In this tight economy consumers on average still manage to spend more on the things they like such as pizza and alcohol rather than the things they need such as auto insurance.
Americans spend a combined $329 billion on pizza, beer and spirits while shelling out a mere $159 billion a year on auto insurance, according to recent estimates from State Farm. Consumers manage to spend $38 billion a year on pizza pie, according to trade publication Pizza Today. They also spend $101 billion on beer according to the Brewers Association and another $190 million on spirits, a figure that has held steady the past couple years even in light of the economy, according to the Dave Ozgo, chief economist with the Distilled Spirits Council.
In contrast consumers spend about $159 billion annually on auto insurance, says Loretta L. Worters, vice president of the Insurance Information Institute (III), a non-profit organization that works to improve the public’s understanding of insurance. “Different people relate to money differently. We all relate to money, to a degree, in an emotional way, and this in turn affects how money enters and leaves our lives,” Worters says.
The decision on how and where people spend their money is a psychological one based more on how the spending makes a person feel as opposed to how wisely the funds are spent. 1. Consider dropping collision and/or comprehensive coverage on older cars. As a general rule, it does not make sense to pay comprehensive or collision on a car worth less than $1,000 as any claim payment you receive would not substantially exceed your premiums minus the deductible. 2. Buy your homeowners and auto coverage from the same insurer. Many insurers will give you a discount if you buy two or more types of insurance from them. Also, you may get a reduction if you have more than one vehicle insured with the same company. Some insurers reduce premiums for long-time customers. 3. Maintain good credit. Your credit rating may affect what you pay for insurance (along with the cost and availability to finance the purchase of the car), so keep a close eye on it. 4. Seek out safe driver discounts. Some insurance companies offer discounts to policyholders who have not had any accidents or moving violations for a number of years. You may also qualify for a premium cut if you have recently taken a defensive driving course. 5. Take advantage of low mileage discounts. Some companies offer discounts to motorists who drive a lower than average number of miles per year. Low mileage discounts can also apply to drivers who carpool to work. 6. Inquire about other discounts: Other potential discounts could include group insurance, a good student discount for young people who take drivers education and/or get good grades and a defensive driving discount. Source: Insurance Information Institute
“There are spenders and there are savers. Someone who squanders their money on pizza and beer when they can eat at home and save money toward their car insurance may have a psychological need to have a good time,” notes Worters.
However, scrimping on your auto insurance coverage can prove to be costly in the long run. Minimal liability insurance is a law for all vehicle owners, but that minimum may not be enough to cover the damages sustained in a serious multi-vehicle accident or one involving an expensive vehicle that could put the policyholders other assets in jeopardy.
“In today’s litigious society, buying only the minimum amount of liability coverage means you are likely to pay more out-of-pocket—and those costs may be steep,” says Worters.
While industry experts feared at the onset of the recession more consumers would drop their auto insurance coverage altogether, the Insurance Research Council’s 2009 report “Public Attitude Monitor” has found most people are maintaining essential coverage but have taken steps to reduce their overall insurance costs.
With nearly one in 10 Americans out of work, and others forced to make ends meet with less money, many people are looking for ways to cut costs. There are smart ways to save on auto insurance and there are also mistakes that can result in being dangerously underinsured.
Worters says there are better ways to save money than to carry just the minimum coverage required by law.
Consumers should consider dropping collision and/or comprehensive coverage on cars worth less than $1,000. The insurance industry and consumer groups generally recommend a minimum of $100,000 of bodily injury protection per person and $300,000 per accident protection.
Raising deductibles may also be a sound saving idea – if you can afford the higher deductible. Increasing your deductible from $250 to $500 could reduce your collision and comprehensive coverage cost by 15 to 30 percent on average while going to a $1,000 deductible can save you 40 percent or more on auto insurance premiums, advises Worters.
According to the IRC Public Attitude Monitor, 15 percent of the people surveyed say they have increased their insurance deductibles or reduced the amount of coverage in order to reduce premium costs.
“These findings confirm that most Americans recognize the importance of maintaining essential insurance coverage on their homes and cars, but they also show Americans are willing to shop and reevaluate their insurance needs in order to reduce insurance costs,” says Elizabeth A. Sprinkel, senior vice president of IRC.
