Car insurance can be expensive. It’s probably one of the bills you hate paying the most. You’re paying for something that you’re seemingly never using. You’re insuring something that is going down in value. It’s just a whole lot of not so great feelings. You have to think about deductibles and what type of coverage to get. It’s a lot of headache and money, and you’re just being a good citizen and following the law, you haven’t even been in a car accident ever or maybe in years.
Whatever it may be, you need the insurance. It’s required, for one things, and you’d be foolish not to get it to protect your health and your assets. How can you lower that bill though and still have everything in line? Here’s my top 3 ways to do it.
1- Don’t pay for what you don’t need
Just like with anything else, if you’re not using it then you should be paying for it. This is especially true for car insurance, where what you have and what you’re actually “using” can be very confusing.
By law, you’re only required to get liability insurance to be legal. Liability covers the damage and injuries you cause to others. It might be wise to get more than just liability coverage though. If you have a new car or a car that has some value then it would be smart to also get collision and comprehensive coverage.
The first thing you should do is ask your insurance company for an explanation of each coverage that you’re paying for. With that being said, Collision coverage pays for damages to your car from an accident. The definitions can get confusing so you might want to read them over from your actual insurer. However, Comprehensive coverage pays for the other things, like if your car is stolen or storm damage.
Some companies may put an accident with a deer as collision coverage if you were driving your car while it happened, however it might fall under comprehensive if your car was parked when it happened.
Confusing stuff, yes, but something that isn’t confusing is whether or not you should be paying for any of this stuff. If you’re car isn’t worth much money then it might make sense to drop the coverage that pays for your car if it was damaged. What’s the point of paying an extra few hundred dollars per year if your car is only worth a couple grand anyway? The most you would get back is the value of the car. There’s just no point to do it. Instead, you can take that money and invest it somewhere else.
Think about it this way too. Are you really going to file a claim on your $2000 car for the $800 of hail damage that you got an estimate for? Is it really worth the trouble? It’s an old car anyway, and if it’s driving fine then it probably doesn’t really matter. Why would you want to file a claim and risk the insurance company raising your rate. Insurance companies raise rates all the time for whatever reasons they see fit. Besides, if you would have been saving the extra $200 you were paying each year for the extra coverage you would have saved enough to pay for the damages yourself in 4 years.
It’s really tough when you talk insurance and savings because you’re really damned if you do or damned if you don’t with insurance. You never know when you’re going to get into an accident, but you do know what your car is worth. Don’t pay for insurance to cover your low value care. Instead, pay for the insurance that covers your own mistakes so that if you hurt someone else or damage someone else’s things you’ll be covered.
Another thing to think about is to check your own health insurance and see if it covers any medical expenses to yourself if you’re in an accident. If it does cover expenses then it doesn’t make sense to pay for that twice does it? Drop it from the car insurance if it makes sense. (be careful with this though if you drive other people around in your car, they might not be covered!)
What are you paying for anyway with car insurance?
That’s the real question. The best way that you can figure out whether or not you’re paying for what you need is be asking the right questions. Ask your insurance company, and then ask a lawyer what you’re covered for. Those damn things are so confusing that you’re best getting a second opinion somewhere to make sure you’re covering yourself properly. You don’t want to pay for what you don’t need, but you also don’t want to not have what you do need when it comes to car insurance.
2-Make your deductible higher
If you have a car with some value then you should keep your collision and comprehensive insurance so that you’re covered from a big loss. You have to make sure that the value of your car is covered. All those numbers in the contract mean something so make sure you find out what they mean or ask around if you’re not sure. Make sure the full value of your car is covered in case of a total loss.
With that being said, you can now save some money by raising your deductible. Raising your deductible is one of the easiest, and least confusing ways to save money on your insurance. It makes sense, and you can easily understand what is going on. Unlike figuring out what you need and whether or not you should pay for it. If there’s anything you should do to lower your bill it’s to at least do this.
If you have a $0 deductible right now on a policy then what that means is that if you had $2000 worth of damages on your car that you would have to pay $0 out of your own pocket to pay for that. Your insurance would cover all $2000 of it. That’s great, but you’re paying a premium for that money every year. If you were to raise your deductible to say, $1000, then you would have significant saving each year.
You can do the math and see how your policy changes, but you might save $250 per year by raising your deductible from $0 to $1000. It might be more than that. It all depends on your insurance company and their rates at the time. What this means is that you’ll now have to pay $1000 out of your pocket and the insurance will cover the other $1000 to pay for the $2000 in damages.
How are you going to come up with the $1000? How about you save that $250 the first year, and then do it again 3 more years. After that you’re rolling in free money.
You might think, oh I don’t want to take that gamble. That’s fine if you aren’t good about saving your money, but if you’re reading around here you’re probably a good saver. Take my advice and save your money each year. You’ll likely come out ahead eventually, especially so if you’re a good driver.
3- Look somewhere else for insurance
When’s the last time your shopped around for car insurance? If it’s been a while then go ahead and do it. It’s possible that you might find equivalent coverage from somewhere else for cheaper.
Go online and put in some info to see what numbers you get. If you find something cheaper you should first try to use that to bargain down what you’re paying at your current insurer (if you like them). If they won’t budge, switch. The trick here is to make sure you’re comparing apples to apples here. There’s so many variables with insurance that you might think you’re getting the same coverage only to find out that you’re not when you read the fine print.
It’s going to take a little bit of work, but you can lower your car insurance bill. The easiest thing to start with is raising your deductible a bit. Do that first and then shop around once you figure out what you’re actually paying for. In another post I’ll try to really dig deep into what you’re actually paying for what I do my own shopping around for insurance. Until then, drive safe out there.