by Ashley
We’ve all seen the Geico commercials. “You can save 15% in 15 minutes on your car insurance!”
I particularly like the new commercials (from E-surance) poking fun at the old commercials. Their point is you can actually save more money in less time by using online car insurance services.
Well, in my quest to spend less so I can pay off debt faster, I thought car insurance would be a good place to start. We are very loyal customers of Progressive. Although we have good driving history, ourselves, we have both been very impressed with Progressive’s customer service whenever we’ve been in accidents (between the two of us, we’ve been rear-ended 3 times in the past 4 years). In some cases the other guys’ insurance companies have been a hassle to deal with. Progressive is awesome – they front us the money needed for repairs/rental car/etc., and then pursue the other insurance company to be reimbursed. We love it because we don’t have to wait for the “other guys” to approve a claim. Progressive does it automatically and then THEY deal with the headache of getting the other people to pay up. All of this to say, I am not interested in switching car insurance companies at this time. But I AM interested in saving money.
I was reading one of Suze Orman’s books, The Road to Wealth, and there’s a whole section about auto insurance. After reading what she had to say, I went to progressive.com to their online services (SO convenient!). Wouldn’t you know – we were over-insured!!
Exhibit A. Chris’ work truck. Chris drives a 2002 Ford pickup truck. It’s old, beat up, and has high miles….worth approximately $2,000. And for some reason we were paying comprehensive insurance on it! So I dropped the comprehensive/collision insurance.
Exhibit B. Suze Orman says, “those with fewer assets should consider changing their policy coverage to $15,000 for bodily injury per person, $30,000 bodily injury per accident, and $10,000 personal property coverage per accident.” I checked it out and we were insured for WAY more than that. Seeing as we have very few assets (in the unlikely scenario that someone would sue us from an accident), I lowered our coverage. I switched from $100,000 down to $15,000 (bodily injury per person), $300,000 down to $30,000 (bodily injury per accident), and from $50,000 down to $25,000 (personal property per accident). You’ll notice that I still kept our “personal property” coverage a little higher than Suze Orman suggested – mainly because the cost of cars is so expensive that $10,000 felt a little too low.
And guess what…..
.
.
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I saved WAY more than 15% in 15 minutes!
Our monthly bill was sliced from $128/month down to only $80/month! That’s a savings of $48/month ($576/year), or 37.5% lower than our original bill. And it only took about 5 minutes, if that!
So there you have it! I encourage all of you to check out your policies! I’m sure when I originally signed up for our coverage that I had NO IDEA what I was doing. I think I recall asking the insurance agent (who makes a commission, by the way) what they recommended and just going with that! Ha! I can’t wait to funnel that extra $576 per year toward debt! Wahoo!!!
How much do you pay for car insurance? When’s the last time you checked your policy and assessed your coverage?
Pssst: Check back this afternoon for another big announcement!
Hi, I’m Ashley! Arizonan on paper, Texan at heart. Lover of running, blogging, and all things cheeeeese. Freshly 40, married mother of two, working in academia. Trying to finally (finally!) pay off that ridiculous 6-digit student loan debt!
Hi Ashley,
good for you to take action and good for you to find something that makes more sense financially. (I really should check my car inssurance as well, lol.)
Excellent plan to drop the collision on your husbands truck. I always go back and forth on when the “right” time is to drop collision. Is it when the value of the car drops below a certain dollar value? Or a certain number of years old?
Good question! I’m not sure if there’s a rule of thumb or guidelines for this. I’d love to hear others chime in! I did a quick google search for “when should you downgrade car insurance” and this post came up that said the key question is, “If a significant repair needed to be done to your car, would that be the final push you need to replace it?” (from here: http://www.thesimpledollar.com/when-should-you-downgrade-your-car-insurance/) In our case, the truck’s value is low and its already on its last leg. We’ll drive it to the ground because that’s what we do with our vehicles, but if significant repairs were needed, that would probably be “the end” for the truck’s life.
