More drop collision and theft coverage as economy takes toll.
Hundreds of thousands of motorists in financially beleaguered Michigan have downgraded their auto insurance — a money-saving gamble that could leave them without a ride if their vehicle is stolen or smacked by another car.
The latest available data shows that nearly 300,000 comprehensive policies were dropped from 2000 to 2004 — a trend that has continued, some large insurers say. Comprehensive covers vehicle theft — Detroit has nearly 100 reports a day — and deer-vehicle accidents, a growing suburban problem.
Another 28,500 got rid of their collision policy, which covers damage from another vehicle, while many more are reducing coverage or raising deductibles to save money, agents say. Collision and comprehensive policies are not mandated by law, although most bank loans require both in addition to liability — which every vehicle owner must have. When drivers scale back on insurance to save money, other drivers are not affected. But those who reduce coverage could face sometimes costly repairs.
Pooja Gupta, a 29-year-old medical researcher from Bloomfield Hills, recently hit a deer in Rochester Hills that cost her several hundred dollars in repairs to her 1997 Honda Accord’s windshield and front end.
The expense has convinced her to add comprehensive coverage.
“It wasn’t too bad, but it’s something I didn’t want and it’s an unneeded and unnecessary problem for me,” Gupta said.
People face tough choices
In a state with the nation’s second-highest unemployment rate — 6.5 percent — and sky-high auto insurance costs, some people are left choosing between keeping the electricity on and paying for full coverage, said St. Clair Lake, an Allstate agent in Detroit.
“I see it very regularly and it’s very disturbing,” Lake said. “But you also have to understand why it’s happening.”
Michigan’s average yearly premium for full coverage in 2004 was $1,128 — the ninth-highest in the nation, according to a report from the National Association of Insurance Commissioners, which culls the most current complete data from insurance groups and government sources. Michigan’s costs have jumped 34 percent since 2000, compared to a nationwide increase of 22 percent.
And Detroit is the most expensive U.S. city in which to insure a vehicle, with an average yearly premium of $5,894, according to Wisconsin-based Runzheimer International. Philadelphia is a distant second, at $4,440.
One reason for the soaring prices is the high rate of vehicle thefts in Detroit — the city ranked 16th nationally in 2006 with 35,106, according to the National Insurance Crime Bureau. But the main factor is the cost of the state’s “no-fault” insurance structure, officials said.
No-fault, or liability, pays your medical bills and any wages if you can’t work, as well as damage to others’ property such as fences and buildings, regardless of who caused the accident. It does not pay for repairs to your car or the other driver’s car. The average liability premium is $488 a year, according to the insurers’ association data.
Lori Conarton, of the Lansing-based Insurance Institute of Michigan, said Michigan is the only state with no cap on medical coverage. “Those benefits are the best in the country,” she said.
But paying for that coverage, and adding collision and comprehensive on top of it, is overwhelming many residents, agents say. The dilemma comes when the car loan is paid off, typically after four years.
According to the association, the number of comprehensive policies in Michigan dropped 6 percent from 2000 to 2004. That bucks a 7 percent increase in comprehensive policies nationwide.
Couple keep full coverage
Although Joan and Bernie Belisle of Wyandotte raised the deductible on their Honda Accord and Odyssey from $250 to $500 to save money, they’d never consider dropping their full coverage, Joan said. The retired nurse said she’s had vehicles rear-ended, stolen and smashed by a cement truck, incidents that would not be covered without collision and comprehensive coverage.
“I’ve had a lot of weird things happen to my cars,” said Joan, 61.
Nancy Cain of AAA Michigan, a motor club and auto insurer, said more people are raising their deductibles on collision and comprehensive from $250 to $500 or even $1,000. The higher the deductible, the lower the premium.
State Farm has seen a trend of fewer comprehensive policies in Michigan since about 2002, said spokeswoman Angie Rinock. Allstate spokeswoman Lisa Finney said the company “is aware of an increase in Michigan consumers who are opting to remove comprehensive coverage from their auto insurance policies.”
The average comprehensive policy is $175 a year. But dropping it means your vehicle is not covered if you hit a deer, a fact that surprises many, Conarton said, adding that the average claim on a deer-vehicle crash is about $2,000.
Deer-vehicle crashes increased nearly 4 percent in Michigan last year, to 60,875, according to the Michigan State Police. Oakland County saw a 10 percent jump and now has the third-most deer-vehicle crashes in the state, with 1,866.
Lake said many customers are also dropping collision coverage or downgrading it from the most expensive “broad form,” which covers car repairs and only requires a deductible if police determine the accident is your fault.
Lake suggests motorists at least keep a limited collision policy, which covers most repair costs if the accident is not your fault. It won’t pay up if you’re at fault. Dropping from broad to limited coverage can save you about $700 a year, Lake said.
The average collision premium is $465 a year. But scrapping collision or comprehensive can be a risky move, several agents said.
“The analogy I like to use is that you’re playing high-stakes poker,” Lake said. “You’re betting your car won’t get hit and won’t get stolen.”
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