If you own a car, you probably have auto insurance (or you should). On this week’s episode, Josh and Austin discuss the various kinds of auto insurance, deductibles and how to shop for insurance. They also give tips on how to reduce your insurance cost, like not getting fancy cars and avoiding long work commutes. The episode is ended with Josh and Austin giving you a look into how they personally deal with auto insurance. You won’t want to miss this one!
Main Talking Points
[3:28] – Different Kinds of Auto Insurance
[12:50] – Dad Joke of the Week
[13:42] – Deductibles
[18:14] – Shopping for Insurance
[24:06] – Ways to Reduce Insurance Cost
[31:33] – What’s Right for You?
[34:17] – Josh & Austin Preferences
Links & Resources
045: Do You Need Disability Insurance?
070: Don’t Forget About Life Insurance!
How Car Insurance Works – howstuffworks.com
Revealing the Secrets of Cheap Car Insurance – The Everyday Advisor
Invest With Us – The Invested Dads
Free Guide: 8 Timeless Principles of Investing
Social Media
Full Transcript
Intro:
Welcome to the Invested Dads Podcast, simplifying financial topics so that you can take action and make your financial situation better. Helping you to understand the current world of financial planning and investments, here are your hosts, Josh Robb and Austin Wilson.
Austin Wilson:
All right. Hey, hey, hey. Welcome back to the Invested Dads Podcast, the podcast where we take you on a journey to better your financial future. Today, Josh, we are going to be talking about car insurance.
Josh Robb:
Car insurance. So question for you.
Austin Wilson:
Yeah?
Josh Robb:
If you have car insurance, and you set up reoccurring payments, does that make it auto insurance?
Austin Wilson:
That’s funny, auto insurance. And we’ll get to it later on, but always, always, always set up recurring payments on everything in your life. That’s just common sense.
Josh Robb:
Don’t want to miss anything.
Austin Wilson:
Don’t want to miss it.
Josh Robb:
Go back to our credit episode where we talk about credit scores.
Austin Wilson:
Exactly. So, yes. Good point, Josh. Auto insurance, but we’ve done a handful of episodes in general when it comes to a couple of different types of insurance. We had specific episodes on disability insurance and life insurance. So check those out if you haven’t already. We’ll link those in the show notes below. The principle of insurance is really the same for no matter what kind of insurance you’re talking about. Right Josh?
Josh Robb:
Yeah. So the concept of insurance, really from a high-level standpoint, is there’s risk involved, monetary risk involved in certain situations. You’re taking that risk and passing it to someone else. So in the life insurance, as an example, the risk is if I die prematurely, earlier than I anticipated. The risk is that then my family will be out the income I was providing. So the life insurance is saying, the company says, “We’ll take that risk in exchange for you paying us monthly.” And so you’re passing the risk over. Car insurance is the same way. You’re saying, “Okay, what is the risk that I’m driving my car and something happens? I crash or get hit or something, and I need a new car, or I need to repair my car.” You’re passing that risk on where the full amount they’re going to take responsibility for a certain amount. You’re paying them monthly for that.
Austin Wilson:
Yeah. So I mean, yeah, you’re passing the risk on to someone else. In this case, an insurance company is what it’s typically going to be. And similar to the way that life insurance is calculated using actuarial tables and stuff like that, it gets pretty morbid talking about who dies when and all of these statistics. Well, similarly auto insurance companies have statistics on driving and who’s driving what and how fast they’re going, and all of these things.
Josh Robb:
What color your car is.
Austin Wilson:
It could have a higher … yeah, it could change.
Josh Robb:
Red cars.
Austin Wilson:
Well, I know they’re more for getting arrested than …
Josh Robb:
Well, the insurance company knows that too.
Austin Wilson:
Oh man. So yeah. So you’re passing the risk along. They’re using statistics to pretty much bet that you are going to pay them, you and everyone else are going to pay them more in premiums than they’re going to be paying out in claims.
Josh Robb:
And it really comes down to pooling, in the sense you take multiple people, put it together. Because again, the chances are someone in that group is going to need to have a claim. But if you have enough people in that pool, you have more premiums coming in than the payments out to fix or repair the cars. That’s the goal.
Austin Wilson:
And when you’re not paying out, any insurance company is not just letting their money sit there in a bank account. And that’s really how they make money. Yeah, so I guess insurance in general is passing the buck-
Josh Robb:
In more than one.
[3:28] – 8 Kinds of Auto Insurance
Austin Wilson:
Get it? Two different ways, to the insurance company. So let’s break down auto insurance. So the term auto insurance is actually an umbrella term. It’s not just like, “You have auto insurance. Great. You’re done.” There’s a lot of different kinds of insurance within auto insurance that we’re going to talk about. There’s a great list on how stuff works.com that we’ll link in the show notes also, but they broke it into eight categories and we’ll go through those here.
Josh Robb:
Eight.
Austin Wilson:
So eight different categories. Number one …
Josh Robb:
Your front tire.
