Cutting Costs: Car Insurance

By Philip

When I married Melissa, she had just gotten into two different car accidents, three weeks apart (one technically wasn’t her fault). She also had a couple speeding tickets under her belt and on her record. I am sure her parents were thrilled to be rid of her as an insurance liability. We stuck with the same insurance that she had been covered by on her parent’s plan, and we paid almost $300 a month for the first year or two. Ouch! It has obviously gone way down since then, and she’s a much better driver now, but it doesn’t mean that we got smart about our car insurance until recently.

Just over a year ago, we decided to start cutting our living costs as much as possible. We had been on autopilot and needed to refocus our efforts on being financially intentional. We realized then (and now) that a big part of becoming financially independent is learning how to cut costs on your monthly expenses. If you learn to live on less money, then you will need to save less for retirement. Which in turn means you will most likely be able to retire earlier. All good things, right? We’ve written a previous post about how to cut costs on your cell phone bill and we believe it’s important to learn how to reduce costs on other recurring bills too. Today we want to take a look at car insurance. 

Where we were previously

Before taking a closer look at our finances, Melissa and I used the same insurance company for our cars and house for 14 years. I’m sure the agent loved us (and laughed his way to the bank every six months). We almost never made any claims, we never questioned price increases and always paid our bills on time. We paid our six month premium ahead of time to save money on a “full pay” discount and also so we only had to think about it twice a year. Of course we complained to each other about prices going up but never did anything about it. Call it comfort, call it apathy, it doesn’t really matter. We were being taken for a ride. And from what I’ve learned, unfortunately we weren’t the only ones.

The personal finance website, Nerd Wallet, did a survey a few years ago that showed the American driver is overpaying on their car insurance by $368. That’s just the average, for us it was way more than that. Who wouldn’t want to have $368 or more in their pocket right now? This should be all the motivation you need. If you are currently like we were just a year ago, then you are throwing money down the drain. So why do so many people do it? Because you have to put in some work. And sometimes (oftentimes) life is hard and we just want to watch Netflix and fall asleep on the couch.

The same Nerd Wallet survey showed 88% of people found shopping for car insurance a frustrating process. Shopping around is time consuming, sometimes difficult to compare prices, and often requires personal information people aren’t comfortable sharing for a quote. After my experience this year I can confirm all of these things, but trust me the money you will save is worth the time and effort.

What are things that will affect your premium?

-Where you live

-Age

-Driving history

-What type of car you drive

-Your credit score

-If you’ve had a lapse in coverage

-How high your deductible is

-Do you have an anti-theft system

Now that you know what makes up your premium, you can see if quick improvements can be made. Can you change any of these things immediately to reduce your costs? You could probably raise your deductible or ditch your new car for a cheaper older model. However, most of those things are areas you’ll just need to improve as you move forward in order to keep getting better rates. The main thing you can do right now to reduce your costs it to start shopping around. Even if you are in the middle of a policy cycle that you’ve paid in advance, most insurances will cancel your plan and reimburse you the prorated amount. 

Start shopping around

There are a few things to remember before starting your search for new coverage. First, everyone’s coverage is not created equally, just because your friend or family member has good coverage with a specific company doesn’t mean you will. Also, everyone has different determining factors that change those prices. And of course, don’t ignore local insurers. We all know the names of the big companies but sometimes a local company can give you better coverage or prices with more attention. 

Now that we are ready to start searching it’s important to learn about all the tools that are available to find you that will help the most. You can always go to each individual companies website and enter all your info to a quote. That can be very time consuming, but helpful. Luckily there are several places you can go to cut down on that time.

Helpful Websites

gabi.com :  Gabi is a free tool that compares auto and home insurance rates across top providers and finds you the cheapest rate for your exact coverage. Gabi pulls up your current insurance information and instantly compares your policy to quotes from every major insurance company to find the best rate.

compare.com / insurify.com / thezebra.com All of these websites are similar and will compare rates of major companies for you. It’s not based on your current coverage like Gabi. They take your info and try to help you get the best rate.

Learn from our past mistakes!

Use these tools, compare different companies, and find your best rate. It might surprise you how much you can actually save. We were completely shocked when we made the switch how much money we had been wasting for YEARS. Also, here’s a few other tips to help you keep your prices down. A lot of these companies will give you even better rates if you bundle your car insurance with home insurance as well. So keep that in mind as you are looking at the different companies. And most companies will give you a discount for paying for your coverage six months at a time instead of monthly installments. Ours is over $100 less when we pay in full at the beginning of the premium. And lastly, shop around every 3-4 years, as companies will start to raise premiums and you might be able to find better coverage elsewhere.

All in all, it is a headache, for sure. But when I tell you that we are saving more than $1000 a year since switching, hopefully it will be the motivation you need to pause Netflix and start looking for new car insurance.

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