Stop Being Lazy – Why Overpay When You Can Save Money On Insurance?

Have you been paying attention to how much insurance is costing you these days? While it is a necessity, it’s possible that you are overpaying and could benefit from learning how to save money on insurance, from car to home, and more. I know people overpay because at one point I was overpaying. When I…

Michelle Schroeder-Gardner

Last Updated: January 20, 2020

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Do you know how to save money on insurance? Sadly, many don't and end up overpaying on their car, home, and other insurance! This can easily add up to thousands of dollars each year.Have you been paying attention to how much insurance is costing you these days?

While it is a necessity, it’s possible that you are overpaying and could benefit from learning how to save money on insurance, from car to home, and more.

I know people overpay because at one point I was overpaying. When I was 16, I had just gotten a new-to-me car. It was cheap, had high miles, and had more paint chips than actual paint.

Even though everything else about the car was overused and cheap, the insurance was over $100 a month!

My Dad helped me find a policy, and neither one of us paid much attention to the cost, which was surprising considering how frugal he was. Yes, I was a teenager and a new driver. However, neither my Dad or I did our homework and shopped around to save money on insurance, as we just used my dad’s insurance company.

Also, I had all kinds of coverage on this cheap, ugly car. I had a very low deductible (like $250 or something), and collision insurance (which usually isn’t needed for a super cheap car). Once I realized all of the mistakes I was making, I made changes and my insurance dropped by over HALF. I went from paying over $100 a month in car insurance to somewhere around $50 a month.

And, I know I’m not the only one with a story like thisI

Whenever I look over someone’s spending to find ways for them to save money, I almost ALWAYS see that they are overspending and could save money on insurance.

This applies to many different types of insurance rates, such as for your car or your home.

In fact, just the other day I was online, and someone said that their monthly car insurance payment for a $2,000 car was over $200 a month. I wish this was the first time I heard something so crazy, but it comes up all the time!

Many times, people just stick with the same insurance company, and this can lead to overspending for years, if not decades! I recently overheard someone say that they didn’t want to switch insurance companies, even though they knew they were overpaying, because they didn’t want to offend their insurance agent.

Well, let me tell you something. Your insurance agent isn’t really “yours” – they work for the company!

There’s no need to waste money on overpriced insurance. Instead, you should be finding the best value for you and your situation.

So, I decided to do some research on who is overpaying and by how much. That led me to Gabi (which is a personal insurance company that I have no relationship with, and they have no idea who I even am), and I found that customers from Farmers, Nationwide, and State Farm are overpaying most often. In fact, 87% of the time, Farmers customers were overpaying, 81% of the time for Nationwide customers, and 80% for State Farm customers. Geico was among the most competitive rates, but even then, 1 out of 3 of their customers was still overpaying.

Here’s a chart from Gabi’s website that breaks down, by company, the average amount people are overpaying for insurance:

Source: https://www.gabi.com/guide/youre-likely-overpaying-for-insurance-heres-why/

As you can see, many people are probably overpaying for their insurance, and they probably don’t even realize it.

Here are my tips on how to save money on insurance.

 

What impacts how much you pay for insurance?

First, in order to save money on insurance, you need to learn about what exactly impacts your insurance rate.

For the sake of ease, I am going to simply refer to car insurance in this section.

Some of the factors that come into play for car insurance include:

  • Where you live. Depending on what city and state you live in, you may pay more or less than others. This impacts your insurance rate because if your area has a higher than average amount of accidents, lots of car thefts, crazy weather, or something else, then you may have to pay more for insurance.
  • Your car. A Corvette is probably going to cost more to insure that a Camry. Sorry to say, but this is definitely why you should be thinking about the WHOLE cost when deciding on what car to purchase. Your monthly and/or yearly insurance payments are directly related to the type of car you purchase. This is because certain vehicles simple will cost more money for an insurance company to fix damages.
  • How you drive. Yes, the way you drive has a large impact on your insurance rate. If you get in a lot of accidents, then you are probably going to pay more than someone who never has.
  • Your age. A 16-year-old is going to be charged a higher insurance rate than someone who has been driving for two decades. This is due to experience and the likelihood of getting into an accident.
  • Your credit score. Yes, your credit score plays a part in your car insurance rate. The higher your credit score, the less you may have to pay for car insurance. This is because car insurance companies think that those with higher credit scores tend to be more responsible. You can check your credit score with Credit Sesame for free here!
  • The coverage you choose. There are a lot of different coverage options you can choose when purchasing car insurance. This will greatly impact the rate you have to pay.

These are just a few of the many factors that will cause you to overspend or save money on insurance.

 

Shop around to save money on insurance

So, with the above information, you may say “well, I’ll just completely avoid the most expensive insurance companies.”

Noooo!

You should not do that. There are cases in which they may be the best for you. To save money on insurance, you should always shop around to find the best rate for you and your situation.

