Categories: Business & Finance

Car Insurance: An Overlooked Area For Savings

March 14, 2017

When you develop a budget and try to save money, every little bit counts. That $3 you save every other day by brewing your own coffee instead of going to Starbucks could add up to $45 a month. Couple that with brown-bagging your lunch just two times a week, and you could have $100 saved by the time the next month rolls around. Many articles on savings also talk about getting books and DVDs at the library, and shopping at secondhand stores. One area that often seems overlooked, though, is car insurance.

Remember: Cars Get Older, and Life Situations Change

That $50,000 car you bought 10 years ago and continue to drive—how much is it worth today? As a rule, its value is a mere fraction of what you paid for it. However, you may still have similar levels of insurance coverage on it. For better and for worse, insurance is something that people set and tend to forget about. That’s why it’s very possible you are overpaying on your car insurance.

Set an alert on your smartphone. It need be for only once a year, but use this opportunity to assess whether your car insurance coverage makes sense for the realities of your situation. If not, you could enjoy immediate savings. For example, you may want to opt out of collision coverage if you are paying more than 10 percent of the car’s value in insurance premiums per month.

Also, remember to ask about discounts each year. Maybe you’ve gone another year without an accident and now qualify for your insurer’s good-driver discount. Maybe your 20-year-old son is now enrolled in college and could get a good-student discount.

Anticipate: Don’t Be Caught Off Guard

The costs of car insurance are easy to overlook amid the excitement of shopping for a new vehicle. You’re caught up in colors, sleekness, bells and whistles, and much more. The cost of gas, the cost of insurance, and other costs are things you’d rather not think about—or you just simply forget about them. However, if you have a budget, that car taking you, say, $2,000 over could end up costing you more than that. Higher-value cars tend to carry pricier insurance, and you might need to keep gap coverage for longer.

If you are in the market for a car, here are some ways to save on insurance.

  • Buy used.
  • Buy inexpensive but safe.
  • Pay for the car in cash, or make a hefty down payment.
  • Use online calculators to approximate your monthly costs (they may include car payments, gas, and insurance).

By the way, you’re probably fine to buy red. It is apparently only a myth that drivers of red cars pay more.

Compare: Get a Minimum of Three Quotes

Whatever type of insurance you’re talking about, be it car, home, motorcycle, even renter’s, it pays to shop around and to compare. You can get estimates by visiting individual insurers’ sites and entering a bunch of data at each, but sites such as simplify the process. You enter the data at this one site and get multiple quotes.

Even if you love the insurer you are with now, try shopping around when renewal time arrives. You might be surprised at the rates you find. At the very least, you have a bargaining chip to bring up with your current insurer.

A big reason to get multiple quotes is the fact that each insurance company considers different factors when setting rates and assigns varying areas of emphasis to each factor. For example, one insurance company may see a certain make and model of car as less risky than another insurer sees it. People in different ZIP Codes can also pay considerably different rates as well.

Some insurers also assign more weight to factors such as whether you use the car to commute and for how many miles. If you drive your car less than 30 miles a week on average (primarily for running errands, say), you could be missing out on big savings.

Do you like your current insurer? You don’t necessarily need to shop for new insurance rates every year when your smartphone alert goes off, but doing so every three or five years ensures that you get the most bang for your buck. Inertia can be costly.

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