Austin Wilson:
Your front …
Josh Robb:
Back tire.
Austin Wilson:
You only have eight tires?
Josh Robb:
Yeah. I don’t know.
Austin Wilson:
Number one insurance, liability insurance. So this coverage pays for accidental bodily injury and property damages to others. Injury damages include medical expenses, pain and suffering and loss wages. Property damage includes damaged property and automobiles. This coverage also pays defense and court costs. State laws determine how much liability and coverage you must purchase, but you can always get more coverage than your state requires. So liability insurance is like the legal requirement for most states.
Josh Robb:
Right. So when you talk about car insurance, most people are talking about liability from the very minimum, bare minimum.
Austin Wilson:
That’s a legal requirement. And this is a disclaimer early on, but you need to look by state by state and see what those requirements are, because it’s not the same across the country. It’s definitely not the same around the world. So look at what the requirements in your area are, because they’re probably different than what we’re seeing here in Ohio, if you’re not from around here.
Josh Robb:
Yep.
Austin Wilson:
So yeah, that’s the number one, that’s basic insurance-
Josh Robb:
That covers other people.
Austin Wilson:
Correct.
Josh Robb:
And that’s why it’s required is if you get a car crash, your fault, you need coverage to help replace or make right everybody that was involved in that, that you were responsible for.
Austin Wilson:
Yes. So flip side of that is called collision insurance, number two. This coverage pays for the damages to your vehicle. So Josh and I are in an accident, it’s my fault. Liability coverage would cover I’m liable for his issues that come out of this, but the then I’m out if my car gets hurt, if I do not have collision insurance. But collision insurance is now the insurance company, after my deductible, which we’ll get to later, will pay to repair my car as well. So that’s collision insurance there. Third category is called comprehensive insurance. And I consider this … it’s very cheap.
Josh Robb:
Yeah. Adding on, yes.
Austin Wilson:
Comprehensive insurance is extremely cheap. This coverage pays for loss or damage to insured vehicles that does not occur in an auto accident at all. So this type of damages can be fire, wind, hail, flood, vandalism, theft, hitting a deer is something common in this part of the world.
Josh Robb:
Yes, which is important.
Austin Wilson:
And I think in my world, collision insurance is a non-negotiable because of how cheap it is. And most people don’t really consider it, but it’s really a cheap add on to your …
Josh Robb:
Yeah, comprehensive. I mean, a great example of that is a hailstorm blows through. You have a car parked in your driveway. You come out the next morning, got a bunch of dings in it from this hailstorm or cracked windshield or whatever. I wasn’t driving, so liability and collision do not apply.
Austin Wilson:
Do nothing, right.
Josh Robb:
It was sitting there. So that’s where this comprehensive come in. Now you can get all this muddy, “What if you park it in the garage?” And then there’s this debate on whether it’s home insurance, car insurance and all this fun stuff. We’re not talking about that today.
Austin Wilson:
Let your insurance company hash that out.
Josh Robb:
But in general, comprehensive is for the non-driving issues that you have with your car.
Austin Wilson:
Unless you’re hitting a deer.
Josh Robb:
Deer’s one, because it’s a natural phenomenon.
Austin Wilson:
Or a phone pole hits your car while it’s going down the road.
Josh Robb:
Falls over. Yeah.
Austin Wilson:
Yeah. Those are sort of things. So yeah, that’s collision … or that is comprehensive insurance. And I consider, between those three, liability, collision, and comprehensive, that’s the high level umbrella, right?
Josh Robb:
The only argument would be comprehensive, if you own some old junk car that you use just to haul stuff around or whatever, maybe comprehensive is less of a worry to you because you said, “You know what? The car is only worth $400. So my deductible alone is going to cover …” It’s debatable, but you do need liability because you’re still responsible for anybody else and collision’s nice. That would fix it. But those are the ones where I’ve known people who have just … an old beat up truck that they just use that to haul wood around or whatever they do. But you need liability, no matter what.
Austin Wilson:
Yeah. And another example that I think that should be taken into consideration when it comes to comprehensive insurance, and I’ve used this myself, is windshield replacement. Most insurance companies will cover … If you’re driving behind another car or who knows, and a rock flies off their tire. It’s not the driver’s fault or whatever. That’s not a collision, a car collision or whatever, that is a product of the environment. And that would be a comprehensive claim. And most insurance companies will … If you crack your windshield or whatever, will replace your windshield for a very, very low affordable deductible. And I’ve had to do that a couple of times and it is so great because … Well, it actually helps them out because if you’re driving around with broken windshield, you’re more of a risk to be in further accidents.
Josh Robb:
Yeah. Fixing it’s a lot easier than what happens later.
Austin Wilson:
Exactly. So that’s comprehensive. The next one we’ll talk about is medical coverage. Medical coverage pays medical expenses regardless of fault, or when the expenses are caused by an auto accident. So suppose you’re in that accident, no matter whose fault it was, your medical coverage in your auto insurance policy pays for those medical expenses there.
Josh Robb:
Or if you’re a passenger.
