Let’s Talk Car Insurance

This was my husband’s Durango after being stolen from our driveway on Monday. All four wheels, dashboard, roof lining, steering wheel, and his favorite emergency cologne were gone. The police estimate it took about an hour to do all this. Cool, right? My husband spent the day stressed, pissed off, and mentally drained from all the phone calls and running around. Honestly, I was a little impressed. Beyond the headache of dealing with everything, I’m not really mad. I begrudgingly pay for expensive great car insurance, so I’m taking my ‘L’ like a grownup. I’m actually looking at this as an opportunity for a do-over. Frankly I wanted heated seats anyway.

Since we’re knee deep into the insurance claim process, I figured I’d offer some thoughts on auto insurance. I won’t go into a car insurance 101 discussion here. If need to understand the basics of the various coverages and how they work, start here. Instead, I want to discuss some common missteps and some ways to save money on your insurance.

Minimum Coverage Doesn’t Cut It

Each state has different laws mandating minimum levels of insurance coverage. That said, you always want to go for optimal coverage, not just the minimum. Optimal is subjective, and depends on the value of your vehicle, your budget and several other factors. For example, if you drive a hoo-ride, you may want minimal comprehensive coverage, since the replacement value of your vehicle is low. If you have a more valuable vehicle, you’d definitely want some comprehensive. It obviously won’t make sense to carry loan/lease payoff coverage if your car is paid off, it . Find that sweet spot for having all the coverage that you need, while also balancing the budget.

GAP Insurance

Guaranteed Asset Protection (GAP) is insurance that covers he difference between the actual cash value of the car, and the amount you still owe on it. This can happen for a number a reasons, but typically if you purchase without a sufficient down payment, or if your purchase price was higher than the actual value. Other times your financing company might mandate GAP coverage. Many insurance companies offer these policies, as do financing companies when you purchase.

Quote Insurance While You Shop

If you don’t consider your car insurance until you’re ready to sign and drive, YOU’RE DOING IT WRONG. Waiting until the end of the car buying process puts you at two major disadvantages :

1) You’re less likely to shop around for the best quote. This is pretty obvious, right? I recommend getting at least three quotes once you’ve honed in on a model or two that you like. In fact, tell your agent that you’re shopping around. That might motivate them to find some extra discounts to throw your way, especially if you’re a repeat customer.

2) You could have found a different car, with a lower total cost of ownership than the one you’re already sold on. This second point may be less relevant if you’re absolutely set on a particular car for your next purchase. But if you’re open to different models, get a quote for each car you like for a clear picture of total cost. In my area for example, the insurance rates on a Chevy Malibu are so high that the combined note + insurance are slightly more expensive than a Cadillac ATS…no lie.

The bottom line here is, if you’re shopping around for cars, also go online and run a couple quotes on the car insurance for models you’re considering. It’ll help you narrow down your options.

Beef Up Your Coverage for Business

If you’re using your car in the course of your business, or for ride sharing, you might need more coverage. If you have an accident or loss while using your car for business, your insurance company could hold out on paying your claim. The additional expense is worth it. On the flip side, you can add those business expenses as deductions on your tax return at year end. Win – win.

Adjust your Deductibles

This is one of the simplest ways to save money on your monthly premium; the higher your deductible, the lower your premium. If you have adequate emergency savings in place, you could raise your deductible to pick up some cost savings. If you’re not disciplined enough to keep that money set aside, the $1000+ deductible is not for you!

Most insurers also allow you to set different deductibles for your collision and comprehensive portions. I’ll use my personal coverage as an example. I have three cars insured, and live in an area where car theft is fairly high (especially among Dodge Durangos- again, not surprised). Given the higher risk of a theft, I opted for a low comprehensive deductible ($500, $50 deductible on glass replacement), and a slightly higher deductible on collision ($1000). Given our zip code, number of cars, and the fact that we always have enough set aside to cover our deductible, this yielded a premium that we were comfortable with, deductibles that we wouldn’t be too mad about paying in case something happened.

Pay The Whole Premium In Advance

This one will take some planning, but you can generally save around 10% on your premiumwhen you pay it all up front. If you start now, you can have your entire premium for your next renewal set aside in just a few months.

Avoid Short Term Policies

In some states (like Michigan), no-fault insurance has created an environment where insurance rates are so high that a predatory, temporary insurance industry has formed. People use these 7 or 10 day policies to purchase/register a car, and later get rid of the policy. The people who seek these policies out, do so because they cannot afford an entire month of coverage, but the rates on these policies are usually so high, that they’re nearly the same cost as a full monthly premium.

Let me be clear, I understand the politics and financial realities surrounding these policies. But if you, or someone you know are using this as a means to get by, you’re actually digging a bigger hole. Some states are doing away with these policies soon. Others are beginning to criminalize the practice of using them. If you find yourself in this situation, I want you to formulate a plan to work up to at least minimum coverage as soon as possible. If you have a family member using these policies, take it upon yourself to be their advocate and help them find affordable coverage.

Keep Your Credit and Driving Record Clean

Aside from some of the other factors listed above, car insurance rates are also based on your driving record and credit, to an extent. Keeping these items as pristine as possible can only help you obtain lower rates. Maintaining continuous coverage with one company may also yield some loyalty discounts, depending on the company.

What’s your experience with car insurance? Any claim horror stories to share? Any great experiences to share about your company?

Let’s discuss in the comments!

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1 Comment

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    February 23, 2018 at 9:19 pm

    Great article Danielle! You go girl!!

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