I’ve been trying for years to reduce my car insurance bill. But for some reason, no matter how good of a driver I am and how much older I get, it doesn’t happen. I drive my car less than almost any other American, and I still pay over $100 a month just for liability coverage. Five years ago when I bought my 2003 Ford Mustang, it had 23,000 miles and today, this car has 51,000 miles. More than half of the 28,000 I’ve driven came from driving up and down the east coast while in school, but now that I’ve been working from home, I would estimate I drive 25 miles a week. For insurance, I’m paying $1 a mile, which is unacceptable.
Unfortunately, my options are limited as to how I can save money on this expense. I’ve done my due diligence, shopping around for months looking for a cheaper rate, but Progressive is as good as it gets. Owning a sports car and living in Miami is just killing me, and I really can’t change either of those facts. But one of the ways I have been able to reduce the amount of money I spend on car insurance is not to pay for collision or comprehensive. At the time, the decision to only carry the necessary liability coverage was made because I couldn’t afford a $325 monthly insurance payment. Now that my financial situation has improved, I still choose to avoid the added costs because quite frankly, it’s a rip-off.
The value in collision and comprehensive car insurance comes only if your car is damaged or stolen. After all, it’s insurance, and the only time a customer receives value in insurance is when something bad happens. For a guy like me who never drives, the odds of getting into an accident are slim to none. Also slim is the chance of this car being stolen, as it’s garaged in an “odd” location. Justifying a $200 expense each month, means justifying a $2,500 expense each year and it’s just not going to happen. I receive absolutely nothing in return for my payments, other than the peace of mind I already have.
Instead, I take the $200 a month I would have paid for these services and I put it into an online savings account. If the day should come where I have to fix damage to my car, I can draw from the savings account and pay out of pocket. Outside of standard upkeep, which isn’t covered by car insurance anyway, I don’t expect any major repairs to my vehicle for years so by the time I actually need to draw from the savings account, I’ll have more than enough saved. Two immediate benefits from this decision are:
- Even though I have to pay out of pocket repairs, my car insurance does not increase because I won’t report the accident.
- I earn a return on the money I save from not paying car insurance
My choice was not without complete risk however. I suppose there’s a chance that tomorrow on my way to the grocery store, I’m struck by an idiot who wasn’t paying attention. But by not having paid for collision for more than four years, I’ve saved enough where the risk is covered. And, as I continue to get older, my perfect driving record will only help in reducing my car insurance rate. Perhaps there will come a time when collision and comprehensive insurance are affordable and smart, but that day is not in the near future.
Carrying only the mandatory auto insurance certainly isn’t for every consumer, however I would suggest it’s the right idea for most. Obviously, the cheaper you can find added coverages, the more likely they make sense, however millions of Americans carry unnecessary coverages rather than save the money they would have spent. If you currently pay a high price to insure your automobile, consider dropping a few coverages and saving that money instead. Yes, you’re taking a risk but if you dot your I’s and cross your T’s, it will be a calculated risk with a great reward.
Published or updated May 13, 2011.