Austin Wilson:
Yes, that’s exactly … Good point there. The next one is called PIP or personal injury protection. It’s required in some states, not all states. Look into your state. This coverage pays for medical expenses for the insured driver, regardless of fault for treatment due to an auto accident there.
Josh Robb:
And that really kicks in if what the coverage is doesn’t cover your full amount.
Austin Wilson:
Correct.
Josh Robb:
Then that would kick in on top of that and continue to cover for you.
Austin Wilson:
This whole thing is kind of tiered. It just gets more and more … as one insurance lets go, there’s another one that can then take its place or whatever. Uninsured motorist is the next one. So that pays for your car’s damages when an auto accident is caused by a driver who does not have liability insurance. Now in the United States, it is a requirement to have liability insurance. That being said …
Josh Robb:
Does everybody? No.
Austin Wilson:
… Some people are idiots and don’t have liability insurance, and yet they’re still driving. So what that does is it pays for your damages if your car is in an accident caused by someone else who’s not insured. Word to the wise, just get your dang insurance and we won’t have this problem.
Another one is under-insured motorist. This pays your car’s damages when an auto accident is caused by someone who has insufficient liability insurance. So suppose that they have just the state minimum, but the accident goes above and beyond that in terms of dollar figures, your insurance would then kick in on top of theirs to cover the difference there. And the final one, the number eight is rental reimbursement. This type of coverage will pay for a rental car. If your car is damaged due to an auto accident, often this coverage has a daily allowance for a rental car.
Josh Robb:
So true story, last year, 2020, I hit a deer driving home in our van.
Austin Wilson:
In your van. I remember.
Josh Robb:
I should take that back. The deer hit me, jumped into the side of the car.
Austin Wilson:
That’s usually how it goes.
Josh Robb:
80% of time it is that way anyways, but hit the side of our car, damaged it. While it was getting repaired, we did have rental reimbursement. So they said X amount of dollars per day while it’s getting repaired. And so we had a replacement van for … I mean, I wouldn’t say for free, because you’re paying your insurance, but it did not cost me extra while it was getting repaired, which is nice. It’s very helpful if you don’t want your life totally thrown out of whack.
Austin Wilson:
Yeah. In most family situations around my world, anyway, you kind of need two vehicles because kids got to go here, you’ve got to go there. Your wife’s got to go here. You’re always kind of running around in our world anyway. So having that coverage is helpful. And especially if you are dependent on your vehicle to get to work and you can’t just bum your wife’s van for a week and have her stranded at home, it is very important. Now, if you live close enough to work where you can walk, it might be something to …
Josh Robb:
If it’s not bad weather.
Austin Wilson:
Yeah, exactly, to not have to consider there. So I think in general, between these eight and there are other specific little kinds, but these are the main eight, most people will have multiple different coverages between all of these different types within their comprehensive policy. And I mixed up comprehensive and not meant comprehensive.
Josh Robb:
Just the one piece, don’t overall…
Austin Wilson:
But comprehensive is in the overall policy.
Josh Robb:
And again, it comes back to your personal situation. You say, “Okay, what do I need to pass on to someone else to take that risk or burden off of me?” You may say, “You know what? I’m in retirement. And I got a good financial situation going on. I may not need X coverage. Maybe the rental reimbursement is not a big deal. I’m retired, I’m flexible.” Or, “I live in a city. I can get Uber,” or whatever. So just look at your situation and say, “Okay, which of these makes the most sense?” Now, some of those, there’s a pretty high level of coverage for a low cost where it makes it pretty efficient.
Josh Robb:
And some of those can be a high liability for you, like medical coverage, things like that, where there could be some big costs that it may be worth paying a little extra to pass that risk on to an insurance company.
Austin Wilson:
Absolutely.
[12:50] – Dad Joke of the Week
Josh Robb:
All right. Let’s take a quick break and do a dad joke.
Austin Wilson:
Ooh, dad joke of the week.
Josh Robb:
We’ll come back and talk a little more insurance. All right. This is just more of a fact for you.
Austin Wilson:
Okay.
Josh Robb:
You’d think that a snail, if you removed its shell, would be faster. But in fact, it’s just a little more sluggish.
Austin Wilson:
Those things are gross by the way.
Josh Robb:
Which one? A snail or slug.
Austin Wilson:
Yes.
Josh Robb:
Yes. Both.
Austin Wilson:
Sometimes when we get tons and tons and tons of rain, like I think we’re about to because it’s spring and it’s just seems like it’s going to rain all the time. We have one of those walkout basements where it’s like an old house where you open up the doors, you go down the things. So where the stairs are, it’s a dark moist place. And when it’s raining and stuff-
Josh Robb:
They come out
Austin Wilson:
We get slugs.
Josh Robb:
Oh, the slugs.
Austin Wilson:
And sometimes those things will scoot across the wall or whatever and they’ll leave that trail. And it freaks me out.
Josh Robb:
You know where they’re at. You know where they went.
Austin Wilson:
It freaks me out.
