Saturday, September 22, 2007

Reducing Our Car Insurance Bill

It's car insurance season at the Shadox household. We insure our cars with AAA, and our renewal notice just arrived. Essentially we have one good car - a 2005 Toyota Sienna - and one junk car, my not so trusty Geo Prizm 1997. The Geo is in fair shape. I have never had any accidents or major mechanical problems with this car, and it has definitely served me well over the years. However, it is clearly showing its age, and according to the Kelly Blue Book it is worth something like $2,500.

My philosophy regarding insurance is a simple one: if you can afford to self insure, do it. There is no sense in insuring against a risk that you can easily afford to bear yourself in a worst case scenario. Complete loss of our Geo falls into the self insurance category, in my opinion. If I had to replace this vehicle tomorrow the dent to our finances would be minor.

With that in mind, I spoke with my wife and proposed that we eliminate the collision and comprehensive coverage on the Geo, especially given the fact that our insurance carries a $500 deductible. This move would save us a total of $300, or about 25% on our insurance bill. My wife quickly agreed to eliminate the collision coverage for a savings of $200, but did not want to get rid of the comprehensive coverage, which is supposed to insure us against theft or vandalism. She just did not agree with my reasoning that there is no real difference between the two types of insurance in terms of our financial exposure.

At the end of the day, our total cost to insure both cars was about $900 including the comprehensive coverage for the Geo. While it pains me to pay $100 that I don't really think are required, I would rather not have to fight and argue with my wife over a relatively minor expense.


Armchair Fiduciary said...

I totally agree with dumping all but the mandatory insurance on the Geo. Insurance companies sell insurance so they can profit. I did a whole post on this same idea.

Shadox said...

Ahhh... a kindered spirit. Can you talk to my wife? ;-)