Why I Didn’t Save $400 on Car Insurance

When I bought my first car, I knew there would be significant costs associated with maintenance and insurance. So I did what any smart shopper does, and I compared the price of insurance by getting quotes from several insurers. I used to work for an auto insurance company, and no company is ALWAYS better. Progressive and GEICO are known for having low rates, and Allstate and State Farm are known for having higher prices. But since rates are based on different models, some drivers will get a better rate with one insurance company and someone else might get a better rate with another.

So I did my due diligence and found that there was a really large range in prices. For a 6 month policy, I found prices as low as about $600 and as high as $1,000. Obviously I decided to go with something at the low end of the scale, and ultimately, I am paying just over $100 per month of car insurance, which I hear is pretty good.

Am I happy with my rate? Yes. Do I tell people that I saved $400 on my car insurance? Absolutely not!

While I am paying $400 less than I could have had I gone with the expensive insurance, I do not consider it savings. All it is is smart comparison shopping. If you go to a supermarket and look at two jars of peanut butter, one for $5 and one for $4, you don’t save a dollar by buying the cheaper one, you simply are spending less and avoiding overpaying for something you can get for a better rate!

It doesn’t make sense to pay more for something you can get at the same quality for a better price. This is how smart shoppers operate. Find the one with the best quality and price, and buy it. Just because there’s a worse price out there doesn’t make this purchase a better deal.

Advertising companies employ a technique called anchoring to trick you into believing you’re getting a better deal than you are.

Here’s an example:

There are two TVs in a store, one for $1,500 and one for $2,000. They have the same specifications, and there are very minor differences. Which one would you buy? You’re likely to go with the cheaper option, pay $1,500 and walk away thinking you got a great deal.

But guess what? Maybe that TV wasn’t worth $1,500? Maybe you just think it’s a great deal because your other option was so much more expensive?

So I pay $100 on my car insurance, but I didn’t save money. It’s just another expense.

Readers, do you think this is the right way to look at the world? Should I be ecstatic about not paying more for the same thing? Do we get duped all the time into paying more because advertisers play games with us?

9 Responses to Why I Didn’t Save $400 on Car Insurance

  1. When I was a kid, I just used whatever insurance my parents had because it was cheaper to be added to the family plan than to get it on my own. I just kept that insurance when I got on my own for lack of knowing what else to do.

    Then I finally did some comparison shopping, and I found a better deal at GEICO. So yes, 15 minutes did save me 15% or more on car insurance.

    • @Kevin @ Thousandaire.com, Yes! In that case you really did save! You saved the difference between GEICO and your old insurance company.

      But you better not count the difference between GEICO and some of the other quotes you got during the process!

  2. Thanks for sending me this article. You are so right. Shopping around is essential and a better price is not the same thing as saving money. You’re the best!

  3. There is a Geico insurance commercial that highlights the same accident and repair. Their question is why pay more to have your car fixed. I agree!

  4. I agree with you. It annoys me that “spending less” is called “savings”. I had a little rant going on my site a while back about it. Savings is putting money in the bank. So unless you put that $400 in the bank you didn’t save it.

  5. This is a fantastic post with a great point — too many people confuse “not paying the highest possible price” with “saving.”

    I know someone who ran a small business who used to use anchoring to sell his products. He offered customers 3 choices: the least expensive one was for the uber-price conscious, the middle one was legitimately the “best value” (for what the customer received), and the highest price was just something he put there to make people feel better about going with the middle option.

    • @Paula @ AffordAnything.org, exactly! And most people want the best value, so they chose the middle one, which is what the owner wanted the whole time!

  6. You found the insurance that’s going to be the best fit for you and that’s what counts. Sure shopping around can lead to savings but you ultimately have to have the best coverage.