Saturday, November 3, 2012

About getting auto insurance quotes

And, since this site is going to be about rants and stuff, today's post is about people who blindly renew their auto insurance policies, year after year, with the same company.

The main character that fits this profile is a mid-aged male who makes pretty good money (like mid-class or a tad bit higher) and isn't very tech-savvy. He hangs out in a moderately large social circle and his peers are about the same age and probably even work fro the same company. Let's call our guy Bob.

So Bob drives at least one car, much like any other mid-aged American. There are 2+ vehicles in his household, and he is even considering getting a car for his teenage kid when he goes to college because, hey, that's what all parents do.

How does our Bob buy insurance for his cars? Well, he doesn't give much of a rat's ass about it. He bought his first auto insurance policy with GEICO, Allstate, State Farm or another monster twenty or so years ago, and hasn't switched carriers ever since. He got married in the mean time, had a kid who grew up and makes twice as much as he did when he signed the policy. Yet he renews the policy year after year, and pays for 12 months in advance because that's the only way he knows how to save money on auto insurance.

What's wrong with this model?

Well, where do I start from?
  • His driver profile has changed drastically over the past 20 years. Getting married, having a kid and getting a bigger salary is going to put you in different risk categories from an insurer's point of view, and the rates will be adjusted accordingly. If you don't ask for a re-assessment you are going to pay the same rate, year after year.
  • The insurance market is highly competitive. Even though it often pays up to stay with a big carrier, all major companies fight to snatch each others' customers by offering promotions. These bonuses often outweigh the returning customer discount.
  • Companies often offer discounts to their existing customers, but you have to ask for them. Other than the NCD and the returning customer discount, which (should) get credited to your account by default, you have to take some action. If you have a teenager on your policy and he gets good grades in school, you have to submit some paperwork to get a good student discount. If you renew your policy more than 2 months in advance, you can get an early renewal discount that can be as much as 20% of the value of the policy -- but you have to physically do it.
My friend Fred Rackins runs a blog about how to compare auto insurance quotes to get the best rates, and he inspired me to write this article. He works as an independent insurance broker, had a few beers with me last night and told me some horrendous stories about the ignorance of some people who yank at how expensive auto insurance is in the United States, yet they wouldn't lift a finger about it. I'd warmly encourage you to read his tips -- they might save you a buck or two.