Josh Robb:
Oh man.
[13:42] – Deductibles
Austin Wilson:
So deductibles, Josh. We talked about it earlier.
Josh Robb:
Deductibles.
Austin Wilson:
Can’t get around it. Just like health insurance, deductibles in car insurance are the amount that you must pay out of your pocket before your insurance kicks in to pay the rest or whatever that may be. So these can range, with auto insurance, from very low numbers, $100, $200, $1000, maybe more. Maybe you’ve got a really, really expensive car and you have a few thousand dollars deductible. Who knows.
So the example I put together here in my head are suppose you have a $500 deductible and you are in an accident that you are at fault and you have collision insurance. And the total repair costs for your vehicle is $2,000. So Josh, you will pay the repair company $500. You’re going to write them a check. It’s going to be done. They’re already working with your insurance company. Your insurance company is going to send another check for $1500, and that’s how you’re then going to then cover your bill there. So that’s how, just like health insurance, car insurance works similarly in that way. However, it’s not a deductible for a year. It’s a deductible per event.
Josh Robb:
Yeah. Per incident.
Austin Wilson:
Yeah, exactly. But this part of insurance is totally adjustable. So you essentially can set your own deductible with your insurance company. But keep in mind, the lower the deductible … So if you want a really low deductible, maybe you’re a really bad driver. You want a really low deductible. If something can happen very frequently, your premium is going to be higher. But if you’re willing to take on a little bit more of that risk and withstand maybe a higher deductible, $1,000 $2,000, your premium’s going to be a lot lower, but you have to be willing to cover those costs out of pocket more quickly.
Josh Robb:
And that’s where your insurance fund comes into play.
Austin Wilson:
Or your emergency fund.
Josh Robb:
Yeah, your emergency comes into play is from an insurance deductible standpoint, you have three to six months’ living expense in the emergency fund like we’ve talked about in our episodes, that then could be used for this type of thing. So you could increase your deductible, knowing you have that money set aside, reduce your monthly expenses, make it easier on your budget.
Austin Wilson:
Absolutely. So yeah, it’s something that you should, if you’re looking at ways to adjust your insurance costs, it is a lever you can pull. We’ll talk more about that in a little bit. It’s also worth pointing out that providing the other driver is insured, if you’re in an accident and you’re not at fault, so same accident. We’re driving. We crash. I’m at fault, Josh. You’re not at fault. My insurance, provided I have the correct level of insurance, is going to pay for your accident.
Josh Robb:
I don’t have to worry about a deductible.
Austin Wilson:
You do not have to worry about anything. It doesn’t go against you if you’re not at fault, which is something that is very good to-
Josh Robb:
Some States, when you talk about every state is different, some States have a zero fault rule and some don’t, meaning that you could be assigned partial fault for an accident. So it can get really fuzzy there. And I’ve lived in States like that, where you’re in a car crash … Let’s say I’m at a stop sign and I stop and then I go through and you hit me on the other … T-bone me going through. And I had the right of way. I stopped at my stop sign. If they say, “Did you look both ways before you went through the intersection?” “Well, no, it was my turn.” They will assign me a certain percentage fault. And that’s my percentage that I’m responsible for. And so some states it can get a little weird where you say, “Well, I didn’t do it.” But you still may be paying a portion from your insurance.
Austin Wilson:
It is. It’s jacked up. I’m glad Ohio’s not that way. But that brings up another good point. This is why a lot of people have dash cams and stuff in their cars, because they want to cover their butt if something happens and they cannot prove … Or in otherwise they could not prove that they did the right thing or whatever. Yeah. So again, this goes back to understanding your individual state’s laws and requirements about insurance, because they can be very, very different. So Josh-
Josh Robb:
Side note, while we’re here. If you are in a car crash and your car is still drivable, don’t leave it right there. Move safely off to the side, pull into a parking lot or something. Insurance agents and police officers are very good at understanding what happened, even if they don’t see the exact scene that happened. I’ve been told many times, and I pass this on, you’re more of a hazard and can cause more problems if you just have a car accident, you’re just like, “Let’s leave it here for them to see what happened.” No, no, you could cause three or four more cars and you could be responsible for some of that for not moving your vehicle. If it’s still drivable and safely operable, get it off to the side, get it away so you are not a danger to everybody else.
[18:14] – Shopping for Insurance
Austin Wilson:
Josh, how can you shop for insurance?
Josh Robb:
Yes. There’s really three ways to shop for insurance.
Austin Wilson:
Only three?
Josh Robb:
We’ll walk you through those three ways. They’re kind of big ways. One is you do it yourself. And so that means you call up all the different insurance companies and get a quote. Now, the key is, you want to ask for the same coverage so you can compare those apples to apples, not apples to oranges or anything like that. I want to look at the same thing to know what the price is compared to each other, using the same deductible, the same coverage, the same amount, everything like that. Doing it yourself is a lot of legwork, but you’re controlling the situation. You know which companies you want to look at, all that. There’s independent insurance agents and contract insurance agents that work for one exclusive company.
