Category Archives: Insurance

If You Don’t Drive Much, Save On Car Insurance

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If You Don't Drive Much, Save On Car Insurance With This TrickI worked for GEICO for a few years after college, so I picked up some tricks that can help save money on car insurance (link!). But last week, I found a new trick I was previously unaware of and wanted to share with everyone.

Pay Per Mile Car Insurance

I recently found out about a new car insurance company called Metromile. With them, you pay a lower flat monthly rate compared to traditional insurance companies, plus a few cents per mile driven each month. So if you only drive a few miles per day, you can end up saving a lot of money by switching to Metromile. The less you drive, the more you save!

After some conservative calculations, it looked like we’d be able to drop our premium by around $125 every 6 months. That’s a pretty big savings just for switching car insurance companies, so I was prepared to pull the trigger. It would just mean signing up online and canceling my GEICO policy, which at most would take 15 minutes. Save $250 a year for 15 minutes of work once? Sign me up.

Check With Your Current Auto Insurance Company

I called GEICO (our existing auto insurance company) to see if they could match in some way. I switched jobs about a year ago and Lauren cut her commute significantly since graduating from her master’s program. I asked if driving less would qualify us for any additional discounts, and the customer service rep said she could plug in the details and see what that would do to our rate.

We updated our details to go from about 1,500 miles a month down to around just 500 total. With that, our rate dropped by over $100! So in a 5 minute call, we saved $200 per year. Bingo! The difference between GEICO and Metromile wasn’t enough to convince us to switch to a smaller insurer, so we kept our existing insurance, we’ll just be paying a lower rate going forward.

Metromile is a great idea for people who don’t drive much, but if you don’t drive much and are considering a switch to save money, contact your current insurer to see if your rate can be reduced if they have your updated driving data.

As always, it never hurts to ask. By doing some research and making a simple call, the savings can be significant.

When Does It Make Sense To Self Insure?

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When we bought our new Toyota Camry, we realized that as soon as we drove the car off the lot, it would lose a couple thousand dollars in value. But if our car got totaled, our insurance would only cover the current value of the car, not the full cost we paid for it. Some insurance companies cover this difference with ‘gap insurance,’ and in almost every case, the company selling you the car will offer this type of coverage, too.

Insuring Against Disaster

Our car insurance company actually doesn’t offer this coverage, so we were left with one option: going with Toyota’s gap insurance coverage. They offered it for around  $10 a month, but with no option to cancel it once the value of the car gets below the amount on the loan, the total came out to around $550-$600 over 5 years, which doesn’t sound bad, but when you break it down, that’s a terrible deal.

The point of gap insurance is to cover the difference between how much you owe on your car loan and how much your car is worth. On the day you drive your car off the dealer lot, that amount is at its highest (likely several thousand dollars), and it decreases over time. After about 6-12 months, the amount you owe lines up with the amount your car is worth and there is no longer a need for gap insurance. After that, gap insurance is useless because it

Why This Insurance Isn’t For Us

Sometimes, you’re able to cancel gap insurance (when you have it through your car insurance, this is the case), but when you go through the dealer (at least our dealer), you can’t cancel the insurance, it lasts for the life of the loan (even though it only has any value the first few months). To break it down, paying nearly $600 for insurance in case your car is totaled in the first 6 months is a terrible deal. It will save you a couple thousand dollars if you total the car, but if you don’t, you’re out $600 with nothing to show for it. Unless you think you have a 20% or higher chance of totaling your car in those 6 months, it’s simply not worth it.

Our Decision To Self-Insure

We decided to skip on gap insurance. It doesn’t provide enough value to us, and the cost is too high. If the car is totaled in the next 5-6 months, we’ll have to suck it up, but it won’t be the end of the world. We know the math works out in our favor and the worst case scenario is unlikely and we would be able to absorb the blow, so we self-insured in this case.

When You Should Self-Insure

In many cases, insurance is a necessary expense that must be paid. Sure, we’re unlikely to use it, but it protects against disaster. You never think you’ll suffer a terrible illness, but you never know, so you buy insurance for several hundred dollars a month. If you ever need to use it, it won’t cost you tens of thousands of dollars. Rarely do houses burn down, but without coverage, your life could be ruined if by some awful chance, it happened to you. These are perfect scenarios to get insured because you can’t afford the disaster, no matter how unlikely it is.

In the case of gap insurance, the worst case scenario wasn’t going to ruin us financially, just set up back a few thousand dollars. If you can afford the worst case scenario, it likely makes sense to self insure. We’d be out a couple thousand dollars, but that would come out of our long-term savings. In the short-term, not much would really change. And this way, we get to keep our $600, too!

Have you ever self-insured? What would you do in our case?

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

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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.