Wow, a new report by insurance analytics firm ValChoice concluded that over the past five years Americans overpaid for auto insurance by a whopping $101 billion dollars! The report also provided the simple reason why: some auto insurers have more profit built into their premiums than others. Specifically, auto insurers that operate as mutual insurance companies came out on top. A mutual insurance company can be compared to the business model of a credit union, and exists to serve its members, not to earn a profit for shareholders.
Consumer Reports lists USAA and Amica Insurance as their two top picks. It is no surprise that both are mutual insurance companies. Be careful, however, not to assume that a company that uses the word 'mutual' in its name is automatically your best option. A mutual insurance company can be poorly managed and not ultimately deliver the best value to its customers. Likewise, a 'for profit' insurance company may go against the grain and end up offering what turns out to be the best deal for you.
Other Factors That Will Affect Your Auto Insurance
Your Credit Score
A low credit score can cause a significant increase in your premiums. There are only three states that prohibit the use of credit scores in formulating auto premiums (CA, HI, NH). It is interesting to note that an individual with a DUI conviction and good credit may end up paying less someone with a good driving record but a low credit score!
Ask about higher deductibles. Agreeing to be responsible for the first $1,000 of damage to your vehicle can save you 25 percent or more.
Limiting Coverage On Older Vehicles
You may want to consider dropping collision and comprehensive coverage on your older vehicle (value of $5,000 or less). Remember, you should always have liability coverage in place no matter the age of the vehicle. Dropping collision and comprehensive makes you responsible for the damages to your own car. This can make a lot of sense with an older vehicle, as the cost vs. possible benefit does not usually represent a good value. Employing this strategy of self insurance also means that you should have adequate financial reserves to replace your vehicle without the financial assistance of insurance.
Ask About Other Discounts
Inquire about other discounts you might be eligible for, and be sure to mention any factors that might make you a superior risk. This would include such things as being a low mileage driver (living near your workplace, work from home, car pooling, etc...).
How Often Should You Shop Out Your Coverage?
The Paris family shops out our auto insurance coverage every single year. After all, this is an expense that involves thousands of dollars annually, and even a small percentage savings is meaningful.
Helping you make the most of God’s money!