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Facts of life: How Much Auto Insurance Is Too Much? How to Save on an Expense You Will Have as Long as You Have a Vehicle

Every year that you pay your insurance premiums and don’t make a claim is, it may seem, another year of money down the drain. The thousands of dollars could have been spent on buying something of lasting value which would still be around at the end of the year.

Of course, we all know that this is not the right way to look at insurance. A year in which a claim is not made is a good year. After all, that is a year when the misfortune you are insured against has not happened.

The Negative Perception of Car Insurance

Unfortunately, for many people, insurance is a subject that has a negative perception. Take a look at the recent article from CBS mentioning how your rates are going to “double” if you have bad credit.

When you take out a life insurance policy you are betting that despite your best efforts, you will die. With auto insurance, you are betting that no matter how careful you are, you will be involved in an accident.

And so on, for health, home and all other kinds of insurance. In a way this is true, you are betting money that something bad will happen, only then will you get the payout.

Typical Rules for Auto Insurance

Evaluating your car insurance needsHow much to spend on coverage
Your age, assets and driving record.Learn what your state requires.
The age, make and model of your car.
Different types of coverage available.
Your risk tolerance, or how much you can pay out of pocket in the event of a claim.

Consult an insurance agent.
Discounts available to you.Shop around.

State Examples of Minimum Coverage & Recommended Coverage

CoverageFlorida Minimum Liability CoverageRecommended Auto Insurance Coverage
Bodily Injury Protection$10,000 / $20,000$100,000 / $200,000
Property Damage$10,000$50,000
Personal Injury Protection$10,000$100,000 / $200,000
Uninsured MotoristN/A$100,000 / $200,000
Comprehensive CoverageN/A$250 deductible
Collision CoverageN/A$500 deductible

Note: As you can see from the table, the minimum coverage is in the second row while the recommended coverage is the third row. If you lower your coverage or take coverage similar to the second row you will lower costs. Realize that you lower coverage too.

CoverageNew York Minimum Liability CoverageRecommended Coverage
Bodily Injury Protection$25,000 / $50,000$100,000 / $300,000
Property Damage$10,000$50,000
Personal Injury Protection$50,000$50,000
Uninsured / Underinsured Motorist BILN/A$50,000 / $100,000
Comprehensive CoverageN/A$500 deductible
Collision CoverageN/A$500 deductible

Note: As illustrated by the two tables above each state does not require comprehesive or collision coverage. Another way to lower your costs is to raise your deductible or if possible get state minimum coverage only. Be sure to consult with your insurance agent. If you need additional state minimum coverage it is here.

The Search to Cut Costs on an Insurance Policy, But Have Ideal Coverage

That is why so many people spend time examining the amount of insurance they carry and the amount they pay for it. The total of all the premiums put together can seem frighteningly high. So the search begins for ways to cut costs.

This chart shows how raising your deductible will lower your auto insurance costs.

Note: By raising your deductible you take on more risk, but lower the cost of your monthly premium. This is one way to take control of costs.

After all, the amount of insurance you have, or need to have, is often subjective. If you die tomorrow, you want your family to live in comfort and your insurance policy will ensure that.

This chart illustrates how much more, percentage wise, raising your deductible will help to lower auto insurance costs compared to discounts and state minimum coverage.

Note: Here is another illustration of raising your deductible. Discounts and Bundling  policies help to lower costs or you could lower the amount of coverage to PD (Property Damage) an BI (Bodily Injury) or State minimum coverage. However, raising your deductible will lower your rates more most of the time.

Confusion of Ideal Coverage for You

But what is comfort? DO they need a new pool? A huge home theater system? Should the insurance policy be large enough to pay for all this and more? Or should you reduce your coverage, and by doing that, reduce the amount of premium you pay? The money saved will be useful today. And if you are not around anymore, your family should be able to manage with the old TV, the 4 year old car and who really needs a pool?

1st Graph Illustration – Comparing Top Insurance Firms Example

This chart illustrated the importance of comparing quotes since a driver can get different auto insurance quotes from the same company.

Note: In this instance the same person obtained car insurance quotes from the same company and received a different quote.

2nd Graph Illustration – Comparing Car Insurance Quotes

This is a second chart showing the importance of comparing auto insurance quotes to help lower their costs.

The money you save could even be used to start buying these things today. Would you and your family be seriously impacted if the amount of insurance, of various types, that you carry is reduced? It’s easy to think that nothing much will change and the basic risk will still be covered, at least in all the essential ways.

Finding the Right Balance with a Policy

It’s often difficult for an individual, or even a family, to take an objective look at the lives they lead. Even Paula Pant of About.com recommends following the 50/30/20 rule trying to find the right balance with your personal finances.

10 Ways to Lower Your Auto Insurance Costs

RankCoverage Change
1CLEAN DRIVING RECORD
2ASK FOR HIGHER DEDUCTIBLES
3REDUCE COVERAGE ON OLDER CARS
4BUNDLE INSURANCE
5GOOD CREDIT
6LOW MILEAGE DISCOUNTS
7OTHER INSURANCE DISCOUNTS
8SHOP AROUND
9BEFORE BUYING COMPARE INSURANCE COSTS
10GROUP PLAN DISCOUNTS

We all think we are practical and sensible human beings who know what we need in life and what we don’t. The reality is somewhat different. Only a machine can be completely objective – humans’ can’t. It is the quirks and eccentricities that each one of us has that makes us human and adds value to the lives we lead.

Going to a spa once a month may seem like luxury, but not being able to go can affect the happiness of a person who is used to it. A couple who live alone in a big house may have to live in a smaller one if their home is destroyed and their insurance cannot cover the cost of rebuilding it to what they had before. That should be okay, but what about the fact that they will now have to change their lifestyle?

Look for Vehicles Which Cost Less to Insure

VehiclePriceAvg. Premium
Toyota Rav4$24,350$1,261
Honda Accord$22,205$1,267
Honda CR-V $23,845$1,272
Subaru Forester$22,395$1,291
Hyundai Sonata $21,300$1,418
Honda Civic$19,050$1,421
Toyota Camry $23,070$1,459
Toyota Prius $24,600$1,463
Acura RDX $35,370$1,479
Nissan Sentra$16,780$1,498
Lexus RX$44,700$1,511
Audi Q5 $40,900$1,563
Acura MDX $41,165$1,572
Ford Fusion $22,110$1,272
Lexus ES 350 $41,650$1,723
Nissan Rogue $23,290$1,463
Kia Sedona$26,400$1,469
Chevrolet Equinox$22,600$1,572
Mercedes-Benz E-Class$49,650$1,786
Ford F-150$30,600$1,468

Conclusion

When buying insurance it is essential to evaluate what kind of coverage you will need to protect you and/or your family when something bad happens.

This means not just existing but being able to live lives of quality. Then examine how much this coverage will cost.

For further reading see the article below: 

25 Tips For Cheaper Insurance
Advantage to Comparing Quotes
What You Can Do Now to Save on Your Premium
More Tips
Ten Best Auto Insurance Firms
Best Comparison Sites Around

There is often a gap between the two figures and compromises have to be made. But when these are done, it is essential to know what you are giving up in term of coverage and work to improving it in the years to come.

Greg Fowler
I love to network, travel, and spend time with my children. When I am not doing that I am working on AutoInsureSavings or other websites. If I am working, the best way to reach me is via my Google+ Profile.

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