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February 4, 2013
Chris Garlasco, Owner & Managing Partner - Founders Insurance Group

Chris Garlasco, Owner & Managing Partner – Founders Insurance Group

The internet offers lots of fun facts about the cost of things back in the 1980’s. Some sites conflict with others, but here are a few fun facts that should offer the “gist” of things back then.

In the early 1980’s, a first class postage stamp was 20 cents! The average cost of a dozen eggs was 86 cents. The average annual full time salary was $16,135 and the average cost of a gallon of gas in 1984 was $1.21. The average cost of a loaf of bread in 1983 was 66 cents! The minimum requirement for auto insurance coverage was 20/40/10.

Flash forward to 2013 and we find that while everything has changed, the minimum requirement for auto insurance has remained at 20/40/10. In iStock_000003313784XSmalllaymen’s terms, that is a requirement of $20,000 of liability coverage per person with a maximum amount of coverage at $40,000. The “10” represents the amount of property damage coverage. The $10,000 of property coverage minimum was reasonable as the average cost of a new car in 1984 was about $6,600.

So, for a host of reasons, some of which I have discussed in other blog entries, the Connecticut mandatory minimum limit of auto insurance coverage has not been raised for a very long time, yet we know that this was a coverage that was designed for a bygone era. The minimum coverage amount should have gone out with acid washed jeans!

Most responsible independent insurance agents try not to offer minimum liability coverage or at the very least, offer it with some very stern warnings. The Founders Insurance Group has a very limited number of these policies on the books and we do not offer it except in the most extreme cases. We understand, like most agents, that we live in a difficult economy and occasionally the minimum is all that a customer may be able to afford, however we would not promote that coverage level in any way. Even though it satisfies the state’s outdated minimum requirement, it will do little in the event of an accident.

There is a company that has started advertising in Connecticut called “Good2Go.” It is a company that we want to bring to your attention because it speaks to a bigger problem in the auto insurance market. A problem that consumers should be on guard for as it relates to their own insurance. Good2Go advertises itself as a company that specializes in minimum limit auto policies. Many places have sold minimum limit policies for a long time, but Good2Go seems to take it to the next step by marketing minimum limits as a great thing. Good2Go even has a mascot call “MiniMo” that helps to promote the purchase of minimum limits. MiniMo states on the company’s website Pay the minimum you need to get legal. That’s me (MiniMo). While the promotion of minimum limits coverage isn’t illegal it can be a danger not only to the folks that they insure, but to all drivers. Companies like this will make the claim that a little is better than nothing, but I would question how many drivers insured by companies like this realize that they may have assets to protect beyond what the state minimum offers. I would also question if these drivers understand the potential risk that they are taking with their own financial future. I cannot say whether or not Good2Go explains these liabilities to their customers. I do know that they pride themselves in not asking too many questions as their website states, “Our team doesn’t ask for your whole life story….”

So, why should this company and companies like it be of interest to you? The fact is that minimum limit drivers are being subsidized in the form of higher rates to drivers that are carrying more realistic amounts of coverage.

Think of your car for a moment. If you happen to own a newer vehicle, the chances that the value of your vehicle is over $10,000 (the state minimum) are pretty high. So if you’re new car cost you $20,000 and one of these drivers is at fault in totaling your new car, the additional $10,000 needed will come from your policy! Your insurance company may choose to go after the “at fault, low coverage” driver to get their money back by attaching wages or other assets of that driver, but that may be fruitless. As a result, your insurance company in its rate making process must account for the number of uninsured and underinsured drivers in the state.

The bottom line is this; a portion of your insurance premium is being paid to subsidize other drivers that are not carrying a responsible amount of coverage. An increase in the state minimum coverage requirement would also be beneficial to your rates, but that isn’t likely to happen any time soon. In addition to paying additional premiums, you may also need to carry additional coverage to protect yourself, which of course means higher premiums. Promoting the purchase of minimum coverage is something we all should be concerned about.

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