How and Where to Cut Costs for Young Adults, part 2
Easy to follow and put into practice tips that will serve you well for the long run (2 of 3)
Due to a request for me to continue the cost cutting series, here is the 2nd of the series! The first in the series was added previously here. This second previously published piece is focusing on insurance. It is older, but I hope it can save you money!
Last month I focused on the recession and how we can cut some costs by looking at financing options for vehicles. Now I’d like to focus on an important item that gets thrust upon us without us having in-depth knowledge: insurance. As a young adult, you’re probably not covered under your parents’ anymore but don’t know too much about selecting the right options. I’ve always disliked the idea of insurance. It’s just gambling that something bad will happen to you. With insurance, you bet that you’ll be in an accident or your home will be broken into. Unfortunately, the odds are very good that you, the purchaser, will be in a car accident. Maybe not your fault, but it is. In any case, most states require you have car insurance. Regardless of how distasteful I find insurance, it is necessary to have.
We’re all sick of insurance commercials spouting about saving “a bunch of money” by switching. Don’t you wonder where all these people are that are saving so much money? Every company states that you can save money if you switch to them so what company are these people coming from? They’re coming from everywhere. The capitalist sales market we have going on right now does not reward salespeople for keeping clients, only for getting new clients. The salesperson has little incentive for keeping you happy so he/she does little but keep the status quo. The switch often results in the new agent dropping all coverage except the state minimum which leaves you in a risky situation. I hope to offer some ways you can cut insurance costs and gain understanding for what everything is for.
You must have whatever the state required minimum is, but you need to look closely at the rest. One of the most important is collision. If you have an older car that is worth less than you have in savings, you do not need collision. For drivers under 25 years old, collision is incredibly expensive. Once my first car was only worth $3,000 I dropped collision and saved about $800/year. Look for the worth of your car with the Kelley Blue Book. It is what insurance companies use to determine payout. Consider your deductible as well. If you are a good driver with few accidents there’s no reason to have a deductible lower than $1,000. If you get in an accident that is not your fault and your car is totaled, the other driver pays the damages and deductible, not you.
Property Damage and Bodily Injury Liability are protection for your assets. The former is to compensate the other driver for their car; the latter is coverage of the other driver and his/her passengers in an accident. You absolutely need both these because you can still be in trouble if you get in an accident that is not your fault. Property Damage should be near the cost/value of the cars you pass in your daily commute. Your best bet is to make sure this is at least $25,000. How much for Bodily Injury is determined by how much you are worth. If you rent and make less than $50,000/year, you are fine with a minimum of $50,000/$150,000 (50k for each person/no more than 150k for each accident). If you own a home, you must make sure the policy covers your home value + annual salary.
Personal Injury is money that the insurance company will pay out to cover medical expenses associated with an accident. If you have health insurance through your work, that most likely covers this already and you should be fine with whatever the state minimum is. Check your health insurance policy before changing this. If you do not have medical insurance through your work, follow the same rule of them above. If you pass expensive cars often in your commute, the drivers can likely argue their worth is higher when it comes to lost wages and other various determinations legal determinations your resident ambulance chaser attorney can come up with. Talk to your insurance company if you have any questions on the right coverage on Personal Injury!
Now with extras, most are not needed. If you have a decently new car, towing is probably included in the warranty. Towing is only useful when you see a possibility of needing to be towed twice a year; otherwise the cost in your policy isn’t worth it. Some others like rental car assistance will only be used if you were at fault in the accident.
Also, if you have renters (or home owners) insurance, use the same insurance company for both. I can’t stress this enough. You get a discount on both policies for using the same company.
With this knowledge, I hope you can consult your policy and contact your agent to make some easy money-saving changes.
Next month I will finish up this topic and move on to discussing credit.