Renewing Your Auto Insurance Policy
It's that time of year for me. The time of year when I need to renew my auto insurance policy. What most people do (what I use to do), is nothing and let the insurance policy be automatically renewed.
That's great if you don't mind being pinched for every spare nickel you have by the insurance companies.
For some reason, insurance companies take advantage of existing customers. I guess the thought process is most existing customers will not change insurance companies because it is too much of a hassle. First you need to call other insurance companies for quotes (or use an online application to generate quotes). Then you need to apply for insurance. Once you're approved, you need to cancel your other insurance. Big hassles all around.
Frankly, in my case, it's not a big deal to change insurance companies. I use an insurance broker.
Wait! Aren't insurance brokers expensive?
I have no clue. All I know is that I don't have to pay my broker anything. Nothing out of my own pocket.
What? So how do they get paid?
From my understanding, they earn their money by referring clients to the insurance companies.
Is there a chance the broker will go for the big money? Yes, there is. However, my broker tried to steer me away from whole life insurance all those years ago. I should have listened then, but after that experience, I'm confident my broker has my best interest at heart.
So instead of me doing all the legwork and research, my broker does it. Actually, seems the CS reps do it. Apparently, the broker's company is getting bigger. Anyway, for the past 2 years, there wasn't much difference in switching insurance companies. However, this year appears to be the right year.
Apparently, as part of the quote, insurance companies look at your past history when dealing with other insurance companies. They reward clients if they've been with their previous insurance company for 3 consecutive years or longer.
So how much of a discount are we getting? Based on the initial quotes. We appear to be saving over $700 next year on our auto insurance by switching insurance companies. Since we bundle our home and auto insurance together, it appears we'll be saving around $800 next year in total. That's a lot of money that will go towards our investments.
That's not all though.
The CS rep that has been working on my insurance application informed me that if we pay in one lump sum payment, we get an additional 5% discount PLUS we don't pay the 3% interest charges for paying monthly.
What?
That's right, if you select monthly payments the insurance consider that as some sort of loan. You pay interest on the amount owing. Ouch!
Essentially, we get around $150 in our pocket and not having to pay the insurance company maybe $75-90 in interest charges. In total, that's around $1,000 saved just by switching insurance companies.
The only downside, is you need to pay the insurance premium in one shot. I'm guessing our premium will be around $3,000. We have the money in cash so it's not a problem. We just need to replenish our savings over the next little while.
However, to maximize our savings, we're going to put this on our credit card and get an additional 1% cash back. It's another $30, but that's groceries for a few days. Or wifey's mobile phone bill. Or gas for two weeks.
Just don't do this if you don't have money to pay off the credit card. All the money you're saving by switching insurance companies won't mean anything if you owe 19.99% on the $3,000 balance.
So if you've been with your insurance company for over three years, you might be able to save a lot more money by switching.
That's great if you don't mind being pinched for every spare nickel you have by the insurance companies.
For some reason, insurance companies take advantage of existing customers. I guess the thought process is most existing customers will not change insurance companies because it is too much of a hassle. First you need to call other insurance companies for quotes (or use an online application to generate quotes). Then you need to apply for insurance. Once you're approved, you need to cancel your other insurance. Big hassles all around.
Frankly, in my case, it's not a big deal to change insurance companies. I use an insurance broker.
Wait! Aren't insurance brokers expensive?
I have no clue. All I know is that I don't have to pay my broker anything. Nothing out of my own pocket.
What? So how do they get paid?
From my understanding, they earn their money by referring clients to the insurance companies.
Is there a chance the broker will go for the big money? Yes, there is. However, my broker tried to steer me away from whole life insurance all those years ago. I should have listened then, but after that experience, I'm confident my broker has my best interest at heart.
So instead of me doing all the legwork and research, my broker does it. Actually, seems the CS reps do it. Apparently, the broker's company is getting bigger. Anyway, for the past 2 years, there wasn't much difference in switching insurance companies. However, this year appears to be the right year.
Apparently, as part of the quote, insurance companies look at your past history when dealing with other insurance companies. They reward clients if they've been with their previous insurance company for 3 consecutive years or longer.
So how much of a discount are we getting? Based on the initial quotes. We appear to be saving over $700 next year on our auto insurance by switching insurance companies. Since we bundle our home and auto insurance together, it appears we'll be saving around $800 next year in total. That's a lot of money that will go towards our investments.
That's not all though.
The CS rep that has been working on my insurance application informed me that if we pay in one lump sum payment, we get an additional 5% discount PLUS we don't pay the 3% interest charges for paying monthly.
What?
That's right, if you select monthly payments the insurance consider that as some sort of loan. You pay interest on the amount owing. Ouch!
Essentially, we get around $150 in our pocket and not having to pay the insurance company maybe $75-90 in interest charges. In total, that's around $1,000 saved just by switching insurance companies.
The only downside, is you need to pay the insurance premium in one shot. I'm guessing our premium will be around $3,000. We have the money in cash so it's not a problem. We just need to replenish our savings over the next little while.
However, to maximize our savings, we're going to put this on our credit card and get an additional 1% cash back. It's another $30, but that's groceries for a few days. Or wifey's mobile phone bill. Or gas for two weeks.
Just don't do this if you don't have money to pay off the credit card. All the money you're saving by switching insurance companies won't mean anything if you owe 19.99% on the $3,000 balance.
So if you've been with your insurance company for over three years, you might be able to save a lot more money by switching.
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