If you use an agent that works for one company, you can work with somebody to get that quote instead of doing it yourself. But you’re still going to want to shop on your own at multiple places. The third one is you use that independent agent, which really has the ability to shop for you on your behalf. And they’re not tied to really … I want to say middleman in a good way. They’re the broker or the person who just says, “Okay, I have a relationship with all these companies. I will pull the quotes because I do it quick and efficiently and I’ll give them to you. You decide. And I’m just the one that’s going to set up the insurance.” And normally you don’t pay for that independent agent. They get compensated by the companies that they’re quoting, which gives them motivation to get relationships with more of those to get you more quotes. So that’s, I think, the preferred method nowadays, and you can do that online. You can use an independent agent.
Austin Wilson:
You said there’s an app nowadays?
Josh Robb:
There’s some technology now where it does it all for you. And you’re connected to a live agent at the end that you need to work with. But in general, with today’s technology, getting multiple quotes is a lot easier than it used to be. It used to be calling up each and trying to get it all written down and everything. So that’s important.
Now, while we’re talking about shopping for insurance, most insurances are for a one-year timeframe. You get a contract for a year and that’s what you set your payments, your premiums and it’s a year. Most people keep their insurance, even though they’re dissatisfied with it. There was a survey a couple of years ago that showed over a third of the people are dissatisfied with their insurance car insurance and kept it. So interesting to note, every year when it’s getting ready to renew, they’ll let you know. Shop around again. If you’re using one of those independent agents, just do a quick reach out. “Hey, am I still using the best insurance out there?” Because maybe your situation change, maybe your car has changed. Maybe the number of drivers change. Worth noting.
True story, we had some clients in and they were just adding a new … One of their kids was becoming a driver. So they were adding a new young insured driver onto their car insurance. And it jacked their prices up a ton. And their insurance agent called and said, “Hey, did you see your new insurance price?” And the guy said, “No, I haven’t looked yet.” He said, “Well, you might want to, because I think you can find it cheaper.”
Austin Wilson:
That was a good agent.
Josh Robb:
They reached out to them and let them know. And they were able to find a new insurance that was about half the cost of that quote.
Austin Wilson:
Wow.
Josh Robb:
So when things change in your situation, reevaluate your insurance. Because whether you buy a newer car or a different car, safety features on there may make it cheaper, who knows. But keep that in mind along the way is don’t just stay with one just because you’re there. Moving insurances is pretty easy. It shouldn’t be much of a headache.
Austin Wilson:
Oh yeah. And the cost works out too. So even if you’re in the middle of a cycle or whatever, you’ll get a prorated refund from the one company and you’ll only pay the part of the new company. It all works out at the end. It’s not a big deal.
Josh Robb:
So don’t be afraid to shop around. And we’ll have quotes or tips at the end to help reduce some of the costs. But in general, shop around, get quotes, act like you’re looking for the best deal because that’s what you need to do. You don’t want to skip on insurance coverage, but you can find equivalent coverage for a lower price a lot of times. Now, just to note, nationwide, a car owner spends on average $935.80 per year on their auto insurance. That was, came from Forbes.
Austin Wilson:
I wonder if that’s for one vehicle. That sounds like over one vehicle price.
Josh Robb:
For annual, yeah, but that’s, again, you just mentioned eight different things. That’s covering everything, from just a liability coverage to everything. And so take it for what it’s worth, but that’s at least an average starting point for you to look at as a quote.
Austin Wilson:
It’s probably also good to keep in mind that your car insurance premiums should not increase dramatically year over year. So as long as your driving record hasn’t changed, as long as your … That’s really the big thing. As long as you’re driving record and you’re driving the same vehicle and want the same coverage, your premiums shouldn’t really go up that much, if at all.
Josh Robb:
A slight increase possibly with inflation.
Austin Wilson:
Yeah. This is due to the fact that what you’re driving is a depreciating asset. So your car is becoming worth less and less year over year. So your premium should then follow suit, or at least maintain.
Josh Robb:
Yeah. So if you think about it, again, they’re taking the risk. So let’s say you have a $10,000 vehicle. And then next year, if you were to get it appraised, it’s worth $8,000. It depreciated because of the miles you drove and blah, blah, blah. Well, the insurance company is saying, “Okay, if your premium was covering what we were obligated to replace if something happened to you, well, now it’s worth less.” So you’re right. The cost really doesn’t change. In fact, they may be getting more money from you from that standpoint. So yeah, you should not see much change year over year, unless there’s been some changes within your situation.
Austin Wilson:
That would be a red flag to talk to your agent and say, “Hey, what is going on here?” Because yeah, that’s just something that I thought it was worth pointing out.
[24:06] – Ways to Reduce Insurance Cost
Josh Robb:
Now I know we’re going to get into this next, ways to reduce your car insurance. One of those is bundling. Now you may see your overall … If you lump everything together, your home is appreciating in value. And so if you see your overall insurance go up, break it down first before you freak out because it may be your home value increased to the point where your insurance needed to go up for that.
