Drivers See Savings in Not Purchasing Collision and Comprehensive Insurance

According to a recent report from Quality Planning, the number of drivers who saved money on their auto insurance in choosing not to buy collision and comprehensive insurance increased sequentially from 2006 to 2010, especially when it comes to older vehicles.

Additionally, when consumers chose to buy collision and comprehensive insurance, the study discovered major increases in the number of consumers who chose larger deductibles. By doing so, it decreases their immediate out-of-pocket auto insurance expenses, however placing them in danger of economic hardship in the event of a loss.

As the report goes on to note, between 2006 and 2010, American consumers spent on average $721 per vehicle for insurance. Over that period, the average insurance expense for new (present model year) vehicles was $913 – much larger than the average insurance expense of $528 for older vehicles (defined as a vehicle that is 10 or more years older than the year under study).

Quality planning also noted that, for new vehicles, the majority of policyholders acquired complete coverage, that is, liability, collision, and comprehensive. In very few cases, optional coverage types, namely comprehensive and collision were eliminated in order to save money. The reasoning behind this is likely due to the fact lienholders (like banks and credit unions) needed those coverage types or because new vehicle owners were more apt to be risk-averse and chose not to risk losses on their newer and costlier vehicles.

When it comes to older vehicles, Quality Planning reports that policyholders were more apt to remove relatively expensive comprehensive and collision coverage.

From the period of 2006 to 2010, the report notes that the average percentage of older vehicles minus collision or comprehensive coverage rose from 53 percent to 63 percent. For consumers, this resulted in a monthly out-of-pocket savings of $19 a month, or $229 annually.

Another option for consumers to save money on their auto insurance needs is to adjust the collision coverage deductible – the figure the policyholder has to pay out of pocket prior to the insurance policy kicking in. A less expensive deductible costs more than a larger one, leading to the study researching what effect, if any, the recession had on the amount of risk consumers would be willing to assume as it relates to auto insurance.

From 2006 to 2009, the report notes that the percentage of vehicles with small collision coverage deductibles ($0 to 100 and $101 to 250) steadily fell at an average annual rate of some 9 percent, while those vehicles with larger deductibles ($251 to 500 and $501 to 1,000) steadily grew at an average of between 1.6 and 4.9 percent per year.

The majority of the decline was in the $101 to 250 deductible bracket, with consumers transferring into larger deductible brackets. In 2010, this downward trend changed course. The percentage of vehicles with a $101 to 250 deductible actually grew a bit from its 2009 low point, offsetting a likewise decrease in the percentage of vehicles with a $501 to 1,000 deductible.

Owners of new vehicles oftentimes acquire lower deductibles in order to protect their sizable investment. While all model years continued to close toward larger deductibles, the 2010 spike in new car sales that came from the “Cash for Clunkers” program and other sales incentive programs backed by U.S. manufacturers led to the drop in the highest deductible category. The reasoning behind this was due to the fact that 2010 new vehicles represented a larger percentage of total vehicles than in prior years.

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