Insurance Survey: Many Would Have Trouble Covering Repair Bills

Nearly a quarter of U.S. motorists could not pay a $2,000 car repair bill if they had to, and almost one in eight would be unable to cover a $1,000 bill, according to a survey released this week by AAA.

The survey also found that more than 50 percent of drivers are avoiding the expense of buying a new car by holding onto their older vehicles, and one in four motorists said they have put off vehicle repairs and maintenance in the past year to cut costs.

“Economic conditions have taken their toll on many Americans, resulting in them neglecting their cars and leaving them at increased risk for very expensive repair bills,” Marshall L. Doney, AAA vice president for automotive and financial services, said in a statement.

Auto repairsThe survey found that even those who could afford major repairs would be stretched financially, with 38 percent of respondents saying they would use savings to cover a $2,000 bill. Another 20 percent said they would pay by credit card and 13 percent said they would be forced to borrow from friends, family, a bank, retirement or home equity.

When asked whether they could afford a $1,000 repair bill, 46 percent of respondents said they could use savings, while 22 percent would use a credit card and 16 percent would look to borrow.

About 4 percent of respondents said they did not know how they would pay either repair bill, State Farm officials said in an email.

The survey results are even starker in light of research that shows increasing numbers of consumers are trying to save money by opting out of collision and comprehensive insurance, particularly for older vehicles.

And those who do purchase such policies are requesting higher deductibles—what consumers pay before their policy kicks in—according to a study released earlier this year by Quality Planning, a Seattle-based company that verifies policyholder information for insurance companies.

From 2006 to 2010, the average percentage of older vehicles without collision or comprehensive coverage increased from 53 percent to 63 percent, according to Quality Planning.

That translated to out-of-pocket savings of $19 a month and $229 a year, according to the company.

The percentage of vehicles with low collision deductibles—up to $250—fell at an average annual rate of about 9 percent from 2006 to 2009. Meanwhile, cars with deductibles as high as $1,000 rose an average of 1.6 percent to 4.9 percent annually over the same period.

Having a higher deductible can lower costs dramatically. For example, increasing a deductible from $200 to $1,000 could reduce collision and comprehensive coverage costs by 40 percent or more, according to the Insurance Information Institute (III).

But industry experts say choosing a higher deductible is a gamble, because motorists could find themselves having to pay for many repairs out of pocket.  While having a higher deductible can lower costs substantially, it also leaves consumers on the hook for all expenses up to that amount.

Consumer advocates say motorists should consider both short-term savings and the risk of major costs down the road when choosing an automobile insurance coverage plan.

And although repair costs vary depending on the type of vehicle and the type of repair, those expenses can escalate quickly, particularly for older vehicles that haven’t been maintained properly.

According to AAA, a transmission repair can easily run from $2,000 to $4,000 and engine repairs can exceed $5,000.

About Gregor McGavin
Gregor McGavin is an award-winning journalist who has reported across the country for such publications as The Associated Press, the Arizona Republic, the Pittsburgh Tribune-Review and the Press-Enterprise.

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