How to Make a Half-Million Dollars by Saving on Your Car Insurance
by Jason Dean
Could there be a more boring subject in the world than car insurance? Even personal-finance buffs like us tend to get heavy eyelids at the thought of reading yet another generic article called “Ten Tips to Save Money on Car Insurance” — is it just me, or are they all the same? And besides, how important can car insurance be compared to the millions you can make in the stock market?
But the reality is that Americans spend more money on insurance than any other product or service — and for most middle- and low-income people, the bulk of that insurance-spending is on car insurance. An hour or two of research could end up saving you $50 a month, and if you started putting that much extra into an IRA at age 22, then by the time you were 67, you’d have built up $575,000 (assuming a 10% annual rate of return). All that for just two hours worth of work? Not bad.
Understanding the Car Insurance Market
The first thing you need to know is that the car-insurance market is incredibly competitive. Since the Internet opened up nationwide competition, insurers have been forced to cut rates despite rising insurance costs. This has been bad for car-insurance shareholders, but great for everyone else — well, almost everyone. There are still some people who use the “trusty” local agent without realizing the local yokel is taking them for a ride.
You see, when you base your car insurance on a personal connection, you are not treating it like the financial product it is. You might think your local agent is a Good Ol’ Boy, but he looks at you as a captive customer — and he thanks his lucky stars every night that you stay with him.
If you think this isn’t the case, then just try this: Call up your agent and ask him to send your declarations page so that you can review the details of your policy. Tell him that you’re thinking about shopping around and you want to be informed. Nine times out of ten, he will make you a better offer right then and there.
How to Maximize Your Savings
The popular commercial says, “Fifteen minutes can save you a lot on your car insurance.” Fifteen minutes is better than nothing, but if you really want to save, you need to begin to understand car insurance. Yes, I know, it’s boring — but just think how much you’ll enjoy that extra $575k! CarInsuranceRates.com is a really good Web site (I used to write for it) for learning everything you need to know about auto insurance.
Once you understand your own coverage, you’ll be in a much better position to find the best deal to meet your needs. But a one-time investment of fifteen minutes or even two hours won’t be enough. If you really want to maximize your savings, you will need to shop around for the best deal every time your six-month policy term is completed. This would have been extremely time consuming in the days before the Internet, but thankfully Web searches and various sites make comparison shopping a snap.
So, your to-do list for this week should include these two items:
- Set aside an hour or two to do some research on car insurance, and then some comparison shopping.
- Plan how to spend your extra $575,000 in retirement!