Affordable Auto InsurancePosted on October 2nd, 2010 William No comments
One of the hardest parts about saving for retirement is reducing your monthly expenses so that you actually have money to save. If you drive a car, one of your "fixed" expenses is going to be auto insurance; after all, it's required by law. But are you spending more than you need to?
How much car insurance you need naturally depends on several factors, most notably the value of your car. If you're driving around a piece of junk worth a thousand dollars or less, you probably don't need collision or comprehensive coverage; after all, why pay to insure the car when it's probably destined for the junkyard within a year or two anyway? You should probably be saving your money so you can purchase a new car in cash when the current one dies.
On the other hand, you don't particularly want to skimp on liability; remember, if you do happen to cause an accident, you want to have enough insurance to cover the total bill so that your personal assets aren't at risk. Even if you don't have much in the way of assets, you could still wind up with a judgment against you. Liability insurance is required by law, but if you have the option of how much to buy, this isn't the place to get cheap!
On the other hand, if you have a nicer car, it's worth carrying enough insurance to cover replacing the car if something happens. Insurance is what we call a negative expectation investment to lower variance: you pay more than you expect to get back so that if something does go wrong, it's not a major disaster.
So once you've decided what coverage you need, how do you get the best rates on that coverage? It goes without saying that you should start by shopping around, although you shouldn't automatically go for the best price; customer service can be important as well. For example, when the author's car was damaged in a hit and run, his insurance company (USAA) took care of everything, including scheduling the repair and arranging for a rental car for a week, with no trouble at all.
Naturally, your driving history influences how much you'll pay; more than an occasional traffic ticket can send your rates shooting up, especially if you're convicted of an alcohol-related violation. You also want to avoid ever dropping your current auto insurance without having other insurance in effect first; if you're without insurance at all, you're basically at the mercy of the insurance companies.
There are also ways to lower your rating. For drivers under 25 years old, many insurance companies will give a discount for getting good grades, as they believe that good grades indicate someone who takes responsibility and thus will also be responsible behind the wheel. Similarly, a high credit rating also helps get the best rate.
When it comes to the car itself, the insurer would naturally prefer that you have a car less likely to be stolen; this could be because it's a model that is stolen less often or because you have some type of anti-theft or theft recovery system in use, such as the club or Lojack. Cars that have better crash ratings are cheaper to insure as well, as they're less likely to be totaled in a crash. And of course, a more expensive car costs more to insure as well.
Perhaps the largest discount comes from having multiple vehicles insured with the same company, so make sure that everyone in your household is under one policy! The author saved $75 per month simply by moving his wife onto his policy when they got married. Many insurance companies will give you a discount when you buy multiple policies (auto, renter's, etc) as well.
Auto insurance is one of those things that, unless you don't own a car, you simply have to have. It's worth taking the time to bring the cost down as much as possible.