Austin Wilson:
Yeah. And if you are bundling, you will have a different policy for home and auto, even though you’re at the same company or whatever, which is what we recommend, that we’ll talk about in a little bit, if you want to save some money. But you can look into the individual coverages.
Josh Robb:
Yeah. But if you have it all lumped out at once, you may just see a change. Check into it before you go to crazy.
Austin Wilson:
So this is going to be the most exciting part of the episode, I think, how to get cheaper insurance. Okay. So I’ve got some do’s.
Josh Robb:
In 15 minutes you could save …
Austin Wilson:
15% or less on your …
Josh Robb:
That’s right.
Austin Wilson:
So this is do’s, don’ts things to do, this is just life experience thoughts that we’ve had over the years. So number one, avoid expensive, fancy, fast cars or anything that sounds fun, because these cars are A, more likely to be involved in an accident, and B, more likely to get stolen. That’s a good way. So don’t buy a fun car.
Josh Robb:
That’s right.
Austin Wilson:
To save money.
Josh Robb:
Yeah. Boys, men, young 16 year old guys, especially are … I mean, but I know we’re going to talk about the cost of them, but they’re the ones that are wanting that. I mean, I remember when I was in high school and it was like-
Austin Wilson:
I still do.
Josh Robb:
“Man, this is a car I would love to have.” And so if you can even just talk them into waiting a little bit, that’s huge.
Austin Wilson:
That brings me into my next point. So here’s the main thing we can do to get cheaper insurance. You can avoid being an unmarried male under the age of 25.
Josh Robb:
Perfect. Easy.
Austin Wilson:
If you can avoid that, you’re going to have cheaper insurance. And this is just because, and I’m laughing because I’ve been that category. And that category, I remember, I had motorcycle insurance for … I did the opposite of what I’m telling people here. So this is a learning from live experience. But I was 22 years old, maybe 23, unmarried, before I got married. I bought a really fast, really sporty motorcycle. So I was checking all the boxes. And I had to pay like one fifth of the cost of the bike in insurance for a year. I was floored.
Josh Robb:
That’s crazy.
Austin Wilson:
I was floored.
Josh Robb:
But you drove that slow, just under the speed limit the whole time.
Austin Wilson:
Of course.
Josh Robb:
And you’re like, “What is the point of this extra insurance for? I’m being very responsible and I have flashing lights everywhere so everybody sees me.”
Austin Wilson:
Safety first.
Josh Robb:
Training wheels on the back.
Austin Wilson:
It was yellow. It was the most visible thing you could have. So anyway, I’ve been that category and I know that it can be very expensive. Fortunately now, married, over 25, still a male, so that probably still dings me. But not much I can do about that. So yeah, that’s the highest risk, most expensive insurance class. So once men get married, they’re deemed less risky by insurance companies. Once men are over 25, same thing. And we know that women are just less prone to do possibly fun, but ultimately stupid, things behind the wheel. Those are just facts. That’s the funny one that’s actually really true.
Another thing you can do to save some money is avoid long commutes. So if you live close to work, that’s going to save insurance because if you’re driving less in general, that’s going to save insurance.
Josh Robb:
Longer you’re in the car, the more risk you have.
Austin Wilson:
Absolutely.
Josh Robb:
That’s what they’re looking for. They don’t care that you don’t live close to work in the sense of, “Oh, look at you on the road all the time. You’re sitting in your car for X hours a day-
Austin Wilson:
You’re at a risk, yep.
Josh Robb:
You’re at high risk.
Austin Wilson:
Another one is avoid accidents. I think that goes without saying, but in general, be a good, safe driver. Stay within the law because when you have accidents, those stay with you for a few years and make your premiums … You’re all of a sudden a lot riskier to the insurance companies, your premiums go up.
Josh Robb:
Thankfully deer don’t count.
Austin Wilson:
Correct.
Josh Robb:
Acts of God-
Austin Wilson:
Yes, comprehensive claims do not …
Josh Robb:
Or do they call those things? Are all outside of that because you would then be dinged for living in high population states of animals that have no control over.
Austin Wilson:
Like Ohio. Yeah. Like Ohio. Another one is that we talked about, ask about bundling. Generally, asking questions is good. Ask about bundling home, auto, even life insurance. Those companies typically have a lot of options. And the more you bundle, the better of a deal you’re going to get in total.
Josh Robb:
And then also, within the bundling, ask if there are different packages or incentives for your type of car. So if you have airbags, if you have car alarms, if you have all the safety features, you can get discounts on your insurance.
Austin Wilson:
Yes. Yeah. And in general, ask about discounts on top of everything.
Josh Robb:
Everything that’s there. Yeah.
Austin Wilson:
Just ask.
