Friday, August 3, 2012

Drop It Like It's Hot: Car Insurance Edition

Old car wheel

As part of a new end of the month ritual, I've started keeping track of my net worth in a spreadsheet. Partly because I have a creepy obsession with spreadsheets and it also seemed like a requirement now that I have a personal finance blog. As I was writing down the value of our two cars, I was a little shocked by how little our 11 year-old Grand Am is worth.

Fun Fact: The average age of cars and trucks on U.S. roads is 10.8 years.

When I originally entered the Grand Am in Mint 3 years ago, it was worth a massive $3,500. Now $1,657. Ouch. (Ha, just noticed my GRAND Am is worth a GRAND.) In all fairness, it has lost its air-conditioning and bounced off a couple deer since then, so maybe I should be happy it's still worth as much as it is. Being the financial nerd that I am, my first thought was hey I think I can finally drop my comprehensive and collision insurance.

After the potential savings excitement, I had to try to remember the rule for when to drop collision and comprehensive insurance. A little googling brought me to the Consumer Reports auto insurance guidelines. Their magical rule is that if your annual collision and comprehensive premiums are over 10% of your vehicle's worth, then you should consider dropping your coverage. My numbers are $144 annually for comprensive and collision with a $1,657 vehicle. That puts me 9%ish. However, as you know, I am a REBEL, so I will be contacting my insurance company and getting me some savings (at least until I find deer number three...).

As long as we are talking auto insurance, I thought I would throw a few more tips out there because I'm not sure how many of you are rolling in a well-seasoned vehicle like me.

Raise Your Deductible - One of the first things we did after getting our jobs was crank up our deductible to reduce our premiums. It is generally recommended that you raise your deductible to at least $500, if you can afford it. We bumped ours to $1,000. I know because we had to pay it when we had a Thanksgiving day date with a deer. Still, over the years it has paid off because we've saved more than that one deductible in reduced premiums.

Comparison Shop Every Year or Two - This was something I learned the hard way. We were paying $1,200 on a six month policy for our two cars. After talking about it with some family and friends, I realized we were paying way too much. After doing some shopping online, I found the same coverage for a little over $500. That's $1,400 a year in savings. All I'm going to say is when we hear "you're in good hands", we remember they were talking about our money and not us.

Combine Policies - Many insurers provide discounts if you have both a homeowners and auto insurance policy with them. So, when you're shopping around make sure to check for policy combining.

Pay Your Full Premium - I'm sure this varies depending on your company, but we save 6% by paying in full instead of by installments.

Don't Hit Things - Don't hit things. That is the kind of quality advice you can expect to get here.

Hopefully you can use one or more of these tips to put a little more money in your pocket.

If you're wondering how much your car is worth, I use Edmunds car appraisal. There's also NADA and Kelley Blue Book.

How old is your vehicle? Are you part of pushing the U.S. average to its all-time high?

-Photo by John Salvino

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