Trent has great advice!
Wow! That is an incredible savings, especially for such little effort on your part. Don’t you wish everything was so easy? 😉
When I got my new car, my insurance costs actually went down! (I assumed they’d go up since it was newer than my old car and more value to it). Thanks to the myriad of safety features on my car, it helped to drop some costs. We also dropped the deductible from $1,000 to $500, because that seems like a more reasonable amount to scrounge up if something were to happen to my car (and that way I wouldn’t have to halt debt repayment just to fix my car).
But if you kept it at $1000 wouldn’t that have made the insurance even cheaper?
Yes, it would have. I know it sounds silly to save money with the new car features, then raise the insurance with a lower deductible.
But, the lower deductible gives me the peace of mind that I can easily cover it if something were to happen to my car. In my mind, $500 is easier to keep in the bank then $1,000. In the next year or so I will probably raise the deductible back to $1,000 after I’ve have more time to cushion my EF (I’m putting most of my extra $$ towards deby repayments now, still saving but not nearly as much as I want to!).
Just something else to point out – if something happened that required major repairs, generally insurance companies (I think ALL of them, but my experience is primarily with Progressive) will assess the damage, say it will cost “X” to repair, then take the deductible out of that money. So if your repair cost $1500 and your deductible was $1000, they would just take the $1,000 out and give you $500 (meaning – you never have to come up with the money at all). In my experience, you can ALWAYS find body shops to do the work for much cheaper than the rates quoted by the insurance companies, so you may still be able to get necessary repairs taken care of without any money out of pocket. Of course, if the damage is less than $1,000 then you’re out of luck. Just something to think about!
That is interesting to think about! I haven’t had a lot of interaction with insurance claims (my one and only was a totalled car!), so it’s still kind of a foreign world to me. I’ll have to play around with the numbers and see what makes the most sense for my budget now and any potential future emergencies!
Yes, you saved money on the premiums, but do you have enough money to replace his work truck in the case of an accident? Who is going to pick up the difference if you are in a accident that is your fault and you meet the accident limit just in the ambulance ride?
Great questions! This is actually something I took into consideration when revising our recent budget. I’ll have a post about that topic up next Monday so stay tuned! : )
Hi Ashley!
Congrats on the ‘found’ money. I just switched my phone bill with ATT to their mobile share and dropped that from 200 to 135, so I know how good it feels. Maybe my car insurance will be next 🙂
Wow, that’s a huge savings!!! We have Sprint phones and I’ve been seeing all these commercials about how to lower rates by switching to a “Framily” plan. None of my actual family has Sprint, but I’m totally thinking of putting a shout-out up on Facebook to see if any friends have Sprint and want to consider doing this with me (its separate bills, so it seems “safe” from that perspective).
If you have Sprint, just switch to Ting. It’s painless and I haven’t noticed any appreciable difference except that my bill is half or less than what I paid for Sprint. They charge you for what you actually use instead of a flat amount. Don’t use texts this month? Pay nothing for texts! They will also reimburse 25% of your early termination fee up to a certain amount as a credit.
I have a smart phone, but I don’t use a lot of minutes/texts/data. (I use mostly wifi/apps.) Sprint required me to have a certain plan and pay an extra charge for “smartphone” data. It cost $85/month or so. My bill on Ting last month was $19. Yeah. Typically it runs a bit higher at about $35. No change in usage. It’s also nice to have the option to scale back usage and save money if I wanted.
Catch: There is no data when roaming. It’s happened exactly once in the middle of the desert while on vacation. Drove ten minutes and got a signal. Check Sprint’s coverage maps, but it’s not an issue for most people.
