51 - Auto insurance
Trimming the Fat From Your Auto Insurance Bill
from Consumer Credit Counseling Service of Greater Atlanta
It's important to remember that there are always ways to save money, no matter what you're purchasing. And as a consumer, making the most efficient use of your money should be your primary goal. However, this is in direct conflict with the goals of the companies you spend your money with. Their primary goal is to make their products so appealing that you feel compelled to buy as much as possible.
Auto insurance companies are no exception. Because auto insurance is legally required, their sales are virtually guaranteed. They have you as a captive audience from the start, and naturally, take advantage of the opportunity to sell more products. These products usually come in the form of options, marketed as "inexpensive add-ons." This is where there's a lot of room for trimming.
I want to make one point very clear - If you make adjustments to your auto insurance, never cancel a policy until the new policy is in effect. If you leave yourself unprotected, you run the risk of suffering an otherwise protected loss during the short time that you have no coverage.
Having said that, the strategies for saving are simple. For example, many people take the lowest available deductible, usually $100, and pay considerably more for their premium. What they don't realize is that the premium for the same policy, but with a $1,000 deductible, can sometimes cost $40 a month less. As long as you average fewer than one accident every two years, the money you save is more than the difference in deductibles. And, if you're a relatively safe driver who never gets into an accident, those savings go straight into your pocket.
Another revenue-generator for auto insurance companies is medical coverage. However, if you have health insurance, this amounts to double coverage, and usually the medical coverage on your auto insurance doesn't pay if the medical bills are covered by another policy. So, in effect, you could be paying for coverage that is practically guaranteed to never result in a claim.
Towing options are also a cash cow for insurance companies. And if you also have a membership with AAA, or a similar roadside assistance service, they're completely useless. Once again, you're double covered, so drop the towing option and save a few dollars. Another option that is rarely used is the rental car option. If you get in an accident that's not your fault, the other driver's insurance company will provide one anyway, and most repairs don't take long enough to need a rental car.
Finally, if your car is worth less than $2,000 and it's paid for, drop the collision coverage immediately. If your car is stolen - which, for older cars, is highly unlikely - or damaged extensively, and the cost of repairing it exceeds the blue book value of the car, the insurance company is required only to pay you the listed value minus the deductible, and that's the end of it. In that case, you receive no money and are still without a car, so why pay the extra premium? This is another situation where you are practically guaranteed to never see a benefit from the coverage, especially if you follow the earlier advice and increase all your deductibles to the maximum amount.
Finally, if you have automatic seat belts, anti-lock brakes, or a theft alarm, check with your insurance agent - you may qualify for additional discounts.