Many people are opening their car insurance bill to find their rates have suddenly skyrocketed. In this economy, an impossible car insurance bill is the last thing a person needs. What was the reason for the sudden increase?
Most people immediately call their insurance agent for answers. When the agent does not answer the phone or return the call, they then contact the company's home office. After yelling at the person sitting in the cubicle in Connecticut or Rhode Island to no avail, they start shopping around. To avoid having to deal with a new "salesy" insurance agent they enter phony information on Internet quoting sites or call telephone quoting services. What they discover is that across the board, given the same coverage, the rate is relatively the same.
Is the entire insurance industry conspiring against you? Well, in a way, yes. Insurance companies change their rates periodically. Sometimes they have new management with a different philosophy. Sometimes they want to lower a concentration of policies within a geographical area to diffuse the risk. But the most likely reason for your rate increase is that something changed in your life that makes you a greater insurance risk. Someone in your family had a traffic accident or violation. Or you may have recently filed a claim. Or one of your children just turned sixteen. Or maybe something happened as seemingly unrelated as your credit score being lowered. When it rains it pours.
Most people do not think about their car insurance until something shocking happens. Believe it or not, this is a great opportunity to make some changes that will save you literally thousands over the rest of your life.
The main principle to remember regarding any insurance is this: insurance is for catastrophes. This sounds simple, but hardly anyone lives by it. If you are paying an insurance company to protect you against a loss that is not catastrophic, you are throwing your money away.
Insurance is based on the idea of indemnification. To indemnify is to have access to an amount of money equal to the amount of a loss. There is only one entity that you should be paying to protect you against a loss that is not financially devastating. That entity is you. You must become your own insurance company.
The first step is to recognize whether you are upside down; whenever you owe more for your vehicle than the vehicle is worth. If this is the case, get out of this situation. Sell the car and purchase one that is not financially devastating to replace. Even with the remaining balance on the previous vehicle, you are still in better financial shape with less debt.
Then make a decision to pay an insurance company only for protection against a catastrophe. The most practical way to do this is to raise your deductible on your Collision coverage. With a $ 1,000 deductible (or higher), you can reduce your promotions significantly. Use the reduction in premium to save up the amount of your deductible in an emergency savings account. Keep contributing to your savings until you have enough to equal the replacement value of your car. Then drop your coverage alike. By doing this you have taken control away from the insurance company.