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.