Since you are reading this blog, chances are you’re already well-aware of the fact that you should review your auto insurance needs and get quotes from multiple companies at least once a year or at every renewal, which might be every 6 months. You have also probably noticed that the renewal rates are steadily going up even if you did not have any claims or traffic tickets, and even on car insurance with no upfront payment. This is precisely what happens to me once or twice per year prompting the auto insurance dance described in this post.
I must have switched insurance companies at least 10 times in the last 10 years. From my experience it appears that their marketing plan can be summarized as “get the clients through the door with teaser introductory rates and then increase the premium at the next renewal hoping that people are too complacent to switch”. According to NorthShore Advisory, most people pay their insurance premiums in monthly installments so they are less likely to get upset when they see their bills go up a few dollars. Since I pay the entire premium at once to save on fees (read “interest” – almost 8% in the picture above… no thanks! ) that they add to the monthly installment plans, each increase is painfully obvious.
So every 6 or 12 months I begin the process of comparing the new premium proposed by my current insurance company with that of other insurance companies. Nine times out of ten I end up signing up with another company which is offering various forms of incentives for switching to them along with those lower teaser premiums. If you can’t beat them, join them, right?
It’s almost September and my current auto insurance policy with Elephant is about to expire after a one year claim-free relationship. When I switched to Elephant around this time last year they seduced me with a low quote and a long-term twelve month policy sparing the hassle of having to do it all over again at the more customary 6 month renewal. A couple of days ago when I looked at what they want me to pay for another one year relationship I ran back to my computer to start the search for a new mate.
We have two cars and carry the highest single limit Liability and Uninsured Motorist coverages commonly available (500K Bodily Injury and 250K Property Damage) on both cars. On top of that I usually add a Comprehensive coverage with a $500 deductible but I do not carry Collision or any other optional coverages such as Medical Expenses, Income Loss, Towing, Rental etc. preferring to self-insure with an emergency fund. This makes cross-shopping for auto insurance as straightforward as it can be – a plus if you do it as often as I do.
Back in August 2012 a one year premium to insure both cars with Elephant was $334. They beat the closest competitor by at least $50 and got my credit card number and the expiration date in return. There were all kinds of juicy “discounts” reflected on the policy documents including the “first time customer” or something along those lines. They were very excited to have me on board!
Well, I guess their excitement faded after a year so they decided to show their dissatisfaction by increasing my yearly premium to $447… That’s a difference of $113 or a whopping 34% increase! What did I do to deserve this?! No tickets, no claims and no changes to the policy.
Back to the internet drawing board. I heard good things about www.esurance.com by Allstate (no association with this blog) so I decided to try them first. After a 10 minute online quote process I had my numbers. Take a look:
A six month premium of $178 for a yearly premium of $356. Discounts that total more than the premium itself! Champagne! Flowers! Fireworks!
If Elephant went from $334 to $356 I would just stay with them for another year, but since they think it’s OK to raise their quote by 34% it looks like I will be going to Allstate. Of course we have all these “discounts” built into the Allstate quote. I know that some of these will probably disappear in 6 months and I might have to switch again to get that “new insurance company smell” back… I might have to see if Elephant had a change of heart and wants to take me back by then!
Personally I feel like 10 minutes or even an hour every 6 months is a great investment that can pay back with big dividends. In this example, a 10 minute online search saved me $91 or $546 per hour. If you are carrying a policy that costs more than mine due to additional coverage, claims, accidents or pricing differences between locations you could save a LOT more than that for the same amount of work. You don’t even have to pick up the phone anymore and request multiple quotes with a single click of a button! I know plenty of people who pay over a thousand dollars per year for their family auto insurance. At those levels they are looking at potentially saving hundreds of dollars making this an even greater return on the small investment of time.
What about you? Do you regularly chase the lowest auto insurance rate from a reputable company or set it on autopilot and don’t bother?
Update: continue reading part II – 6 month renewal experience.