Auto Insurance – Trimming the Fat Tip #1

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Trimming the Fat on Your Auto Insurance

Auto Insurance Trim the Fat 1

As many of you know, by day I am a risk management consultant and licensed commercial property and casualty insurance agent. I have a Certified Risk Managers designation as well as a Certified Insurance Counselors designation. That means that I know a lot of stuff that is good for me to know, but basically worthless information to the population at large! However, I have decided to draw on some of that knowledge for at least a couple of the articles having to do with the trimming of fat in your household budget so that you can improve your cash flow and pay down your debt. I am going to cover a few points in this article about one of the biggest cash flow sponges in your budget which is auto insurance and looking over points that you may or may not know, and at the end of the article, I will give you a resource that will help you begin your mission. This is so important because no matter where you are in the world, if you drive a car, the chances are you’ll be taking out insurance whether it is car insurance Australia, North America, Europe, or anywhere else, therefore, I am hoping that this article will help you to save some money! So, let’s dive in!

Know your Coverages: Without running you through an entire 16 hour segment on the Personal Auto Insurance Policy, I will give you a very high level explanation of the basic coverages on the policy. There are a bunch of coverages in the policy form, but there are 3 basic coverages that will impact the bulk of your premium:

  • Liability– Liability establishes who the responsible party for the crash was, who caused bodily injury and who caused property damage. For this, you may want to click here to get in contact with a lawyer who specializes in brain injuries as a result of car accidents. They’ll be able to point you in the right direction when making any claims for compensation.
  • Comprehensive/Collision – this is what covers your car should you have a wreck that does not involve another vehicle or you are hit by someone without insurance. This covers your vehicle so that you can get back on the road quicker and your insurance company will then “subrogate” and get their money back from the other party’s insurance company or they will sue the other part (if no insurance) in an effort to be reimbursed.
  • Uninsured/Underinsured Motorist – this coverage pays you in the event you have bodily injury as a result of being in an accident with an uninsured motorist or someone who carries liability limits that are too low. In Florida, 87% of the drivers on the road are uninsured or underinsured. I will explain the reason for this later.

Know your limits: Controlling your auto insurance premium isn’t as easy as dropping the limits of insurance on your policy so that the premium goes down. The premium is determined by the level of insurance you carry, the value and age of the vehicle you are driving (for physical damage coverage), and the driving record of the people that are listed as insureds on the policy.

You do not want to play around with your liability limits. The average person should carry no less than 100/300/100. That means that if you are in an accident with another party and are at-fault, your policy will pay out $100,000 per person, a total or $300,000 per accident and $100,000 for property damage. This is called a split limit. That means that they divide out everything and assign a number to it. It would be interesting to see what your limits are as you look through your auto policy. I suspect there are plenty of you reading this article that are at 10/20/10. That means you only have 10k per person, 20k per accident and 10k for property damage. What happens if you T-bone a Mercedes carrying 4 people? The short answer: nothing good happens. When shopping for insurance, be it online or with a local broker like this one in Georgetown, DE, make sure you ask for an adequate level of liability. That is the one that you truly cannot control.

With regard to uninsured motorist, you will need to know whether or not it is “stacked” or “unstacked” in your state. Stacked is more expensive. You don’t need it stacked. If you have 100/300 in limit and you have 2 cars, stacked UM coverage would mean that you really have 200/600 in coverage. Unstacked would mean that you have 100/300. My advice on this is to buy a little higher limit like a 250/500 and have it unstacked. You actually get 50k more in coverage per person, but 100k less per accident. The premium difference between the two will justify the decision to have it unstacked. Understand that this is a question you will have to ask, or specifically click on if quoting online. Many states require that the uninsured motorist coverage be stacked automatically and that you as the insured “opt out” of stacked coverage in favor of unstacked. I don’t recommend not buying the coverage, but simply making this minor adjustment. It will save you $. In Florida, this coverage is through the roof because of the number of underinsured motorists. I attribute this to the fact that the state only requires a limit of 10,000 on the liability portion of the policy to get your tag. Unfortunately, many people probably believe that they are fully covered since this is what the state requires. Not true. That said, because they carry low limits, when they are in accidents, uninsured motorist coverage ends up paying out for the insured. This drives the price of the coverage up.