Referral code for anyone that wants it. We both get a $25 credit so it’s win/win.
https://zt26gm1t444.ting.com/
You do realize you are taking on the following new risks:
a) If the truck is damaged or totaled in an accident, you have to pay for repairs or buy a new one. Before you would at least get $2000 (minus your deductible) from the insurance.
b) Your risk of bankruptcy just went up significantly. Any accident will now exhaust your insurance coverage almost immediately (medical expenses and legal fees, etc.), and from there they will go after your personal assets.
You buy insurance to cover the risks you can’t afford to pay for yourself. The cost/benefit on the collision coverage comes down to the math, but the other one to me is playing with fire.
I definitely agree the coverage is a little low. In terms of law suit, however….we have no assets. Don’t own a home and the truck is the only vehicle we own outright (the other vehicle still has a large note on it). I will be addressing the need to start a vehicle-replacement savings (for the truck) in my next budget update, next Monday. I also see this as a temporary reduction in insurance, until our CCs are paid off (about a year or less). In my opinion we were definitely over-insured before, but I think there’s a happy medium between where we were and where we are now. I’m taking the calculated risk currently (knowing we haven’t been in an at-fault accident in over a decade) to hopefully be able to pay down debt sooner!
You have no assets, but if you are liable in a collision and you are sued, you are still liable for the settlement or whatever the case may be. That means bankruptcy. These are VERY LOW coverage amounts.
I agree with Kaleb here. You are uninsured. Too often people go with the lowest price policy and don’t realize the MAJOR consequences if they are sued. Also, if your bodily injured policy limits are very low and you are hit with someone without insurance your policy could be maxed out before your medical is covered. I enjoy your enthusiasm, but I don’t think this is a wise choice. One place Kaleb is wrong is about claiming bankruptcy. Your liability in a personal injury suit are NEVER dischargeable in bankruptcy. I am a bankruptcy attorney and I know all the nuances of bankruptcy law.
I meant underinsured.
Honestly I really agree. There’s a reason that the minimum state required coverage, where laws exist, require $25,000/$50,000. You may not have assets TODAY, but a plaintiff who wins against you can claim against your current assets as well. A typical car costs more than $15,000. Medical bills? High…
I’m not saying this to be negative. When I was 18, I worked for a jerk who happened to also represent State Farm. I have also been sued. I didn’t even know I was being sued because the insurance company doesn’t even tell you unless you have to be deposed or worse, but I got hit and found out that I actually had TWO open claims. I had $100,000 and had no idea how much she got. She was a “friend” who dropped off the planet about a week after she was a passenger in an accident we had on black ice. I sincerely believe she was just taking advantage of my insurance company and that she wasn’t hurt. Bottom line – you NEVER know. I ended up switching from SF to Progressive because SF was almost double the cost, but it would have likely taken me years of paying premiums just to make up for that one accident.
Wow! What a scary accident! Fortunately, we rarely (if ever) have to deal with ice. I can’t believe your friend taking advantage that way – such a terrible situation!
Your logic on this is backwards. If you are dropping coverage on the $2,000 truck you are saying you can afford a surprise $2,000 bill. It makes total sense to drop coverage for this when the value is this low on a car. On the other hand, if you are saying you can stomach a $2,000 bill in an emergency then there is no reason to lower the deductible on the other car. If you are already accepting the $2,000 risk you should be able to INCREASE the deductible on the other car to the same amount (2k). Safely I’d say you should have kept it at 1k but in reality raise it to 2k.
However, I recently switched from Progressive to Geico. Playing around with a few scenarios I found that a $750 deductible was only $5 more than $1000. With this in mind you should be looking at the best bang for your buck with the multiple options. In several cases the “jump” in premium from the different coverage levels you can get 2-3x more coverage for as little $10-$20 more for 6 months.
Another thing to keep in mind. You can quote and switch insurance at any time within the 6 month premium. They will give you a prorated refund for amounts already paid on the cancelled party. If you know a violation is going to fall off at a certain time do a few quotes the week or month after to see if you can obtain lower rates.
