I was recently invited by the kind folks at the Oxbow Eco-Center in Florida to give a talk on Your Money or Your Life on April 4. My husband and I decided it would be a great opportunity for a family vacation with our two daughters, Elli (6) and Bella (3). Flights were too expensive, so we resolved to drive our 2001 Mazda 626. The only problem is that our car now has 93,000 miles on it which made me think that we needed a back-up plan in case the car died mid-trip. I decided to call my insurance agent to confirm the details of our road assistance policy and wanted to share two aspects of the conversation:
1) We pay $4.40 per year for our roadside assistance policy which includes towing to any repair shop within a reasonable distance and all sorts of other advantages (such as battery and fuel service or help with a flat tire). Compare that with AAA’s least-expensive “basic” policy which costs $63.75 per year and only covers a tow within three miles. It’s important to note that AAA is “free” whereas my car insurance requires you to pay for service up front and then get reimbursed. But if you have been following the Your Money or Your Life nine-step program, you have plenty of cash stored up for emergencies and can easily float this cost.
2) I then checked in about our liability and property damage coverage. When asked, the official policy of my car insurance company is to tell people that they must purchase coverage of at least $25,000/$50,000 for bodily injury and $25,000 for property damage. Most insurance agents won’t tell you this, but the state minimum is often lower and you can sign a waiver to qualify for the cheaper rate. In Maryland, for example, the minimum coverage for property damage is $15,000. But if you ask me, it’s important to buy the smartest policy over the long-term — not just the cheapest one in the moment. Consider this: if you hit a late-model SUV, or read-end a car which then rear-ends another, you could be looking at a property damage bill that far exceeds the typical minimum coverage cost. I have therefore personally opted to carry $100,000 per person/$300,000 total and $100,000 property damage and do my best to save money on my bill in other ways, such as keeping my car and rental insurance policies with the same company and remaining accident-free (savings of $44 and $122 each year, respectively).
As always, do your homework and know what works best for your unique situation. If you need help understanding your policy, send me an email at firstname.lastname@example.org and I’ll share the name and contact information for my agent whom I’ve used for nearly ten years and trust completely.