductible, $27. So the extra $100 coverage costs $42. As an alternative to Comprehensive, Fire and Theft insurance is available for $24 a year with no deductible. Fire and Theft provides no protection against hail, windstorm, flood, falling objects, etc. At first glance this would appear to be a likely place to depart from our resolve to insure against disasters only, especially if you have a set of wire-wheeled hubcaps that disappear every two or three months. But don’t weaken, because you can’t beat the system. If you turn in three or four hubcap claims in a single year your carrier will require you to switch to $100 deductible comprehensive the following year. Besides, living in Texas without coverage against weird weather occurrences is like going to the Pyramid Room without a credit card.

Medical Payments; Personal Injury Protection. Medical Payments insurance covers medical expenses incurred by you or by anyone riding in your car as a result of an accident, regardless of whose fault it was. $22 will buy $10,000 worth of protection. Personal Injury Protection (P. I.P.) covers this and more. In addition to medical expenses, it pays up to 80% of the injured party’s lost income while disabled, and also pays funeral expenses. Naturally it costs more. The same $22 will buy only $2,500 worth of P. I. P., while $ 10,000 worth of P. I. P. costs $41. Whichever way you go, $2,500 worth of medical expense protection is not much. But the deciding factor on either coverage should be based on a comparison with your non-auto insurance. If, for instance, your hospitalization covers you and your family, you have an overlap, and must then decide whether coverage for non-family passengers is worth the extra expense. If you’re a car pooler, it’s worth considering. Expect a hassle with your carrier if you rely solely upon your liability coverage to pay for injuries to your passengers.

Uninsured/Underinsured Motorist. If you had a wreck and it was the other guy’s fault, and he doesn’t have any insurance, or doesn’t have enough insurance to cover the damage done (bodily injury and/or property damage), this insurance will protect you. It’s relatively inexpensive – 10/20/5 costs only $8 for our prototype motorist. But it’s fraught with overlaps. The property damage coverage carries a mandatory $250 deductible. So if you have $250 deductible Collision, you’re paying twice for the same thing. Actually less than the same thing – the Uninsured Motorist insurance, unlike Collision, has a dollar maximum.

Uninsured Motorist bodily injury coverage overlaps Medical Payments and P.I.P., both of which pay off regardless of fault. So if you carry one of these, the only benefit of Uninsured Motorist coverage is in the protection afforded by high maximums, such as 100/300/50, which costs $47. The maximum Uninsured Motorist coverage which you can buy is limited by the maximum amount of your Liability coverage.

C.B. Rider. Comprehensive and Fire and Theft coverages do not pay for stolen C.B. radios. This coverage runs $15 per unit extra, for units costing $750 or less. So insurance on a $29.95 cheapie is the same as on the deluxe $749.95 model. No separate coverage is required anymore on stereo tape players. They’re covered by Comprehensive and Fire and Theft.

In the old days, everyone charged the same insurance rate, as established by the State Insurance Board, then paid “dividends” upon the expiration of the policy. Some insurers, like Farmers Insurance Group, still do this, but others now offer front end State-approved discount rates, as indicated on the accompanying chart. Generally, the front end discounts are a better deal than having to wait six months or a year to get part of your money back. The dividends can also get lost in the shuffle if you change carriers.

At least as important as the cost of insurance is the claims service. It doesn’t do much good to have low cost insurance with a carrier who won’t honor your claims. If you have an agent who is interested, available and responsive, you’d better think twice before abandoning him to save a few bucks on premiums. But if you’re not being overwhelmed with service, there are more rate shopping alternatives available today than ever before.

If you decide to shop, ask questions about the claims service. The days of sending in a couple of estimates and receiving a check by return mail are just about over. One company. GEICO. still handles claims of less than $ 150 this way, but most adjustors now insist on personally inspecting the damage. This can be handled in a variety of ways. Some comparties ask you to drive the car to a drive-in claims office. This may be a time-saver, but can be an inconvenience if you don’t happen to crash near a claims center. After inspecting the damage, the claims adjustor will usually send you a check based upon what he thinks it should cost to accomplish the repairs. This amount may or may not be sufficient to get the work done where you want to take the car. Another way is for the adjustor to visit the shop you select to inspect the car and strike a deal with the repairman. A much less common and less desirable practice is for the adjustor to select the repairman.

Find out what a company’s claims procedure is before you buy their insurance, not after you have a wreck. And if you do much traveling, check on the geographical scope of their claims activities. Dallas drive-in claims service won’t help much if you’re sideswiped by a reindeer in Fairbanks.

For more basic information on the essentials of auto and home insurance write for a free copy of A Family Guide to Property and Liability Insurance, available from the Insurance Information Institute, 1777 Fidelity Union Tower, Dallas 75201. Or call 741-5195.