Hidden Costs of Auto Insurance: 3 Ways Auto Insurance Companies Get You to Pay More

In our current world of instant gratification, fast food, the internet, same day delivery and cell phones, it’s no wonder so many people want and expect an insurance transaction to last no more than 10 or 15 minutes. If one doesn’t, however, take the time to understand what they’re getting themselves into, it’s very easy to pay a lot of money for something you don’t need.

When shopping for insurance, whether it’s auto, homeowners, life insurance, etcetera, it makes sense to inform and educate ones’ self ahead of time. People often jump into agreements without attempting to understand the major financial commitment they’re entering into. The actual language of an insurance policy, particularly an auto policy, is a complicated legal contract. It’s written in tedious terminology and, some think, is a great cure for insomnia. Due to this, most people have little desire to take any more time than necessary to get a grasp of what they’re purchasing. Consumers with a short attention span are not entirely to blame for this. Unscrupulous insurance agents’ are sometimes culpable of not taking the time necessary to educate a customer adequately about insurance. Insurance companies are also partially responsible by making quotes quicker and easier to obtain on the internet and over the phone; this downplays the necessity of having a meaningful discussion about what protection the coverage’s will, and will not, provide.

Three Ways Auto Insurance Companies Get You to Pay More

1.    Collision Coverage: If you have a car that’s more than 7 or 8 years old, it’s worth considering increasing your deductible or doing away with collision coverage entirely. The reason for this is because, if there’s a total loss, your insurance company will only reimburse you for the amount you might receive currently if you sold your pre-loss car in a private transaction. Depending on the car, this amount is often much less than the money you’ll spend on collision coverage in a couple of years. The best thing is to do the math. Check out www.kbb.com and get an idea of what your car is worth if you were to sell it privately and not trade it in at a dealership. If it’s worth less than the amount you’re paying for collision coverage over a few years, you’re paying more than you should for auto insurance. Remember, however, if you drop this coverage you will have no coverage to repair your car if the responsibility is yours to fix it. Instead, it’s better to put the money you would have spent on collision coverage in a savings account and spend it on another car, or major repairs, if you need to.

2.    Low Deductibles: Some people love low deductibles. In their view, with a low deductible, if they have an accident or submit a claim, their out of pocket expenses will be less when it comes time to pay the deductible to make them whole again. This is a logical conclusion until you start to realize how much money you’re paying for that low deductible. The best thing to do is to set your premiums at the highest level you can comfortably afford if there were to be a claim; the amount you save on premiums should be placed in savings. This is similar to the example on collision coverage.

3.    Vehicle Usage: Something people are often not aware of is, if their lives and habits change, the usage of their vehicle might decrease and they might be entitled to a rating that will cost less in premium. Insurance companies, at the time of application, tend to be very careful about matching the risks they take on with the appropriate amount of premium. As people’s lives change over time, it’s important to revisit those decisions made when we first bought the auto policy and make sure the coverage’s are still appropriate for our needs and lifestyles today. If you’re driving less due to retirement, using public transit, riding your bike, working from home or working less, call your insurance agent and find out if your current vehicle usage warrants a lower premium.

Insurance isn’t something immediately tangible, like a home or a car, so people tend to overlook its’ necessity and potential value. It’s shortsighted to believe that insurance is simply something that you’re forced to purchase by the DMV, the bank or by your parents. Insurance deserves the time and energy it takes to comprehend the intricacies and details that make up your own individual situation. Becoming aware and knowledgeable of these things, along with seeking the regular advice of a trusted agent, can provide better coverage and save you money down the road.