I just saved $160 per year on my car insurance by switching to GEICO! (No, really, I did.)

What do Warren Buffett, a green gecko, and an Indian blogger dude all have in common?  They all suggested I’d save money on my car insurance by switching to GEICO… and they were right!  I’ll be honest, I was skeptical and sloth-like in seriously investigating how I could save more money on my auto insurance, but thanks to Ramit Sethi’s motivating tip on how to have money on auto insurance, I searched around and found a better deal in about 45 minutes when I stumbled upon and filled out GEICO’s online quote process.

How can you save money on your insurance?

First, read the above-linked article by Sethi.

Second, read another link within that post that goes over how much coverage you should have.

Next, call up a couple of reputable firms and get quotes (or do it online.  You could start with esurance, which I used; followed up by GEICO.)

One thing I DIDN’T do, that I should have, was call my previous (as of today) insurance company and make sure I had the lowest possible rate based on available discounts (like maybe they weren’t including the fact that my wife and I have low-risk occupations, teacher & engineer.)

Coverage mumbo-jumbo

A few tips on deciding what type of coverage and limits to get: most states (like Washington, my home) mandate that you have liability insurance to cover accidents where you’re at fault.  There are two types of this: Bodily & Property.  Bodily liability insures passengers in your car and those in the car you hit.  The limits are given as two numbers, per person and per accident.  I have $100K/$300K (typical for many, but maybe too much if you have few assets (no home) and have a low net worth/salary.)   This means I’m insured up to $100K in medical bills, etc per person and up to $300K per accident.

Property liability covers the non-living things that you hit (typically a car, or God-forbid, you blind-drunk fool, a house.)  A typical limit is $50,000 per accident.  I got $100K because the difference was only ~$4 more per year for both me and my wife.  (So if I wreck your new Lexus, you don’t have to sue me; my insurance will cover it!)

In addition to liability, there’s Collision, which pays for damage you cause to your own car.  Comprehensive covers damage due to other causes like theft, vandalism, natural disasters etc.  Both of these have deductibles, often $500, which you must pay yourself before your insurance pays for anything above that.  One way to lower your premiums is to raise your deductible to, say, $1000 (but make sure you have an ample emergency fund to cover this if you need to.)

Another way to lower your premium in a big way is to drop Collision/Comprehensive entirely.  If you have an older car, you might want to do this.  Apparently, the rule of thumb is to drop your Collision &/or Comprehensive coverage when your yearly Collision premium is 10% or greater than the value of your car.  I would also add that you should bulk up your emergency fund/short-term savings to include the price of a new (used) car.  My wife and I drive relatively inexpensive cars, >7 year-old sedans worth about $5000 apiece, so we dropped Collision completely.  Also, with our short-term savings, we could cover the price of replacement cars should something happen to either of ours.

Of course, having a safe driving record is the best way to lower your auto insurance premium, so be careful on the road and save money.

Back to GEICO

So what did I do?  I put my current policy in front of me (which I found online at Progressive.com.  If you’re not insured through Progressive, you probably won’t find your policy there…)  My Progressive policy was $383 per 6 months.  Next, I called up Ameriprise to see if I could get a good deal via my Costco membership.  I couldn’t; their quote was $567!

Then, I checked out GEICO and was quoted $303.  I was stoked at this point, but restrained myself from signing up instantaneously until I did a search on esurance (which I really should’ve done first, since it searches multiple sites.)  This returned $336.  Go GEICO!  I signed up for everything online and had new insurance in ~30 more minutes!

$160 in savings per year for about 2 hours of reading and workI highly recommend you check out your insurance options TODAY.


Description of coverages from Allstate.com’s website (that’s not an endorsement; I just happened to search and found their definitions first!):

Protection for People, Property, and the Unexpected

Bodily Injury Liability Coverage

If people are injured in an accident that’s your fault, Bodily Injury Liability coverage helps protect you from bills that can include:

  • Emergency aid at the scene
  • Medical expenses for bodily injury
  • Medical services for sickness or disease
  • Compensation for loss of income
  • Funeral expenses
  • Legal defense fees and/or bail bonds for anyone listed on your policy
  • Other expenses not listed here


Property Damage Liability Coverage

If another driver’s property is damaged in an accident that’s your fault, Property Damage can help pay for their:

  • Structural damage to homes, storefronts, etc.
  • Repair or replacement costs for other stationary objects
  • Vehicle repair or replacement costs

It can also help keep your assets safe in the event of a lawsuit resulting from a covered accident.


Other Coverages

Choose any of the following options that might suit your individual circumstances best and build an auto insurance policy that helps fit your needs.

Collision Coverage helps pay for repairs or replacement to your car if you’re in a covered accident that involves other vehicles or stationary objects.

Comprehensive Coverage helps pay for covered losses caused by natural disasters, theft, vandalism, or other similar events.

Underinsured/Uninsured Motorist Coverage helps protect you if the covered accident was another driver’s fault and he/she either has no auto insurance, or not enough insurance to cover the expenses.

Medical Payments Coverage helps pay medical bills if you or your passengers are hurt in a covered accident. This option may also cover other members of your family when they’re driving the insured car.

Personal Injury Protection typically helps reimburse you for lost income, child care expenses, medical expenses, and other similar things if you’re hurt in a covered accident. (Personal Injury protection is not available in some states)

Limits and Deductibles will apply to certain types of coverage. Your Limits and Deductibles determine how much your insurance company will pay and how much you’ll have to pay when you make a claim for a covered accident.

Author: Ward Williams

Ward is an independent financial advisor at Better Tomorrow Financial. He started working as an independent investment advisor in 2009.

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