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Holding the Reins on Runaway Auto Insurance Premiums 

With so many things draining our income, Americans are looking at every possible area to cut costs and pay down debt. Unfortunately, some are cutting valuable insurance plans leaving them at high financial risk. In any given roadway, one out of ten vehicles has probably dropped their insurance. NOT a comforting thought. Yet, do the math: increased unemployment, student loans, record credit card debt, medical debt for various health issues, all contribute to the pressure of how far the dollar will stretch and cover essentials.

Perhaps the first question to consider is, “Can we do with LESS for NOW?” As expensive as auto insurance may be, few drivers want to risk not purchasing at least a minimal coverage policy. How do we stick to a budget plan, pay the least premium for the maximum coverage, and still not be stuck with a huge deductible. Can you actually have one without the other? Not without serious research and shopping.

D.Eric Giles, financial expert and President of DebtFreeAmerica.com, offers basic tips for planning your premiums.

  • Drive a conventional car with a smaller engine.
    Not as exciting as that high-powered sports car, but not nearly as expensive on gasoline or your initial insurance premiums. Delayed gratification may take years until student loans are paid, home mortgage is stable, and kids’ college funds are established. While your high school or college buds are driving by wondering where your toys are, remember, a few months down the line those friends may be facing repossession, eviction, and years of bad credit history.
  • Avoid modifications.
    Avoid significant upgrades to vehicle performance, styling or audio as these are often frowned on by insurers. Be careful not to draw attention to high-theft items on or inside your vehicle and anti-theft modifications might significantly decrease premiums. Small changes are often OK, but ask your agent first.
  • Plan your Spend.
    Your first insurance premium will probably take you by surprise. Many people find it difficult to pay the whole premium up front. Most insurance companies will let you pay in monthly installments, but they often charge a small fee for doing so.

The bottom line is that you will get what you pay for, so as to Financial Education and getting out of debt, we recommend that you follow these basics when shopping insurance:

  1. Realistic Coverage: Describe to your agent the general time and route for your weekly use of your vehicle. Discuss the age and condition, passenger or carpooling, and what you should or should not be using your car for until you can afford better.
  2. Higher Deductible:Depending on the age and condition of your vehicle, you may be able to cut major dollars off of the monthly premium. You may have to pay more initially if you have an accident. Hopefully, you will drive more defensively to protect your costs.
  3. Just Keep Shopping: Even after you purchase a plan, with depreciation and a good driving record, your premiums are subject to decrease over the years. Let your agent know you are always searching for the lowest and best. Making agencies compete for your best coverage should be their problem, not yours.
  4. Examine Your Stats:Your driving record, health habits, safety features on your vehicle, security cameras on your property, anti-theft and alarm systems installed in your vehicle, as well as being a non-smoker, or non-drinker,  could bring significant reductions in premiums.
  5. Package Deals:If at all possible, obtain your competitive rates from the same agent and company. Military, Educators, and other professionals have group agencies that cover health, auto, home/renters, life, and even pet insurance.

While cutting corners as tightly as possible to eliminate your Debt Tower, be sure to purchase enough coverage for adequate assistance. No need to pay for entire replacement value for your home or vehicle while you are in debt. Keep realistic payment priorities as your guide: “Every Dollar On Purpose!”