In Part 1, we talked about the first five ways to save money on car insurance. In Part 2, you'll see the next five.
STEP 6: Review, change, or cancel PIP and no-fault coverage (Personal Injury Protection)
Both No-Fault Coverage and its twin, PIP, were great ideas at first. In fact, your premiums were going to go down. Then, your State Politicians got involved (at the urging of Insurance Lobbyists, of course) and messed it up.
See, the idea behind no-fault insurance was that each person's losses would be covered by their own car insurance company, no matter who was at fault.
Today, car insurance companies make a lot of money off of "no-fault" laws in many states because they were able to convince lawmakers to make "modifications."
Because of these changes, no-fault laws are now being used by car insurance companies to cut the amount they pay out when a customer makes a claim, instead of lowering premiums as they were meant to do.
So, premiums keep going up and up, but insurance companies end up paying less for claims. Someone is getting rich on this deal, and it's not you.
And to make things even worse, some states (with really, really good Insurance Lobbyists) also require an extra premium on top of the no-fault premium. Personal Injury Protection is the name of this work of art (PIP).
PIP is a "wide-blanket" of coverage that can include Collision Coverage, Hospitalization, Social Security Disability, Workers' Compensation, Personal Disability Insurance, and Life Insurance.
The problem with PIP and what it covers is that....
You already gave most of these coverages, if not all of them, didn't you? So you have to pay twice!
So, there are a few things you need to do:
Google "minimum levels of required auto insurance" to find out if your state requires No-Fault Insurance and/or PIP;
Check your policy next. If your state doesn't require you to have No-Fault/PIP Coverage, you should get rid of it. If your state requires you to have No-Fault/PIP, take the bare minimum. This is how.
If you must have No-Fault/PIP, ask your car insurance company for a deductible and get it.
STEP 7 - Cancel Medical Coverage
Medical Coverage is a promise on most car insurance policies to pay "reasonable" medical bills for anyone riding in your car if you get into an accident or if someone else hits your car.
Cancel it. It's not what you need.
Why do you say that? Well, the medical coverage that comes with your car insurance is the same as what you already have:
- Your health insurance plan; - Your life insurance, if you have it; - The liability sections of almost every car insurance policy written in the U.S.
Think about it this way: Do you have a Health/Medical/Hospitalization Plan through your job or an organisation you belong to?
Then why do you pay extra for your car insurance policy's Medical/Hospitalization Coverage?
Here's what will happen if you tell your car insurance company or agent, "I don't want the hospitalization/medical coverage." You will hear some very clever "scare tactics" meant to make you change your mind.
The insurance company worker will say, "Well, if you cause an accident and anyone else in your car gets hurt, who will pay for their medical bills?"
This is the answer. Your Health/Hospitalization Plan already takes care of your family. If anyone else in the car gets hurt, they are covered by your Bodily Injury Liability coverage, which you already pay for, and their own Health/Hospitalization Plan.
So go ahead and get rid of this coverage to save some more money.
STEP 8: Cancel Death, Loss of Sight, and Being Torn Apart
Do any of these coverages come with your current car insurance? If so, stop them.
And don't let anyone talk you into buying car insurance if it's your first time or you just want to get a few quotes.
Why?
Because this kind of coverage is a waste of money. Most of these extra coverages are just "glorified" versions of life insurance with crazy rules and outrageously high premiums. Make a separate Insurance Policy for life insurance if you need it.
STEP 9: Turn off any extras
Does your policy include "Roadside Assistance" or "Rental Car Reimbursement?" Delete them if so.
Again, don't worry about these coverages if you're buying insurance for the first time or getting quotes for car insurance.
Why? Because they are way too expensive, are rarely used, and put limits on what you can do.
For example, some "rental car reimbursement" coverage costs almost $100 a year for each vehicle on your policy. So if you have two cars, you'll spend almost $2,000 over the next 10 years on rental car coverage that you probably won't even use.
And help when you break down? The peace of mind it gives isn't worth what car insurance companies want to charge for this coverage. Help on the side of the road is a good idea. But AAA is a cheaper way to do it.
STEP 10: Get rid of collision and comprehensive coverage on older cars.
If you have an older car that's worth less than $2,000 wholesale (what a car dealer would give you for it if you traded it in), cancel or decline Comprehensive and Collision Coverage when you get a quote for car insurance.
This is why. If a brand-new car and an 8-year-old car both have the same damage, the cost to fix both will be the same, even though the 8-year-old car isn't worth much.
You can see that the price of a bumper and fender is the same for a brand-new car or an 8-year-old one. So, your insurance rates don't go down when the value of your car goes down. Your payments stay pretty much the same year after year.
But what you'll be able to get for that old car goes down to nothing. For example, your insurance company will only pay you the wholesale value of your car if it is "totaled."
So, if your car is worth $1,000 but the damage is more than $4,000, the insurance company will only give you a check for $1,000, less your deductible, of course.
So you might get $500 back in the end. Even though it sounds like a bad deal, that's how it works.
So, as a general rule, you should drop your comprehensive and collision coverage when your car is worth less than $2,000, or you'll just be throwing your money away.
Okay, you've made some notes and are ready to make some changes to your car insurance policy. So call your insurance company and start cutting your premiums!