Physical damage coverage is a whole different story. If you finance your vehicles, you have no choice. Your bank will dictate to you what limits to carry and what deductible you must have. If you don’t finance your vehicles, this is another place to save! If your vehicle is paid off, depending on the age and value of the vehicle, you may choose not to carry this coverage. For example, if I am driving a car that is only worth about 2500 bucks, this coverage doesn’ make sense for me. Why would I pay around 300 per year for coverage with a $500 deductible on a car that is only worth $2500. Another thing to know is that the higher the deductible, the lower the premium. If you have followed our financial webinars, you should have an emergency fund of $1000. Take a $1000 deductible on your physical damage coverage. You already have the deductible covered in your emergency fund. If you aren’t in a position to drop the coverage altogether, go ahead and take the higher deductible and save the money on premiums.

Know your premium: While I don’t advocate shopping your car insurance on a monthly basis, I do think it makes sense to shop it at least once per year. Some people shop it every 6 months. If you have the time on your hands, go for it! The internet has made it very easy for you to be able to get quotes and see whether or not a change makes sense. At the very least, you need to shop around to keep your current provider honest. Many of these companies will give you a fantastic rate to get your business and then gradually up the premium over time. Don’t let that happen! If you have a good history, you need to make sure you are getting the benefit of that good record. Shop your coverage and continue to drive that premium down. The longer you have a good driving record, the more you will benefit from it. If you have slipped up, however, and now need SR22 Insurance on top of your policy because you have a DUI, for example, that’s something that certain insurers will be able to add on for you. If this is something you need, you should make sure to check your state’s requirements for SR22, as they can differ.

As with anything else, it doesn’t cost you a thing to shop. You may be surprised what you find! Remember, this isn’t like your credit report. You want to inquire about your auto rates as much as possible.


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  1. Elaine Spink says

    David, Thank you for sharing this! Gieco is now in Massachusetts which is good for us! A little off subject but we had trouble getting home insurance due to the fact we live within three miles of the ocean. We had to get coverage thru the state of MA because other Insurance Companies would not insure you in fear of a big hurricane! We were paying $2000.00 a year just for home insurance! Luckily, Gieco moved into this area and we now pay $1200.00 a year. Another problem we were facing with Insurance Companies was that we have a German Shepherd and there are some out there that would not cover us. We also have our auto insurance with them which is a lot less than we were paying with Safety Insurance. My husband believes we have the
    right liability on our auto insurance but is going to check just in case because of this article you wrote. We have downsized to one auto due to the fact that mine was sitting in the garage most of the time. We now do fine with just one!! Thank you for sharing, it is very informative!
    Elaine Spink

  2. Elaine – I understand the frustration with your dog. We have a Rottweiler and many insurance companies just plain refused to insure us. We finally found a company that would and did not increase the rate because of her. Then we moved out of state and had to go with a different company. Now she is written out of the policy (along with our trampoline). But there are a lot of companies that won’t even talk to you if you have a so called “Bully” breed. ha! I’d like for them to come meet my Rott and then some of the dogs other people have and tell me which one is the “bully”

    • I totally understand what you’re saying, Nicki! We have a pug/chihuahua mix. For such a tiny dog, he is a HUGE bully…lol Would take a Rottweiler any day!

  3. Renee Witherspoon says

    Thanks for the great article!! I do carry the 100/300/100 have for years. Hubby had the lowest until we got married. I can’t bring myself to drop the physical damage even though I’ve never owed on the car. It’s part of my comfort level I guess. Now that I’ve bought another one and still won’t give up my Honda, insurance companies really like us. His truck that we have to carry one million dollar coverage because of his work, they make us (our ins co) carry it on all 3 vehicles because they won’t write them separately. Add the 3 cars with the house insurance…… you get the idea 🙂 I have checked around but still haven’t been able to find lower rates, but I know they have to be out there!!! We’re paying $1,500 a year on the home and almost $2,000 a year on the vehicles now that I’ve added the 3rd one. Not an expense I enjoy

  4. How serendipitous that you posted this today!! As part of our “trimming the fat” for the new year I spent the majority of the day on the phone with insurance carriers. I found out that the life insurance we purchased for my husband we grossly overpaid for and I was able to get him triple the coverage for less money and an ADD policy for myself (I had melanoma 4 years ago so my rates were astronomical). When we bought our home in August, we switched homeowners and car insurance and really didn’t have the time to shop because I was due any minute and there were lots of other things. Come to find out I can save us another 20% on our auto and keep our homeowners the same with more coverage! I was able to get our car insurance down to $98 a month for two cars!!

