Learn How to Save Big on Car Insurance Premiums Finance Charges & Fees
by Ed Sneineh
Charted Financial Consultant
Getting some saving on auto insurance requires that you have some knowledge and common sense, and little knowledge of insurance and money. You probably need to spend some times to learn the different levels of liability insurance, the terminology of deductibles and exclusions, etc. Maybe you got misinformed when someone told you that your liability insurance will cover you for towing and rental, and perhaps it was all miscommunication between you and your agent when your were told that you will be getting 'young driver discount.'
There are certain issues which when you learn about save you lots of money, or lots of time and aggravation, and maybe both. With certain companies, insuring 5 vehicles is less expensive that insuring 4 vehicles. How could that be true? If your policy contains 4 vehicles with full coverage on all, and the policy schedules 2 adults and 2 youthful drivers, adding a 5th vehicle liability only and assigning the 16 year old boy with 1 ticket to that 5th vehicle will undoubtedly reduce the premiums with most companies that allow assignments of drivers to vehicles. Remember that if you delete the 5th vehicle later, you may have to pay more to take that vehicle off your policy. Now that is a complicated situation which may intrigue many consumers.
However there are other situations where you do not have to be an insurance expert to realize how easy it is to save. The following is a scenario that is very frequent in its happening with individuals seeking insurance, every day. The situation involves people with options to make either full payment or down payment and monthly payments.
Case: Lets assume that you negotiated an insurance quote, with a total premium of $476.00. Payment Options: Your agent asks you to either pay in full or may give you another option. Make a down payment of $140.00, and then the remaining balance of $336.00 get billed 4 monthly payments of $91.27, leading to total payments of $505.08; [140+(4X91.27)].
The insurance industry is one of the highest regulated industries. The state regulatory normally sets limits on the maximum charges that you may pay for having your premiums paid on monthly or quarterly basis. In Illinois the maximum interest rate that can be charged to a customer for outstanding balances is 10%. However the law allows for setup fees on the contract, with a maximum setup fees of $40.00. In the previous examples, the client is paying $29.08 [$20.00 setup and 9.08 interest] for choosing to make monthly payments.
Paying $29.08 may seem a 'OK' decision, but when you realize that this amount is paid to take care of a balance of $336.00 for only four months, which makes it equivalent to approximately 50% of the money borrowed, it will make you wonder if you took the right decision. What makes things more complicated is the extra charges that you will pay as a result of (1) Being late, (2) Monthly payment contracts being cancelled and reinstated (3) Paying extra for using online/phone payment system by credit cards or check by phone. If you miss 1 payment, get cancelled and reinstated once, and paid once by check by phone you extra charges will be over $15.00. So imagine if you miss that 2 times, or even 3 times!!
Paying your insurance in lump sum, if you can and you need to make an effort to, afford it, will definitely save you money, time and aggravation from seeing late or cancellation notices on your insurance!
Edward Sneneh, insurance professional since 1989