How often do we complain about the cost of our auto insurance? It seems that there is always an advertisement on TV featuring a reptile, a cowboy or just a "happy family" sharing how their new car insurance is the cheapest.

Since when does it make sense to buy something simply because it is the least expensive? Why not look into what you are actually buying? If you are buying car insurance on price, then at least make sure the benefits are the same. What I have seen recently is an increase in the amount of policies issued by small, medium and large insurance companies which have lowered the amount of coverage issued for Uninsured Motorist (or Underinsured). The problem is this: If the Uninsured Motorist coverage is lower than the amounts for Bodily Injury, then the uninsured driver that hits you receives a larger payment for pain and suffering than you do, even though you are the one making the payments.

"The problem is this: If the Uninsured Motorist coverage is lower than the amounts for Bodily Injury, then the uninsured driver who hits you receives a larger payment for pain and suffering than you do."

I know this may not make sense, so please let me explain. A new client had Bodily Injury limits of 100/300. That means if he hit another vehicle and was at fault, his insurance company would pay the other driver up to $100,000 per person for a total of no more than $300,000 for the entire accident. This covers loss of wages, pain and suffering, etc. However, he also had Uninsured Motorist coverage of 15/30. Now that means if he was hit by an uninsured driver, he would receive up to $15,000 for per person in his vehicle, for a total of $30,000 for the incident. This would cover his loss of wages, medical bills and pain and suffering.

This might not seem so bad on its surface, but what about accidents where the fault is split 50/50? He may get to collect on half of your Bodily Injury portion of your insurance, up to 50 percent (that's $50,000). Wait a minute, you only had a $15,000 limit on your uninsured motorist. That means you may receive up to $7,500. You obeyed the law, paid the premiums, and only have the potential to receive $7,500 at the end of the day. The uninsured driver breaks the law and he can recieve as much as $50,000!

Something doesn't seem quite right here but there is a solution. Start by checking your current policy. See if the coverage is the same and if they are enough. You may be underinsured yourself. Then, check with your agent or advisor to see if he/she can compare with many different companies to get you the lowest rate.

Always remember to shop and compare for new insurance when you add a teenage driver, move to a new home, add a new vehicle or sell an old one. This may seem obvious, but what about when a parent or grandparent has moved out? When another adult lives in your home, they should be either added or excluded from your policy. This could impact your policy cost.

Some agents may be reluctant to give you this quote unless you push, as their company may not be competitive with the new limits.


Arif M. Halaby is President and CEO of Total Financial Solutions, Inc and hosts two financial radio shows on Tues and Thurs from 1-2pm on KHTS AM 1220.