Is 'Premium' Car Insurance Worth It?

It seems like you can get a premium service for just about anything these days, so why should your auto insurance be any different? You may have noticed the TV commercials for Allstate's new insurance extras, such as "accident forgiveness," which keeps your rates from being raised after a crash, and for new car replacement.

There's a catch, of course. You have to pay for these extras so even if you hate the way insurers boost your premiums for fender benders that weren't your fault, think before you buy.

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Allstate is selling two premium policies, the Gold Protection and Platinum Protection plans, in 37 states.

Gold plan drivers pay an extra 5% to 7% on average above the standard policy. They receive a $100 reduction on their deductible for each year they are accident-free up to $500 and a guarantee that their premiums will not increase after a first accident.

The Platinum plan costs 14% to 15% more than the standard policy and comes with "accident forgiveness" for multiple accidents and a 5% discount on your premium while you remain accident-free.

The new car replacement add-on costs another 2% and is intended to cover drivers for the rapid depreciation of a new car. If your car is totaled within three years of its purchase, Allstate will buy you a new one, rather than pay you the depreciated value.

Allstate spokesman George Nolan admits the coverage may not be for everyone but says the company created the products to fit demand.

So how good a deal are these premium services? For starters, you may already be getting some of those features for free.

Many insurers, including Allstate, give drivers a discount for remaining accident-free customers for three or five years, so don't pay 15% more for that 5% discount if you're already eligible.

As for "accident forgiveness," it's true that insurers often raise your rates after a crash. But Nationwide forgives a single accident and multiple minor ones after three years of safe driving and it doesn't cost you a penny more.

When it comes to new car replacement, the chances that your shiny new auto will be totaled (not just damaged) as you drive it off the lot are slim but if the new vehicle is expensive and the worst happens, you will indeed be out the amount of depreciation, which could be thousands of dollars.

Before you buy the add-on, though, check to see if your financing company can provide similar coverage at better rates.