How Reducing Coverage Saved Us $600 Per Year On Our Car Insurance

We’ve all seen the car insurance commercials that promise to save us hundreds of dollars if we switch to their company. I’ve never actually met someone who was overpaying their car insurance by so much that simply switching companies (and keeping the same coverage) resulted in a saving of several hundred dollars.

Sure, you can get quotes from a company that is $400 higher than what you’re paying, but I don’t count that as actually saving $400. It’s simply not paying $400 more for the same product. It’s absolutely the right financial decision, but it’s not saving.

Our Old Car Insurance Coverage

For the past two years, we’ve had approximately the same coverage. We have been paying around $775 for a 6 month period. We switched from Progressive to GEICO when we realized we could save $86 per year.


Recently, I decided to look into how much car insurance we really need instead of simply looking at how much we were paying. I discovered that we were probably paying for coverage that we didn’t need.

The three portions of the policy I investigated were Medical Payments, Collision, and Comprehensive Coverage.

Our New Car Insurance Coverage

The first thing we did was drop medical coverage. We were paying well almost $100 per year just for medical coverage that we likely would never be able to use. The reason it was unlikely this policy could ever kick in is that we are already covered by our health insurance. This was the easiest decision, so we removed this from our policy without much discussion.

Next was the comprehensive coverage. This coverage pays for loss or damage caused by “fire, theft, vandalism, hail, windstorm, riot, falling objects, flood, collision with an animal.” While these are unlikely to happen to us, it was under $100 per year, so we kept it on there. However, paying $100 per year doesn’t make sense when there is a $1,000 deductible. If something was to happen to one of our cars, we’d still have to pay the first $1,000 in damage. Well, our cars are not new and not worth all that much, so by the time we pay $1,000 we might as well start looking at getting a new (or used) car.

Finally, we got to collision coverage. This was the hardest decision to make, but it was by far the most expensive as we were paying over $500 per year for this coverage. This coverage pays for accidental damage to your vehicle caused by collision with another vehicle or stationary object. Obviously if someone else is at fault, they are responsible for the damage and will pay it. If I am responsible, I will have to pay the first $1,000 in damage to my car as a deductible, plus the $500 per year just for the right to use it. Again, our cars aren’t worth that much and if we get into an accident that requires that much repairs, we will consider getting a new car.

How Much We Saved By Reducing Our Coverage

In all, our savings totaled $617 per year of $308.50 every 6 month term. That’s a lot of money we were able to save just by reducing our coverage. I encourage everyone to look at their car insurance coverage to make sure they need them. Paying hundreds of dollars for something you won’t (and in some cases, can’t) use is silly, so if it makes sense in your situation, consider dropping those extra coverage options.

12 Responses to How Reducing Coverage Saved Us $600 Per Year On Our Car Insurance

  1. FI Pilgrim says:

    The same thing happened to me a few years ago! I saved the “or more” part of 15% or more by switching to Geico. :-) The best part is that it wasn’t a bait and switch, my rates have never gone up since I switched 5 years ago. Great insurance.

    • @FI Pilgrim, Yup, usually rates go down slightly each period where there is no incident. I was actually disappointed at how little they were going down, so I ended up switching from Progressive to GEICO at the beginning of the year.

  2. Changing your coverage amounts is a solid way to save some money, but it’s important to consider the ‘what if’ situation and to be covered, so if you raise your deductible from $500 to $1000 you should make sure you have access to $1000 should the need arise.

    • @Money Beagle, we could definitely cover the deductibles, and while it would definitely be a hassle, I can’t imagine we’d total one of our cars every 5 years or so, so the savings ends up being worth it mathematically.

  3. Syed says:

    Very timely post as I’m looking into this right now with my car insurance. I got some good quotes from other car insurance companies with the same amount of coverage I currently have but I haven’t heard good things about their customer service. I have had a great experience with nationwide so far so I’m going to try to decrease my unneeded coverage as much as possible before switching. Thanks for the great post!

  4. We review our coverage and rates every renewal. I actually left USAA to go to GEICO which shocked me because USAA was always cheapest by far.

    • @Lance@MoneyLife&More, yah, I’ve never heard anyone ever say USAA was more expensive. Nice job with checking every renewal period. Sometimes it sneaks up before I have time to do my due diligence.

  5. Lee Veldkamp says:

    I just wish I didn’t need a car. They are so expensive.

  6. ira says:

    All makes sense to me except Comprehensive. This covers total loss of the vehicle, so of course you’ll need a new car. The $1,000 deductible just means that if your car is worth $5000, you’ll get only $4000 to apply to the new car you will have to buy. So, it seems to me that the decision about Comprehensive should be determined solely by how much your car is worth. The more its value exceeds the $1000 deductible, the more worthwhile.

    Ira

    • true, but if my car is worth $5,000, how much should I be paying each year just for the $4,000 in insurance if one of those unlikely events happens? Theft, vandalism and glass damage likely wouldn’t be enough to hit my deductible, so natural disasters and hitting animals are likely the only uses for this.

      Insurance by definition is a bad deal. Mathematically, I’m likely to pay for something I won’t use. I can afford if it something were to happen, so I guess I’ll roll the dice that I won’t get into a large accident with a deer in the next 2-3 years.

  7. Another consideration is the amount of liability coverage you currently have.

    Most people don’t have an umbrella liability policy, so the only liability they have is their auto insurance, or perhaps their home insurance. If you have high liability coverage on multiple policies, you can likely save money by reducing those and buying an umbrella liability policy.

  8. ‘Saving’ eight hundred dollars or more (for example) by paying less for the same coverage product is absolutely possible. This arises because of the spread of ‘Base Rates’ that exist for a driver’s basic profile and location. It represents the difference between a comparatively low tier rate carrier and one that is expensive for the given driver in question. A standard policy premium (that contains comprehensive and collision) could differ in price by $1,000 on account of base rate variation. Average savings reflect average (modest) shopping effort. Switching carrier is the principal route to a cheaper premium above all other techniques.

    Collision and comprehensive is considered essential for most drivers. Only when the vehicle has greatly depreciated in value (kelley blue book worth under $2,000 for example) does it indeed become economically viable (on balance of risk) to consider dropping such coverage, because of the associated cost and deductible scenario.
    If you lease or have an auto loan, you will be required to hold Collision and comprehensive under contract regardless.

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