Take control of your auto insurance
Many people are opening their auto insurance bill to find that their rates have suddenly skyrocketed. In this economy, an impossible car insurance bill is the last thing a person needs. What was the reason for the sudden increase?
Most people immediately call their insurance agent for answers. When the agent doesn’t answer the phone or return the call, she contacts the company’s head office. After yelling to no avail at the person sitting in the cubicle in Connecticut or Rhode Island, they begin searching. To avoid having to deal with a new “sales” insurance agent, they enter false information on Internet quote sites or call telephone quote services. What they find is that, in general, given the same coverage, the rate is relatively the same.
Is the entire insurance industry conspiring against you? Well, in a way, yes. Insurance companies change their rates periodically. Sometimes they have a new administration with a different philosophy. Sometimes they want to reduce the concentration of policies within a geographic area to spread risk. But the most likely reason for your rate increase is that something changed in your life that makes you a higher insurance risk. Someone in your family had a traffic accident or a violation. Or he may have recently filed a claim. Or one of your children just turned sixteen. Or maybe something as seemingly unrelated as your credit score dropped. When it rains it pours.
Most people don’t think about their car insurance until something shocking happens. Believe it or not, this is a great opportunity to make some changes that will save you literally thousands of dollars for the rest of your life.
The main principle to remember regarding any insurance is this: insurance is for catastrophes. This sounds simple, but hardly anyone lives it. If you are paying an insurance company to protect you against a loss that is not catastrophic, you are throwing your money away.
Insurance is based on the idea of compensation. Compensation is having access to an amount of money equal to the amount of a loss. There is only one entity you must pay to protect you against a loss that is not financially devastating. That entity is you. You must become your own insurance company.
The first step is to recognize if you are upside down; if you owe more on your vehicle than the vehicle is worth. If this is the case, get out of this situation. Sell the car and buy one that is not financially devastating to replace. Even with the remaining balance from the old vehicle, you’re still in better financial shape with less debt.
Then make the decision to pay an insurance company just for catastrophe protection. The most practical way to do this is to increase your deductible on your Collision coverage. With a deductible of $1,000 (or more), you can significantly lower your premiums. Use the premium reduction to save the amount of your deductible in an emergency savings account. Keep contributing to your savings until you have enough to match the replacement value of your car. Then drop your collision coverage entirely. By doing this, you have taken control away from the insurance company.
