Tl;dr
- Essentially, if you’re good business for the insurance company, you should be keeping more money to yourself instead of giving it away to them.
- After several years of inflation on goods and services, including insurance, impacting your wallet, look into your auto insurance to realize some savings.
- Increase some of your deductibles, save that money in a high yield savings account, and don’t touch it.
- Consider American Automobile Association (AAA) in your mix of insurance companies to get quotes to mix and match your insurance needs.
- Review whether you have any overlapping insurance coverage between your auto insurance and health insurance (e.g., personal injury protection.
Introduction
Little did I know that what started with a simple renewal process and my desire to get some savings and move my policy to California, ended up being a weeks-long time-consuming process.
Towards the end of Jan 2024, I received an email from my current auto insurance carrier, Progressive, that my policy is up for renewal in February.
To my dismay, I found out that my policy, with the same coverage, would jump $889 or roughly 46% compared to last year.
While I had been expecting a significant increase because I had had attempted to lock in savings in different insurance policies that I carry, the increase was surprisingly large.
Previously, I had relied on my insurance broker to compare policies and cost in WA state.
While he was trustworthy and took care of all my insurance needs, his objective was to give me great coverage at reasonable prices, not sufficient coverage at lowest possible cost.
In light of the large scheduled jump in premium, absence of a good insurance broker to rely on (I just moved to CA), and my desire to better understand insurance in general, I committed ~20 hours over the course of a week for my new auto insurance, a post on how to lock in savings, and another post (unexpectedly) on what my process looked like.
Overly Simplified Understanding of the Insurance Industry
The insurance industry is in the business of helping people managing risk. Without it, many businesses and activities would otherwise not function as well as they do today.
It is heavily regulated at the state and federal levels, and there are various protections for the consumer for different types of insurance products (e.g., minimum coverage levels for auto insurance or financial health of life insurance companies).
Similar to other industries, the insurance industry uses different distribution channels – 1) wholesale (directly from the insurance company) or 2) retail (insurance brokers)
As a consumer, there are pros and cons to purchasing your insurance policies from different channels. but similar to other industries, you’re most likely to get the cheapest price apples-to-apples buying wholesale instead of retail.
My Rules of Thumb
The role of insurance is to shield someone from a very small chance of something horrible happening and as a result of this event, the person being devastated in many ways, including financially.
Another way to think about this is that your insurance policy/company shouldn’t pay for every accident or damage that you experience, just for the really bad ones.
Regardless of where your financial situation is, it is often cheaper to lower your coverage and maintain/build up a financial reserve/cushion/rainy day fund.
Essentially, think of this as a limited form of “self-insuring”. If you get into a small accident or experience a small damage to your car every once in a while, you can afford to pay it out of your own pocket; if you get into a large accident (knock on wood), that’s when your insurance should rightly kick in and help you pay for any damages.
I like to evaluate myself as a customer to the business that I’m getting products/services from – am I a desirable/profitable/easy customer for the business, in this case the insurance company?
If you have a good driving history, drives responsibly, and are low risk in your opinion, you want to minimize the money that you’re paying to the insurance company and keep more of it to yourself.
Why give your money to someone else every year, when you could keep more of it yourself?
My process
I looked at my current policy, new premium for the next year, and tried to get comparable coverage in CA at GEICO, which was the only major national carrier that was able to provide an online quote for me.
Simultaneously, I considered Tesla insurance a little bit, but the system wasn’t working well, and I didn’t see many glowing reviews about it (notable Reddit discussion here). Below is a summary of my coverage and findings.