For us, our Jeep is insured through State Farm. And, I know that it’s the most affordable rate for me and my situation. So, that goes to show that you shouldn’t completely avoid the more expensive companies mentioned above.

Shopping around is important, but it does require you to do a little extra work. However, considering that the average person can save several hundred dollars a year, possibly over $700 even, then it can be a task that will pay off quite quickly.

I recommend shopping around for better insurance rates about once a year. One good way to do this is to use the annual renewal notice as a reminder.

 

Analyze your insurance coverage.

Not everyone needs some crazy policy with all of the possible options.

Some things you will want to analyze or try include:

  • Your deductible amount. Some people choose the $0 or $50 deductible amount, which can lead to a significantly higher insurance payment. You should analyze whether paying the extra is worth the lower deductible. For us, we usually choose the $500, $1,000, or even the $2,000 deductible.
  • Evaluate what you actually need. In some instances, you may only need liability coverage. Paying collision coverage on a $500 car may not be worthwhile, which is something you should analyze. For us, when we had cheaper cars, we would only ever get liability coverage.
  • Ask for insurance discounts. Things such as the good student discount, good driving discount, etc., do exist, so you should ask about them! You probably qualify you something, and it’s money you’re just throwing away if you haven’t asked yet. And, if you don’t know what you qualify for, simply call and ask “I’m finding a more affordable car insurance policy elsewhere, what percentage discount can you offer me?” Or, ask something like “What discounts do I qualify for if I am a good/loyal/long-term/etc. customer?” The list can go on and on. If you’re not happy, just call back and try again.
  • Bundle your insurance. Bundling does tend to save money. So, if you have both home and car insurance, you may want to bundle them together to see if you can get a lower insurance rate.

Remember, in many cases, your insurance agent isn’t there to help you save money on insurance. YOU need to do that yourself. Only you have your best interest in mind.

How much do you pay for home and/or car insurance? Have you ever sought out a more affordable rate? How do you save money on insurance?


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Michelle Schroeder-Gardner

Author: Michelle Schroeder-Gardner

Hey! I’m Michelle Schroeder-Gardner and I am the founder of Making Sense of Cents. I’m passionate about all things personal finance, side hustles, making extra money, and online businesses. I have been featured in major publications such as Forbes, CNBC, Time, and Business Insider. Learn more here.

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  1. We’ve saved the most money by bundling our home and auto insurance, but that’s not always been the case. I’d love to say that I shop around every year for insurance, but in reality it’s every 2 years.
    And changing companies has saved us money every time. We also always pay in full to get the biggest discount.

    1. millionaireminter

      Agreed. I also think checking to ensure you are at the proper limits for your needs is super important. i think sometimes the insurance agents can oversell on the amount needed for an individuals circumstances. not to say this happens in all cases, but regardless its important to consider whether you are getting the proper recommendations as to amount.

  2. We pay more than $100 in car insurance too! We are on the same plan for our home insurance, and the agent said that we can save money that way.

    Hubby said that one reason why our car insurance is so high is because we bought our car brand-new (big mistake) and I’m a newbie driver. >_<

    1. Oh, being a newbie driver can definitely do that!

    2. You are right, Michelle.

      Being a newbie driver can actually hike insurance.

      What do you think about have insurance riders? I haven’t gotten insurance yet, but I invest time studying about it so that I won’t overpay when I finally decide to.

      Emenike

  3. So many people dream of side hustle success. The best insurance to me is not only purchasing quality insurance for your home and vehicle and health, but also investing in your entrepreneurial insurance by starting your online business now. Many people fail to do this because they are too Lazy to do market research on the topic they want to start a side hustle about, get complacent in their cushy day jobs, and cozy with having a job. I say this…they can save money on insurance now if they not only buy good insurance, but work toward making that internet side hustle work so they’ll have no financial excuses about spending good money on insurance. πŸ™‚

    1. How much do you pay for insurance?

      1. Right now, I’m literally paying a can of beans. I have 0 points on my driver’s license and clean driving record for over five years. I’d be more than happy to help you extend your reach to more eyeballs to this post on DNN in my support of Michelle. πŸ™‚

        1. Sorry, I just asked the same question twice so I deleted it, haha!

          Paying a can of beans sounds nice πŸ™‚

  4. Great post, Michelle.

    I have not registered with any insurance company yet because I don’t have dependents yet.

    Right now, what matters to me is to build my business and buy properties so that I will have something my family can fall back on if I’m not more.

    Thanks for sharing.

    Emenike

    1. Is car insurance not required where you live?

  5. Mr. MFC @ Morning Fresh Cent

    You caught me! It has been on my to do list to research auto insurance quote since the beginning of this year. I am not surprise that Wawanesa is the cheapest. My challenge is when you try to research for both home and auto policy together for additional discounts. It can be tough to compare.

    A great way to reduce your premium if you are a good driver is to increase your deductible. There are also discount usually for teachers, engineers, and other professionals so definitely ask them.

