In this tight economy, consumers continue to spend more on things they want, such as pizza and alcohol, than on things they need, such as auto insurance.
Americans spend a total of $329 billion on pizza, beer, and spirits each year, but only $159 billion on auto insurance.
According to the trade publication Pizza Today, consumers spend $38 billion per year. According to the Brewers Association, they spend $101 billion on beer and another $190 million on spirits, a figure that has remained stable in recent years despite the economy, according to Dave Ozgo, chief economist with the Distilled Spirits Council.
According to Loretta L. Worters, vice president of the Insurance Information Institute, consumers spend about $159 billion on auto insurance each year.
“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 of how and where people spend their money is a psychological one based on how the spending makes them feel rather than how wisely the funds are spent.
“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 auto insurance may have psychological issues where they need to have a good time,” notes Worters.
Saving money on auto insurance coverage, on the other hand, can be costly in the long run. Minimal liability insurance is required by law for all vehicle owners, but it may not be sufficient to cover the damages sustained in a serious multi-vehicle accident or one involving an expensive vehicle, putting the policyholder’s other assets at risk.
“In today’s litigious society, buying only the minimum amount of liability means you are likely to pay more out-of-pocket—and those costs may be steep,” says Worters.
While industry experts predicted that as the recession began, more consumers would drop their auto insurance coverage entirely, the Insurance Research Council’s Public Attitude Monitor 2009 found that most people are maintaining essential coverage while taking steps to reduce their overall insurance costs.
With nearly one out of every ten Americans out of work and others struggling to make ends meet with less money, many people are looking for ways to save money. There are smart ways to save money on auto insurance, but there are also mistakes that can leave you dangerously underinsured.
Worters believes there are better ways to save money than carrying only the bare minimum of coverage required by law.
On cars worth less than $1,000, consumers should consider dropping collision and/or comprehensive coverage. In general, the insurance industry and consumer groups recommend a minimum of $100,000 in bodily injury coverage per person and $300,000 per accident.
Raising deductibles may also be a good way to save money if you can afford it. According to Worters, increasing your deductible from $250 to $500 can reduce your collision and comprehensive coverage costs by 15 to 30% on average, while going to a $1,000 deductible can save you 40% or more.
According to the IRC Public Attitude Monitor, 15% of those polled have increased their insurance deductibles or reduced the amount of coverage in order to save money on premiums.
“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 the IRC.
The Insurance Information Institute offers the following tips for saving money on your insurance coverage:
- For older vehicles, consider dropping collision and/or comprehensive coverage. As a general rule, it makes no sense to pay comprehensive or collision insurance on a car worth less than $1,000 because any claim payment would not significantly exceed your premiums minus the deductible.
- Get your homeowners and auto insurance from the same company. Many insurers offer discounts if you purchase two or more types of insurance from them. You may also qualify for a discount if you insure more than one vehicle with the same company. Some insurers offer discounts to long-term customers.
- Keep your credit in good standing. Keep an eye on your credit rating because it can affect how much you pay for insurance (as well as the cost and availability of financing for the auto purchase).
- Look for safe driver discounts. Companies provide discounts to policyholders who have not had any accidents or moving violations in several years. If you have recently completed a defensive driving course, you may also be eligible for a premium reduction.
- Benefit from low-mileage discounts. Some companies provide discounts to drivers who drive fewer miles per year than the average. Drivers who carpool to work may also be eligible for low mileage discounts.
- Inquire about other discounts: Group insurance, a good student discount for young people who take drivers education and/or get good grades, and a defensive driving discount are all possible options.