Reader Question: Full Tort Coverage?

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Here’s the latest reader question, along with my reply!

Tom writes: I am wondering if I should keep full tort on my auto policy, as I can save $380/year by going to limited tort. What’s your take?

My reply: Most states have mandatory minimums for liability coverage but you’re free to buy more coverage – which is what’s at issue here. Many people do buy it – the reason being that it is possible one may face liability that exceeds the mandatory minimums – in which case, the burden to pay the difference would fall on themselves rather than the insurance company.

On a numbers basis, the risk of being on the hook (if you have no more than the minimum coverage) is definitely there. The cost to repair/replace modern vehicles has skyrocketed. Consider that the average new car sold for more than $35,000 last year and it’s common for people to spend $45,000-$50,000 or even more on a minivan, pick-up or SUV. Medical expenses are, it goes without saying, even more out-of-hand.

But, that all hinges on one big if.

That being if you cause an accident.

And most “accidents” are the result of driver error and avoidable.

If you are a skilled, attentive and responsible driver.

If you are, then the risk of being liable for damages is very low and it is not crazy to reduce your coverage minimums to the minimums, in order to save money. But one ought to be very careful and very honest with oneself about this. If you’ve had any at-fault accidents in say the past 10 years (I’d say 20) then it might be prudent to maintain higher-than-minimum coverage.

It’s a matter of risk-benefit analysis – and your comfort level.

Without going off the rails overmuch, the macro problem with insurance costs is precisely the absurdly high cost of repairing/replacing newer cars and the mercenary cost of medical care. A point will come – soon, I think – when no one will be able to afford even the mandated minimums because of the over-the-top premiums, which are to a great extent the result of people buying $35,000-plus cars and plaster-casting a broken bone costing $15,000 via a trip to the emergency room.

That – and the legal requirement to buy insurance.

Not being able to say “no” to absurdly high premiums, especially when your car isn’t a a $35,000-up new car, means the mafia can redistribute costs not incurred by you onto you.

If insurance weren’t mandatory and by dint of that, insurance companies had to offer reasonable policies (if they wanted the business) to people who live more prudently the cost of such policies would be much lower.

And there’d be pressure – the good kind, from the market – for people to think twice about buying $35,000-up vehicles.

. . .

Got a question about cars, Libertarian politics – or anything else? Click on the “ask Eric” link and send ’em in!

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