I’m reviewing my car insurance because it’s my most expensive bill every month. I am paying over $3,000 per year for my insurance, and I’m wondering how much coverage I really need. I am slightly over the required coverage limits, but I am wondering if it is a necessity to keep this level of coverage?
Maybe I can reduce my coverage slightly and save on my premiums?
What limits should I consider reducing or even increasing?
Car insurance is very costly, and you’ll find people spend between $500 and $1,600 annually on their coverage. College students can be three or four times this amount because they’re still consider a high-risk driver by the insurance company.
When reviewing your policy, you need to make sure that you at least meet your state’s premium limits. The insurer will tell you what these minimum levels of coverage are, and most people will go over these limits to be on the safe side.
You need at least the minimum level of coverage, and anything extra is up to you.
I recommend contacting BrokerLink or any insurance broker in your area that will be able to receive quotes from a variety of insurers to keep your premiums down. Some experts even recommend going to a broker yearly to ensure you’re getting the cheapest insurance rates with the highest level of coverage.
When it comes to coverage, I recommend looking at your deductible first. If you have bumper damage that costs $2,500 to repair and you have a $500 deductible, you’ll have to pay the $500 and the insurer will pay the $2,000. If you increase your deductible from $200 to $500, you’ll find that the annual savings are 30% on your premiums.
If you have comprehensive and collision coverage, consider if you really need it or not. If you’re driving a $2,000 clunker, you may not need this additional coverage. I was driving a vehicle that was over 10 years old and received $3,000 because I had comprehensive and collision.
I was paying only $20 or less per month for the coverage, so it ended up being in my favor.
If you’re really struggling to make payments, you can reduce all of your limits to the minimum required in your state or country. Afterwards, you can increase your deductible, with a $500 deductible saving you up to 30% on premiums and a $1,000 deductible saving you as much as 40% on your premiums.
When increasing your deductible, the insurer takes on less risk and you take on more risk. I recommend setting aside your deductible in a saving’s account. This is an amount of money that you should never touch so that if you are in an accident, you have the deductible ready and waiting to pay.
I also recommend asking your insurer for any discounts that may be available. The insurer will not divulge these discounts on their own, and they can save you a significant amount of money over the course of a year. You can get discounts if you own a home, park your vehicle in a garage, take defensive driving courses or install anti-theft devices on your vehicle.