Josh Robb:
Am I part of a group? Am I part of some sort of …
Austin Wilson:
AAA or whatever that may be. Are you retired? AARP, there’s all kinds of discounts for different groups and stuff like that. Ask about a safe driving program. This can look couple of different ways. Nowadays they’re going more towards having an app with the insurance company on your thing, they can track your driving habits and stuff like that. It could be something to plug into your car. Some people really hate this from a privacy perspective, but essentially you’re giving them data and they’re giving you a discount and it can save you a lot of money. Some people have issues with it. I don’t particularly.
Josh Robb:
Except for when you drive fast, and then you have an issue with it.
Austin Wilson:
Well, I just changed from a little thing that plugs into my car to the app, because they’re doing away with the physical things. And yeah, it can send you an alert on your phone, which I thought was kind of funny. If you’re going over 80, I think it is, or you have a hard braking incident, it’ll alert you. Wouldn’t it be counterproductive to give a notification-
Josh Robb:
Yeah, look down at my phone. “What was the cause of your crash?” “Oh, my insurance agent actually texted me while I was driving.”
Austin Wilson:
Exactly. Another one is considered driving less, carpool, walk. Do you need two cars? I don’t know. This is a choice everyone has to make.
Josh Robb:
Only go downhill so you just leave the car off and just cruise.
Austin Wilson:
Ooh. Does that still count?
Josh Robb:
I don’t know.
Austin Wilson:
Has to still count. Another one is raise your deductible. We talked about that. If you increase your deductible, you’re all of the sudden less risky because the insurance will have to pay out less and that’s going to lower your premiums. Another one that is a … We’re going to say it again. It’s not negotiable. Just do it all the time with everything. Enroll in auto-pay. You get a discount when you do that, usually, with your insurance. And pay in full annually, if you can, because a lot of companies will be thrilled to take your money monthly. But you’re going to pay more than if you do it annually.
Josh Robb:
Yeah. And they give you a discount for annually most of the time, because again, we talk about what do insurance companies do to make their money? They invest it. And so if they can get a big chunk, the longer they have that money of yours, the more they can use it to pay out for other ones, and also keep that invested and growing. And so annually, if you can, quarterly would be second best, and then monthly is the most expensive option.
Austin Wilson:
And another one that some people don’t think about is with a lot of companies, if you link a checking account, you’ll pay less than if you … because they have access to your money right away. They’re not going through a middleman, all this stuff. Then if you use a credit card, often that’s a higher price. So think about those things.
Josh Robb:
Have you ever figured out between credit card points versus the discount to get you, which one nets you better?
[31:33] – What’s Right For You?
Austin Wilson:
Usually it’s still link your checking account, but yeah, if you care that much, run it both ways. So the question that everyone’s wondering is, “What’s right for me?” And I think that there’s a handful of variables that really everyone has to make their own decision about this. And we have our own opinions that we’re going to talk about shortly, but it depends on how much risk you’re willing to take by yourself. If you’re willing to take on a lot more risk and have a higher deductible, and all of these things, have the minimum insurance, that’s an option. Some people choose to do that. They can have very cheap insurance because of that.
It also depends on your vehicle. If you have a newer vehicle, you may want more insurance than if you have that old beater, or if you have something in between, you’re going to have to make that tough call of what kind of insurance and how much insurance do I want? It’s different for every single person and everyone’s comfort zone. It also depends on how much money you have socked away just in case something happens. The more you have socked away, the less insurance is ultimately going to matter to your situation.
How much you drive is a factor as well. So think about that. If you drive a lot, you probably want better insurance because there’s more opportunity for things to … Even just happen to you, not even your fault. So think about that. Your driving record is something that’s going to have an impact on this. So be safe, wear your seatbelt, do smart things, don’t run into people, and hopefully they won’t run into you.
Josh Robb:
Follow the posted speed limit signs.
Austin Wilson:
But not the recommended corner ones. Those are negotiable.
Josh Robb:
Somebody took the time to figure that out.
Austin Wilson:
And they’re also low. 25?
Josh Robb:
When the tires squeal, that’s probably a sign that you’re close.
Austin Wilson:
Yeah. I’ve never had that happen. So another thing to keep in mind is if you have a loan on a vehicle, which we generally don’t recommend. Some people do. If you have a loan on a vehicle, you do not actually own the vehicle. Or if you’re leasing the vehicle, you don’t actually own the vehicle. So you are almost guaranteed to have to have full coverage for that vehicle-
Josh Robb:
Yeah. You may have that a requirement.
Austin Wilson:
Because you don’t own it. So if something happens to that vehicle, the dealer that still owns it or the bank that technically would still own it, they want to get that thing fixed. They want their money. So think about that. If you own your vehicle outright, you can do whatever you want above the minimum.
Josh Robb:
Yes. And that’s where it comes back to is unlike other insurances where you can self-insure, like life insurance. We’ve talked about that. At some point you have enough saved where life insurance becomes irrelevant. People may choose to still have it, but it’s irrelevant at that point as a need. There’s always a need for car insurance. There’s a liability and a obligation-
Austin Wilson:
A legal requirement.
