I need help with reducing my auto insurance. It’s not like I pay super premium but I think it definitely can be lowered from what I pay currently. Let me summarize the details.
Car: 2003 Mazda 6, 100% owned
Mileage: 134,000
Roundtrip For Work: 30 miles
So, I pay over $420 every 6 months. It’s not that bad and I certainly can afford it. But I still feel that I’m overpaying. Perhaps, I’m over-insured. Let’s take a closer look at each item so you and I both can understand what we are each paying for for our own auto insurance coverage.
Automobile Liability
When you are in a car accident, the medical bills that are incurred by the other driver and their passengers are covered under this coverage. Passengers injured in your vehicles are also covered. Property damages for the vehicles involved and other property damages caused by the accident are also covered. In my case, the limits of $100K, $300K, and 100K corresponds to bodily injuries for one person, bodily injuries for all people, and property damages respectively. I feel that I may be over-insured in this category. It accounts for 40% of the total premium but it could come back to haunt me if I skimp on this coverage.
Basically, the general rule of thumb for this coverage lies in the total assets you have. The more money you make and the more assets you have, the higher the coverage should be. If you’re a college student with minimal income and rising student loans, minimum coverage should be sufficient. The problem with this coverage is that it’s there in case you get sued by the other driver. Even if the accident isn’t your fault, you can still get sued. If the other driver complains of back or neck pains, lawyers will find ways to sue you for hundreds of thousands of dollars.
Bodily Personal Injury Protection (PIP)
If you are injured in a car accident, this coverage pretty much bails you out. However, if you already have health insurance, having this coverage becomes redundant. I currently pay $26 for this coverage and I have health insurance from my day job, so there is definitely some money-saving opportunity here for me. However, Maryland like some states require that you carry a minimum of $2,500 PIP coverage. So, not much I can do there. You can find out about your state’s minimum coverage requirements here.
Uninsured Liability
Imagine you’re stopped at a red light and then all of a sudden, you’re rear-ended. You exchange information but you find out that the other driver is not insured at all. What do you do?? It’s exactly for this scenario Uninsured Liability exists. It covers your all accident-related bills in case you’re in a hit-and-run situation or involved in an accident with uninsured vehicle. Although nearly all states require that you carry an auto insurance, there’s always that slight chance you will run into one without insurance. I don’t think I can skimp out on this one since it’s cheap for the amount of limit covered.
Automobile Medical Payments
This coverage is very similar to PIP coverage except it doesn’t cover lost wage due to injuries. For the same reasons for not needing PIP, I think I can remove this option.
Auto Collision and Comprehensive
These coverages are another big portion of your total premium. Collision covers the cost of your vehicle if it’s totaled in a auto accident. It also covers your damages on your car, up to the value of your vehicle. Comprehensive coverage is exactly the same but for situations not involving accidents. Thefts and trees falling on your car falls under this category. Since my car is 7 years old with nearly 135k miles, I think I can lower my coverage or at least increase my deductible from $500 to $1000.
Towing and Rental
I’m not quite sure how I feel about paying $26.90 for towing and rental every 6 months. If I were to be involved in an accident that’s my fault, then I would need a rental, which could add up to quite a hefty amount, especially if it’s over a weekend. Also, towing is only $3, but for only $25 limit. It means I’ll recoup my money if I have my car towed less than once every 4 years. I think I’ll pass on the towing. But for rental, being without a car and paying rental out of your own pocket for multiple days can be significant. Over the next 10 years at $23.90 for every 6 months, that adds up to $478 for rental coverage. At $30/day, I’ll break even after 16 days of rental. Although I haven’t had a need for a rental for the past 10 years, I think it might be worth keeping it.
Online Quote From Geico.com
I currently have insurance from Allstate and my monthly payment is $70.03. I went ahead and did a quick online quote from Geico.com just to compare. I entered every category the same so I can compare apples to apples. Geico gave me a quote of $68.92, for a savings of about 1.5%. from Allstate. Hardly worth the effort of switching from Allstate.
And then I changed some of the parameters which I discussed above. The new quote came out at $62.69 per month for a total savings of about 9%. from the original quote. You can see the output of these results here: 1) Pre-Savings Geico Quote 2) Savings Geico Quote.