  5. Great article and it couldn’t have come at a better time!

  6. Elaine Spink says

    David, Thank you for taking the time to share this article again. We do have the right amount of liability on Kenny’s truck. I am going to shop around again though! Your webinar was awesome last night. I appreciate everything you do! You have no idea! 🙂

  7. Thanks I am submitting my info but I hope they dont call momentarily as it says and wake up the family 🙁 Been wanting to call my agent for a while. I have Onstar and the advertising always says i can get reduced rates, which would help with the cost of the Onstar…It is nice to have but $18.95 a month adds up. I had to use it a few times for minor issues or other persons in an accident. One call was for a cow walking down the road!! I said umm this is kinda a weird thing but…The lady said you would be surprised we actually get a lot of cows at large calls…Can you imagine hitting one of them? This guy was walking down the edge of the road, like it was normal for him/her..

  8. Thanks for your post David. I know you suggested to drop the comp and collision for older cars, but my husband’s car was broken into last month, and the stereo and speakers were taken. The comprehensive covered the replacement of the stereo system. I would like to drop that part of the coverage, since it would save me $300 a year – what are your thoughts on that? Thanks!

  9. Toni Lampman says

    I live in NY and have carried Allstate insurance for years. My policy renews every 6 months and my premium goes up every time, by $20 but EVERY time. I call and ask them why and they say it is a company wide increase. On top of that, I have never had any kind of ticket, never had an accident and only made a claim on a cracked windshield in which if I had it filled instead of replaced they would not count it. I have gone to a few other companies and they tell me that they can’t give me a better price. Feel like I am getting taken advantage of.

    • Toni, unfortunately you are in a state that has a huge amount of insurance fraud due to PIP coverage. It is good that you are checking to see if you are getting a good rate. Unfortunately, it is standard across the industry in places like FL, NY, MI, MA, etc are seeing increases in insurance rates. Even with an outstanding driving record everyone is susceptible to the same increases and decreases that an insurance carrier has.

  10. I know this my be a bit off point but I have been looking for dog ins. (Not the medical) libility. As well as livestock ins. (Mortality) for our show stock. Could you steer in the direction of a few companies that offer either of these. Thank You

    • The Wizard says

      Shoot me an email at and I will send you some information. I don’t personally work with these lines, but I do know quite a few reputable people that do. The only mortality insurance that I write is on 5,000,000 chickens at an egg laying company, LOL.

  11. I am also a P&C agent. When I finally talked my husband into looking at higher Auto Liability coverage and an Umbrella, he wasn’t sure. However, when we upped our Auto Liability to $250K/$500K and added a $1MM Umbrella, our total actually dropped by $250/year. Stacking policies with the same company can do that for you. Yes, $250 less a year and more coverage is pretty much a no-brainer :).

  12. I like your advice to shop for auto insurance on a yearly basis. It’s a great idea for saving money. After all, I shop around for almost any other product that I buy, so wouldn’t I do the same with my insurance? If there’s a better deal to be had, I want it! Thanks for the great read!

  13. The information about the different types of car insurance coverage that’s offered is really useful to know. I’ve heard of liability and comprehensive coverage, but I haven’t heard very much information about uninsured motorist plans. Since this type of coverage would pay me when an accident happens if an uninsured or underinsured motorist hits me, I would probably benefit from having this. Now that I know more about this type of car insurance, I should try to have this included in my plan. Thanks for posting this!

  14. I have never been very knowledgeable about car insurance, so thanks for the help. I didn’t know about the different types of coverages, that is good to know. Is there a difference between comprehensive and collision coverage?

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