Insure your sweet ride so that you’re legal and covered

November, besides being a month of fantastic holidays, is also the month that I pay for the annual insurance on the cars of my wife and I.  Since this only comes up once a year, it is something that is fairly easy to forget.  I pay this out of general savings, but each time I get the bill for our car insurance, it really makes me look to see if I can save some money and to look at some competitive auto insurance quotes.

Now auto insurance is mandatory in the state of Washington, so it’s not like you can drive around without it.  (OK, I guess you could, but it is illegal and you would go to jail if you get pulled over for some reason.)  Since you need it if you drive a car, you may as well try and save a few bucks with your insurance.  Some of the components that drive (ha!) the cost of your car insurance include:

  • Bodily Injury Liability – will pay if you are at fault and hurt someone in an accident.  Usually has limits of $100,000, $250,000, or $500,000 per person or per occurrence.  This is usually about 30% of your premium.
  • Property Damage Liability – If you are at fault and you bust up someone else’s stuff, insurance will pay for this.  Usually has a limit of $100,000, $250,000, or more.  This is about 15% of your premium.
  • Uninsured motorist – will pay if you are hurt, your vehicle or other property is damaged and the at-fault motorist doesn’t have insurance.  Fairly important as if someone is hurt, even if you weren’t at fault, they’re suing you because of you “deep pockets” and insurance.  This is another 15% of your premium.
  • Personal injury protection – have nightmares or trauma from an accident?  This personal injury protection will help pay your therapy bills.  This is usually thought of as “no-fault” insurance coverage because it is often paid if needed.  The coverage levels of this type of insurance is usually fairly low, usually $5,000 to $10,000.  This is often optional coverage that can be added and runs about 10% of your total premium.
  • Loss of income protection – Out of work and still want some cash?  Get this option, though it usually maxes out at a silly low level, like $250 a week.
  • Collision – Did you drive your car into a brick wall?  Collision insurance is what gets it fixed.  Costs you about 20% of your premium.
  • Comprehensive – Did a tree fall on your car or a thief run off with your wheel?  Comprehensive fixes that.  Comprises about 10% of your total.
  • Towing – Prefer not to pay $400 plus $39 a mile?  Get the towing insurance option.

Accidently run someone over and don’t pay the damages? Insurance!

How can you save money on your auto insurance?

There are a number of ways to save money on your car insurance.

  1. The first option is reducing the level of coverage that you are purchasing.  All those limits that I mentioned in the section above?  If you have lower limits, you’ll pay less for your coverage.  In general your cost will scale down a little less than linear, meaning if you cut your coverage in half; you will save somewhat less than have in premiums.
  2. Your second option is increasing your deductibles.  A deductible is the amount you pay (or loose) before the insurance starts to kick in.  If you want to pay only the first $100 of fixing your car after running into that brick wall above?  That will cost you a lot more than if you agree to eat the first $1,500.  This doesn’t scale anywhere close to linear, you’ll save money, but doubling your deductible doesn’t cut your rate in half.
  3. Lastly, you can bundle your insurance and get discounts.  Like the phone and cable companies, if you do more business with your insurance company and bundle your auto, home, and life insurance, they will give you a discount because you are a good customer and send them more money overall.

Readers, do you have some secrets to saving some cash on your car insurance?  Do you ride a bike instead?  Let me know your thoughts.

About Karl

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2 Responses to The importance of auto insurance and saving money

  1. Jon says:

    Isn’t really a secret saving – but is there a reason you decided to pay your car insurance as an annual fee? I’d be terrified for such a large amount to come out at once, so we’ve opted for automatic monthly payments which we don’t really notice as much!

    • Karl says:

      I find it easier to get a single bill for the year, reduces paperwork. I get enough on a monthly or bimonthly basis as it is, but if I were a bit better at automating my monthly bills, maybe that would work better for me. 🙂

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