The Boring Newsletter, 11/17/2024 🚗

Hi Friendos,

+14%. That is inflation in motor vehicle insurance over the last 12 months (Oct 2023 to Oct 2024), according to the Bureau of Labor Statistics’ news release last week regarding the Consumer Price Index (CPI). A few other categories with outsize numbers were eggs (+30%) and motor fuel (-12.5%).

While I find overall national statistics on inflation interesting, I am naturally most interested in price increases for my own household. The “basket” of goods and services that my household purchases is, of course, not exactly like the “typical” composite basket captured by national statistics. For example, I didn’t buy any college textbooks recently (and probably won’t ever again!) so I’m not impacted by their current annual inflation of +3.2%. My building’s water bill is up though, thanks to my mayor implementing an 8.5% rate hike this summer (more than national inflation of 5.5% for “water and sewerage maintenance”).

Even though my November 2024 car insurance renewal came in with no price increase, I did not escape the national trend, as I had rate hikes the prior two renewals. My own auto insurance cost is up 17% since July 2023 ☹

I aim to review my auto and homeowners’ insurance every other year to check that I’m still getting the best available pricing for the coverage I want, and not inadvertently paying for coverage I don’t need. Example: in 2023, a NY State law went into effect requiring insurance policies to add “supplemental spousal liability coverage” unless a person opted out. This covers medical care for a spouse that is in the car while the insured person is driving and has an accident found to be their fault. This coverage is now automatically added to every auto policy in NY state, even for single people! Because I compared the line items on my policy renewal to my current policy (just flipping back and forth between the old one and the new one), I noticed this addition, researched what it was for, and had it removed. This saved me around $130/year (more than most people would save, because I have a lot of liability coverage), and I won’t need to opt out again unless I switch insurance companies.

How to decide on the coverage you need? For deductibles, I recommend thinking about what you could cover out of pocket from your emergency fund if you had to. If you have a fully-funded emergency fund, you can choose high deductibles. It will stink if you have to pay those, but usually you won’t have an accident so you can benefit from the less-than-100% odds of paying out your deductibles vs the 100% odds of paying the higher premiums that goes along with lower deductibles. If you have bulked up your emergency fund since your last auto insurance renewal, you can consider increasing your deductibles.

If you have solid medical insurance and could cover your medical deductible if needed (again, think about the strength of your emergency fund), you probably don’t need additional personal injury protection.

It usually makes sense to have emergency roadside service, as that is cheap relative to the cost of towing a car. Mine costs ~$30/year, so even one tow per decade makes this coverage worth it. Sadly, I did not have this coverage last year when I got a flat tire and needed a tow (in the rain, naturally). At least I won’t make that mistake again.  

The area I would not cheap out on is liability coverage. Bodily injury liability pays for another person’s injury and your legal defense if you are responsible for an accident. We all know medical and legal expenses can be significant so I recommend high limits for this. If you don’t have umbrella insurance, $1 million per person and per occurrence is not too high.

You can also check for possible discounts. My state guarantees a discount on auto insurance premiums if I take an online defensive driving course every 3 years. The last course I took in February 2024 cost $24 but got me a $188.20 discount on premiums over the last year ($564.60 over 3 years if the discount stays the same). It’s a pretty boring way to spend time, but I think of it as an after-tax wage close to $100/hour, so it was worth it to me.

-Stephanie

p.s. This is a great time of year to consider if you need to winterize your outdoor hoses (prevent water at the hose attachment from freezing, expanding, and cracking bricks or causing other damage) or do other seasonal home maintenance. Have you cleaned your dryer exhaust of lint recently? I don’t mean the lint tray you empty after each load – I mean lint accumulation in the tube that goes from the back of your clothes dryer to the wall and from there to outside. Lint buildup is a fire hazard and causes your dryer to run less efficiently. You know that expression “the best defense is a good offense”?  It definitely applies to the financial cost of home ownership.