| Criteria (in order of descending premium $) | Progressive (2023-2024; WA state) | Progressive (renewal for 2024-2025; WA state) | Progressive (updated 2024-2025; WA state) | GEICO (2024-2025; CA state) | AAA | Notes |
|---|---|---|---|---|---|---|
| Collision | $500 deductible, actual cash value limits | $500 deductible, actual cash value limits | $2,500 deductible, actual cash value limits | $2,500 deductible | $2,000 deductible | Maximum deductible is $2k at AAA and $2.5k at GEICO and Progressive. |
| Liability insurance (bodily injury) | $100k each person, $300k each accident | $100k each person, $300k each accident | $100k each person, $300k each accident | $100k each person, $300k each accident | $50k, $100k | Already at minimum coverage for Progressive and GEICO. |
| Liability insurance (property damage) | $100k each accident | $100k each accident | $100k each accident | $100k each accident | $100k | Usually cannot be broken up with bodily injury coverage. |
| Personal injury protection / medical payments | $10k; deductible is $0 | $10k; deductible is $0 | $10k; deductible is $0 | Not included | Not included | Don’t really need it if you have good health insurance; already at minimum coverage. |
| Uninsured motorist (property damage) | $100k each accident | $100k each accident | $100k each accident | Not included, can include limit of $3,500 | Not included | Move in tandem with liability insurance coverage at Progressive and GEICO; keep in mind that 1/8 drivers do not have insurance. |
| Uninsured motorist | $100k each person, $300k each accident | $100k each person, $300k each accident | $100k each person, $300k each accident | $100k each person, $300k each accident | $30k, $60k | Move in tandem with liability insurance coverage at Progressive and GEICO; keep in mind that 1/8 drivers do not have insurance. |
| Comprehensive | $500 deductible with $0 glass deductible, actual cash value limits | $500 deductible with $0 glass deductible, actual cash value limits | $2,500 deductible with $0 glass deductible, actual cash value limits | $2,500 deductible | $2,000 | Maximum deductible is $2k at AAA and $2.5k at GEICO and Progressive. |
| Rental reimbursement | $50 per day, max 30 days | $50 per day, max 30 days | No coverage | $50 per day, max 30 days | $35 per day, max 30 days | Could go lower to $30 a day at some carriers like AAA. |
| Roadside assistance | Yes | Yes | No | Yes | Included with AAA membership and not included in policy | |
| Discounts | Multi-policy (bundling renters insurance), loyalty, three-year safe driving, paperless, five year accident free | Multi-policy (bundling renters insurance), loyalty, three-year safe driving, paperless, five year accident free | Multi-policy (bundling renters insurance), loyalty, three-year safe driving, paperless, five year accident free | Anti-theft device, CA good driver, subclass factor, new car | alumni discount | bundling home, auto, and umbrella policies with the same carrier; taking a safe-driving course; letting your carrier know about your lower annual mileage |
| Policy fee | $30 | $30 | $30 | Unknown | Unknown | |
| Source: | Progressive | Progressive | Progressive | GEICO | Local AAA agent | https://www.consumerreports.org/money/car-insurance/buying-guide/ |
| Full price paid in full with discounts | $1924 | $2813 | $2383 | $1857 ($913.28 for 6 months) | $3685 (+ annual AAA fees if you’re new) |
For me, the most expensive coverage was collision, followed by liability insurance and others (the criteria in the table are ordered in descending premium dollar amounts).
Admittedly, my GEICO quote is not a fair comparison to my other Progressive quotes given that the state and coverage levels are different.
However, a side-by-side comparison of these four policies and their premia gives you a sense of what levers you can pull to fit your insurance needs.
Steps that I took
- Increased my deductibles to the maximum amount for collision and comprehensive. This had the largest impact on my insurance premium.
- Putting aside $2,500 in a high yield savings account as a reserve for your deductible may not be something that you’re financially able to do at the moment. In that case, adjust your deductible up to an amount that you’re able to set aside right now.
- Decreased my rental reimbursement coverage. Because I don’t commute, my thinking was that my family could adapt and uber or rent a car once or twice a week if needed.
- This may not be worth saving on if you commute to an office most days of the week.
- Moved my renters’ insurance policy to AAA from Progressive, since I discovered that AAA was much cheaper than Progressive (Homesite) and I didn’t need to stay with Progressive any more for the bundling discount. I discovered that AAA offered very competitive renters’ insurance policies (I shaved off $60 or ~45% going with AAA compared to Progressive/Homesite – even though I got a bundling discount previously with Progressive/Homesite).
- I also opted out of roadside assistance from the insurance company and signed up for an AAA membership (which was required for my renters’ insurance with AAA) and spoke to an agent about life insurance (I’ll write about this later as well) to get further discounts.
- For the first year, my wife got her annual membership fee waived. I also got a life insurance quote and was able to get the $20 initiation fee waived.
- In total, my savings from the renters’ policy and removing roadside assistance on my insurance slightly more than offset my AAA membership fee (net-net ~$40 or ~30% savings on my renters policy + roadside assistance).
Conclusion
While I wasn’t able to lock in the full benefits from my research, I was able to tell an insurance agent or a website what I wanted in my new auto insurance policy.
Previously, when I told my insurance broker that I want to lower my premium, he would offer me some options but would encourage me to over-insure myself
His job is to provide the great protection at reasonable prices, NOT reasonable protection at great prices (he does have a financial incentive to guide me to a pricier policy, but I don’t think that was his sole driver based on my dealings with him).
I’ve done the hard work for you to show that savings can be real (real savings here). Don’t put this off – adjust your coverage for your current policy and/or future policy renewal by calling your broker, agent, or adjusting directly on the website.
Resources
- Insurance Brokers: What They Do and Who Needs One – NerdWallet
- A Brief Overview of the Insurance Sector
- How Much Commission Do Auto Insurance Agents Make?
- CA Department of Insurance – Automobile Insurance Text Version
- Car Accident Without Insurance Not At Fault California (2024) (eastonlawoffices.com)
Disclaimer
Please note that regulations and options differ by state and the specificity of my opinion on insurance policies in California and Washington state may not be applicable to other states.