Car Insurance Costs Before and After an Accident

In the beginning of the year we changed car insurance after over 20 years of being with the same company. It was after hearing a small radio snippet from consumer advocate Clark Howard. An article related to the quick radio story is on his web site: Consumer Reports Ranks Auto Insurers It sites the Consumer Reports rankings of customer service of car insurance companies.

Other_Drivers

The other drivers are the reason you need insurance!

The main thing to get out of the article was to look at the main reason you get insurance; to cover your costs in the event of an accident. The rankings were important because you want to know if the company you are insured with is going to follow through when an accident does happen. I wasn’t unhappy with the company I was with. I only had three major claims with my insurance company in the 24 years. (2 deer incidents and another driver who ran a red light and totaled my car) So basically they were relatively under utilized- which is a good thing.

I wasn’t really concerned about the past, but what can happen in the future. So a re-evaluation of the car insurance was needed which prompted me to move to a higher ranking company for better coverage. There was a $500 difference per 6 months less on the new car insurance. In the 24 years that would have saved $24,000 in costs.

The article helped with the move to lower insurance cost and better coverage. The process I used is below but, keep in mind not all companies are available in all states and USAA you needed to be a part of the military to join (or defense related; check their website to see eligibility)

Using the 80/20 rule* I grabbed the top 20% companies to get 80% better coverage. It makes my life easier so I don’t have to worry about looking at the others wasting my time. Of the remaining four I saw that USAA and Amica are consistently in the top two. So either one would have been fine with me.

Based upon the article and using the 80/20 rule I came to the conclusion there are only four companies I’d consider:

USAA
NJM Insurance Group
Amica Mutual Insurance Company
Auto-Owners Insurance Group of Companies

Defining the goal is important: Insurance is for accidents so lowering monthly premiums is my goal with great coverage. Start by a high deductible and coverage only for injuries. (The phase 1 car is so cheap I am self insuring it’s loss) I have an emergency fund enough to cover the deductible and  by having 2 cars (my wife’s and mine) so we can juggle 1 car temporarily while we look for a replacement.

The replacement is whatever money we have at the time of the accident. We also combined our house and car insurance under one company to get a discount which we then applied to an umbrella policy. The added savings of having a lower premium by driving an older more inexpensive car is a added plus to having a phase 1 car. It makes you happier to drive the car around knowing this.

The savings just sweetens the deal all the more (phase 1 car). Between the gas money saved with the Phase 1 car and the $83 per month insurance savings with two choices the savings per month for the Phase 2 car went from zero to $173 per month (insurance + gas savings of changing to a more fuel efficient car). In 10 months from purchasing the phase 1 car the savings would be $1730 without changing anything in my lifestyle but switching cars. If I was to add just $100 per month on to that sum and sell the phase 1 car for what I got it for the cash available for the next car would be $6830 which is a big step up from the $3400 I started with.

Momentum Projection for Phase 2 Car:
(Insurance/Gas + Savings + Ramsey Rover sale + sale of Almost Sports car = $6830)

High insurance premiums can be the silent killer of building financial momentum. It is the little financial wins collectively that build momentum and become a big force.

*Additional info

  • Good 80/20 rule book: The 80/20 Principle: The Secret to Success by Achieving More with Less by Richard Koch
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One thought on “Car Insurance Costs Before and After an Accident

  1. Pingback: WAVE-B | Red X Drive to Freedom

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