Josh Robb:
-within your state that you have to have a minimum, at least. So, as we talked through this, deciding what you need, there’s a floor that you have to have to drive a car. And then from there up is decide how much risk you want to take.
Austin Wilson:
Unless you’re driving a Flintstone vehicle, because then there’s no floor.
Josh Robb:
There is no floor, but there’s still a minimum.
[34:17] – Josh & Austin Preferences
Austin Wilson:
There’s still a minimum. So Josh, what are your personal preferences when it comes to auto insurance? How do you manage that with your family?
Josh Robb:
Yep. So we shop around. I shop around, look at the costs. Both of our vehicles are older 10, 11 years old, give or take. And so they’re great cars, but we’re at that stage where they’re not super expensive. And so we have good coverage on it. I pay annually because it is cheaper. And then each month I just put it into a side account and then each year I have it all set aside. So in a sense, I’m setting aside monthly, but paying it annually, which is a nice way of doing it, in my opinion. You save that cost for it.
But in general, I fall into the category, car accidents are not something I plan for. And so I have good coverage because I don’t want to be caught off guard for something like that. Especially if it’s other people involved and I’m responsible for it. I would want to make sure I have enough coverage to take care of that. Also, prior to working here, I worked in an industry where we were transporting kids. And so I had to have a higher coverage. So I understand that there’s a cost associated with the higher coverage you have, but it’s to cover the higher liability. And so now that we have kids and you transport kids around, you just want to make sure you have the full coverage to protect yourself and those involved.
Austin Wilson:
Absolutely.
Josh Robb:
That’s where I land. What about you?
Austin Wilson:
Yeah, kind of a similar situation. So we we’ve been with the same insurance company for a handful of years. But I had another insurance company prior to that and I moved because I got a better deal. I moved because I was able to bundle stuff together. And so right now we’ve got two vehicles, our house, two vehicles and our house and a motorcycle, all on one policy. And the more stuff you have on the policy, the better deal you get. So that’s great. Yeah. We link it to our checking account and pay in full. I think it’s every six months, these things is the best that they can do as far as a discount goes. So that’s what we do. But we do the same thing where we know our total for either the six months or the year or whatever, and then divide it out and set it aside automatically every month into what we call an accrual account. And then it automatically goes back to our checking account when it’s due. It’s great.
So we do a similar thing. Yeah. We try and keep … I actually just got a call from our insurance agent a couple of weeks ago and she was just like, “Hey, just want to walk through your coverage, make sure you’re cool with everything and you understand what you’re getting and what you’re paying for.” And I really appreciated that.
Josh Robb:
That’s nice.
Austin Wilson:
So that it just keeps in my mind that I have what I need. But generally we’re similar to you guys. We have older vehicles. I think my vehicle’s 14 and my wife’s is 12. And they’re older, a little bit higher mileage, used vehicles. And we have money set aside if something were to happen. So we don’t have collision insurance because we could replace a vehicle if we had to or whatever. We just have liability and comprehensive for both of those. And it works out for us and we’ve had to use comprehensive here and there or whatever. But it depends, a lot of people have newer vehicles and that’s a decision that they have to make. So that’s kind of where we land on it.
So as always check out our free gift to you, a brief list of eight principles of timeless investing. They’re overarching investment themes meant to keep you on track to meet your long term goals. We don’t necessarily talk about car insurance in that, but it is a part of your financial picture. So keep it in the front of your mind, especially as you’re going through every year, just making sure you understand your coverages and what you have and stuff like that. So check it out, it’s free on our website. Josh, how can people help us grow this podcast?
Josh Robb:
Yep. Make sure you’re subscribing, that way every Thursday you get an alert of our new podcasts that we drop. Email us any thoughts, questions, anything like that to hello@theinvesteddads.com. Do a review on Apple Podcasts if you liked the podcast. That’s always nice. And then if you know somebody talking about car insurance or is asking questions, share this episode with them.
Austin Wilson:
All right, well until next Thursday, have a great week.
Josh Robb:
All right. Talk to you later. Bye.
Outro:
Thank you for listening to the Invested Dads Podcast. This episode has ended, but your journey towards a better financial future, doesn’t have to. Head over to the investeddads.com to access all the links and resources mentioned in today’s show. If you enjoyed this episode and we had a positive impact on your life, leave us a review, click subscribe, and don’t miss the next episode.
Josh Robb and Austin Wilson work for Hixon Zuercher Capital Management. All opinions expressed by Josh, Austin, or any podcast guests are solely their own opinions and do not reflect the opinions of Hixon Zuercher Capital Management. This podcast is for informational purposes only and should not be relied upon for investment decisions. Clients of Hixon Zuercher Capital Management may maintain positions in the securities discussed in this podcast. There is no guarantee that the statements, opinions or forecasts provided herein will prove to be correct. Past performance may not be indicative of future results. Indices are not available for direct investment. Any investor who attempts to mimic the performance of an index would incur fees and expenses, which would reduce returns. Securities investing involves risk, including the potential for loss of principle. There is no assurance that any investment plan or strategy will be successful.