  6. Real Money Robert

    Great post Michelle!

    I am always in the market for new car insurance. About once a year, I will call my current auto insurance company and ask for any additional reductions in my premiums. Then, I’ll shop around to about 5 different companies to see if I can get a better rate somewhere else. Overall, over the last ten years, I’ve used 4 different insurance companies using this method. Each time I changed companies, I was able to save at least $50 a month. One switch even netted me a $110 per month savings!

    1. $110 per month savings sounds nice!

  7. Mental Intrigue

    Those are some great points, Michelle. In my 20 year of experience with three major insurance carriers and as a broker, I have ancountered numerous households, where customers have no idea about coverage, let alone what to do to lower their bills when it comes to insurance. While every single individual is being rated on many factors, there are some great doscounts out there, and while one carrier may offer high rates to one family, they may be very reasonable to others. It is important, though, to assess your needs and exposure, to determine the coverage you should have, especially when it comes to young drivers. While each company offers different discounts, asking questions and understanding what you are paying for is so important, and unfortunately, very few people know what coverage they have. They only know they need it. That knowlede not only makes them a better customer, but allows them to be more confident when it comes to changing, adding or adjusting coverage to meet their needs.

  8. Suzanne

    Great post! I live in a very high cost insurance state, but so many drivers don’t understand their policies and coverage very well. I’ve shopped around and tweaked my coverage and it turns out that State Farm is the cheapest carrier for me, by a large amount. A good agent should give you pricing if you if you ask about different coverages and deductibles (even if they usually don’t volunteer this information).

    The most important thing is to assess the risk exposure. For example, getting into a serious accident where you are sued is unpredictable. So you might want a much higher liability limit than your state’s minimum vs. collision coverage which you know will never exceed the value of your car (even if it’s a $40,000 car, which sounds like a lot until you compare it with a multi million dollar lawsuit). In, my view, insurance is most important for the most unpredictable of risks that are hardest to value.

    1. Yes, assessing risk exposure is so important!

  9. I use Geico and my insurance is $50 per month. I even think that’s high, but it went up when I got a speeding ticket a couple years ago. I can’t wait until I don’t have to own a car at all, but right now its my closet, lol!

  10. Kris

    I have Metromile and along with my wife, we pay about $80 a month for our Prius C. Since Metromile is a pay-per-mile car insurance company and we don’t drive a whole lot(less than 500 miles a month) it made sense to do that route.

    1. Interesting! I’ll have to look that company up.

  11. This post is so timely Michelle, we are in the process of buying a second-hand car this 2nd quarter of 2018. Our first ever car. I’ll reread this post once it’s time for us to get insurance.

  12. Robbi

    You make excellent points about saving money, yet I feel that focussing on the car so much is really not painting the full risk exposure as Suzanne says. I think it is very misleading to counsel people to shop for the lowest cost policy. Especially as many of your readers are not only trying to reduce their debts and costs but trying to build wealth. Insurance is also about protecting the latter which is all about the liability coverage and really has little to do with the car and once you are a certain age, the driver. Getting into a serious accident (or having someone who is over at your home for a party, in the case of a homeowner’s policy, and gets injured by tripping on something, or heaven forbid, your deck breaks and its more serious, etc.) is not on anyone’s projections for themselves, but if there are serious, life changing or ending injuries to the other parties, one’s assets are in serious trouble. That’s what the liability insurance is about and not only do I personally choose high limits, I buy an “umbrella” policy which is VERY CHEAP (in my mind translating to a good value for the dollars spent) for another $1,000,000 of liability protection. If you go to an agent who works for a chain (such as State Farm and Farmers), yes, they work for the company and not you. But if you go to an “independent agent”, they represent many companies, and sure, they get a commission, but really they DO WORK FOR YOU. Also, Independent agents tend to help you more with claims and to me, that is worth paying a bit more. To me, like anything else, you sometimes get what you pay for and if you pay the lowest cost, and are constantly shopping your insurance, when it comes time to file a claim, you may just find out how that adage rings true. The relationship I have with my independent agent is as important to me as the one with my dentist and doctor. When I read the comment made by Emenike Emmanuel, I was just sad – because though he has no dependents, he is trying to build wealth but it doesn’t sound like he wants to mitigate his risk by buying insurance.

    1. I don’t think I said anywhere that it is about buying the lowest cost policy? I say in the article “finding the best value for you and your situation” is what people should be doing.

  13. Thu

    I was guilty for sticking with the same insurance company for years (for convenience) even though they increase my rates every year and I know it’s too expensive. When I finally sold my house and canceled the home policy, I decided to shop around for a better auto policy. I found one that saved me $800 a year. One of the best money related decisions I made this year.

  14. My son is going to be needing his own car insurance soon. I think he’d find it helpful how you mentioned that the type of car he gets will impact how much he’ll pay for insurance. I’ll pass this information on to him so he can keep this in mind as he looks for a car.