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Saving Money on Car Insurance

Cindy and I needed to renew our car insurance policy this month – the renewal letter came in the mail yesterday. Our current policy is with Liberty Mutual (www.libertymutual.com). They’ve been a fantastic insurance company and rates have always been competitive as far as we could tell. However considering the fact that we desperately need to save money, we decided that it’s time to maybe shop around for a better deal on car insurance.

What a nightmare.

For anyone who’s tried to shop for car insurance, the terms and conditions that are listed in these things might as well be written in Portuguese. I can now understand why most people simply sign up for car insurance without paying much attention to the policy itself.

However, since we decided it’s time to save some money, I started to do some research about car insurance before renewing our policy with the same company. I learned a great deal, and I’m going to pass on these lessons to our readers.

Insurance Policy Terms and Conditions

One thing I realized that the only way to save any money with car insurance is to understand how the contracts work, and to ask for only the types of coverage that are needed, and turn down all extras.

Essentially, it works like this. An insurance policy is made up of nine components – and each of these components has associated costs. The only component of insurance that anyone is legally obligated to carry in order to drive a car is liability coverage. All other components are optional. If the insurance company you’re dealing with suggests that it isn’t optional, then consider going to a different insurance company.

Components of Car Insurance

The liability component of insurance is the one that you are legally required to hold. It covers any of your legal liability if you get in an accident and hurt anyone or damage any property. The insurance company will pay any damages on your behalf to the injured person, or for the property damage that you’re legally obligated to pay.

The medical payments option is known as MedPay coverage and it covers any medical care that you would need after being injured in an accident.

Personal Injury Protection (PIP) is allowed only in certain states, and is better known as “no-fault insurance”. PIP covers any lost wages, to certain limits, if you become disabled because of the accident.

Uninsured/Underinsured Motorist (UM/UIM) protection will cover any damages or medical costs if you are ever in an accident with an uninsured or underinsured driver.

Comprehensive coverage is the component that covers damage unrelated to a typical car accident. Comprehensive insurance covers damage caused but things such as natural disaster, fire, theft or vandalism.

Another insurance option is called Custom Parts or Equipment (CPE), which pays for damage to any custom parts or equipment that you’ve installed on your car, to a particular limit. Another additional option (which also costs more), called ACPE, will cover any custom repairs that cost more than the lower limit set by the insurance company.

The Loan/Lease Payoff option is typically also provided with car insurance, which will pay for the remaining balance of a car loan or lease, up to 25% of the cash value of the car, if you ever total your car in an accident.

Roadside Assistance is an option offered by insurance companies to provide customers peace of mind – it assists with labor costs if you ever have a car breakdown, battery problems, flat tire, or any other such event

The key to paying the least for car insurance is to understand each of these options and to only select those options that you need. This will ensure that you are getting the best coverage that you need at an affordable price for the family.

After doing all of this research, I contacted Liberty Mutual with questions about what options are on our car policy, and I learned that we have several options on our plan that we don’t need. For example, we already are members of AAA, which assists members with roadside assistance, so I asked Liberty Mutual to remove the roadside assistance option from our policy. Additionally, I have very good insurance benefits at work, which would pay for most of the medical costs associated with any accident we have, so I asked them to remove the MedPay coverage.

Once we were able to fine-tune the components of our coverage to suit our specific needs, we ended up reducing the cost of our policy by over $200 a year. The savings were so great that I didn’t even have to shop around, and Cindy was very happy too!