Wait, I’m confused. I didn’t lower the deductible for either car, I just lowered our overall coverage. Did I say this wrong?? Thanks for the tip about being able to quote and switch insurance companies – definitely good advice!
Sorry, I combined one of the comments with your post and thought you did all of them. Definitely need more coffee on the day!
Don’t we all….it’s definitely a Monday! : )
Nice! And thanks for the reminder for me to review our own coverage!
Great! I’d encourage you to now go shop with other companies too. We have Geico, and I’ve yet to find anyone cheaper. I check a couple times a year. I’ve been rear-ended, and had a tree fall on my car. They’ve been fantastic to deal with, and they also pursued the other driver’s insurance. I’m pretty loyal to them, but if I find someplace cheaper, I will jump.
One additional thing about car insurance. If you play around with the policy limits a bunch while quoting with Geico they will sometimes add on a “persistance” discount. Mine was $28 on a 528 6 month policy.
At least thats what I chalked it up to when I saw it appear.
As a former insurance broker, I agree with the comments that you are being penny wise and pound foolish. No one wants to think that they might have the misfortune to hit a pedestrian – let alone kill someone – but it happens. No one wants to think their car will be stolen, but it happens. Insurance is a safety net. You’re gambling $576/yr against the insurance company’s potential $300,000 payout. Also, comprehensive pays for things like broken windshields. The premium is typically pretty low and a new windshield is upwards of $300. Not replacing one can cost you a ticket and/or a repair. If you really want to save money on car insurance, forget your allegiance to Progressive, go online and get competitive quotes for your policy as it was before you “saved” money. Look at the $576 as an emergency fund. One that will potentially pay out far more than you have paid into it. One last thought: did you know your wages can be garnished into infinity if there is a judgement against you for an uninsured or under insured accident? Bankruptcy does not discharge the obligation.
Dropping your liability limits that low is a terrible decision. How many cars are on the road that are worth more than $25,000? A lot. If you hit one of them and there is more than 25k in damage, they are coming after you. That judgment will haunt you forever and could result in wages garnished and you never being able to buy a house. $15,000 would maybe pay for an ambulance ride and the first 12 hours in ICU. Dropping the comprehensive coverage won’t affect you long term but those liability limits could. I urge you to rethink your decision.
Well, crap. That seems to be the consensus. I was so excited about all the saved money! Boo – party poopers!!! (Just kidding, of course, if EVERYONE agrees this is too little coverage I probably need to rethink it. *sigh*)
ND Chic is absolutely right. I am an insurance agent and you cannot play around with limits like that. We always recommend at least 100,000/300,000 bodily injury limits and uninsured and underinsured. I totally agree with your decision on the truck taking comp and coll off, but you just cannot gamble with state minimums on liability. Another thing to check with Progressive is raising your comp ded on the car and choosing the 0 glass deductible since that is usually what happens. Good job with what your doing but just had to chime in on this one. For what little you save now you could be paying a ton for the rest of your life.
I love your excitement over finding a new way to save money but here I also have to agree with the masses. That being said, take some extra time, do some more research on what would be reasonable, contact several companies and see if you find a happy medium – where you still save money but also protect your family assets. You may even want to check into an “umbrella” policy that would cover your family in the event the worst happens and you are at fault. Keep all your options open and it’s worth more than five minutes to protect your family’s future. You are really trying and the results will be forthcoming!
Sorry but I have to agree with everyone else, you NEED high insurance to protect against being sued. People these days are pathetic and will take any opportunity to sue you to death.
Personally, I shopped around and got new insurance, and also removed comprehensive on an old beat up truck.
But the liability type insurance? I raised that to the max!
The drivers around here are horrendous, very rude, dangerous driving, running red lights etc. I’m not about to risk one of them causing an accident with their stupidity and then suing me into bankruptcy.
I’d call your insurance up and raise your liability back to a sane amount.
Oh and I also tacked on uninsured and under-insured to whatever the max that was, due to all the people who drive around without insurance or without near enough!