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The Savvy Shopper: Budgeting for Auto Insurance

Auto insurance is a must for everyone who wants to drive. Why is it so important to purchase you ask? Well, for one thing, it’s the law. Get caught driving without it and you’ll face some tough consequences.

But the main reason you should have auto insurance is to protect yourself in the case of an accident.

Now, auto insurance isn’t cheap. It’s going to cost you so you’ll have to figure out how to manage that in your monthly budget. You can be a savvy shopper though by learning how to budget for auto insurance. And it all starts by making sure you get the right type of coverage.

Planning for the Right Coverage

You need more than one kind of coverage. To get the right auto insurance, you need to make some choices.

The most basic type of coverage you need is liability insurance. If you are at fault in an accident, liability insurance pays for the other person’s property damage, medical costs, and in the worst case scenario, their funeral expenses.

It’s not just a car accident that can damage your car, it’s the elements, theft, or even an act of vandalism. Comprehensive coverage pays for the damages sustained to your vehicle when mother nature or vandals strike.

When figuring out which auto insurance policy is right for you, you need to think about how often you use your car, and how well you take care of it, as insurance companies take this all into perspective.

Making good choices requires careful comparison-shopping. Your rates are based on more than the coverage you choose. Insurance agencies sell a variety of insurance packages that allow you to bundle policies.

If you already have homeowner’s insurance for example, you can bundle it with your auto insurance. This will most likely result in a lower monthly premium.

Another thing to consider is if you’re moving from one state to another, your insurance policy will need to be updated to satisfy state requirements.

If all this sounds a bit overwhelming, there are plenty of online sites such as CoverHound that let you compare auto insurance rates among the best-covered or fair-priced companies. But don’t forget to do a little extra digging on a company before signing on the dotted line. It’s always a good to know the reputation of an insurance company before giving them your business.

Budgeting to Pay for Insurance

Everyone needs a budget, and everyone needs to look it over from time to time to keep it up to date. That means that your budget has to be in writing and you have to know where to find it. You can create a spreadsheet and keep it on your computer, or you can keep it on paper in a file cabinet.

The process of creating a budget is fairly straightforward. Look at your monthly take-home pay and subtract from it your rent, grocery, cable, internet, electricity, and utility bill payments. Once you have an understanding of how much you pay a month for living expenses, you can then figure out which auto insurance policy fits in your budget.

If you’re preparing your budget for the first time, figure out how much money you would like set aside at the end of the month. Even then, it wouldn’t hurt to add a couple hundred dollars and just call it miscellaneous to cover anything you forgot or haven’t anticipated.

And let’s not forget about an emergency fund for surprise expenses. If your expenses do exceed your income, you’ll need to figure out where you can make some cuts. That might mean eliminating unnecessary expenses or figuring out how to pay less for certain things.

Overall, purchasing auto insurance is essential. But with careful planning, you won’t pay too much for it.

Questions: How often do you review your auto insurance policy? What tips have you learned to save money on auto insurance?

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Comments

  1. I always maintain good credit and a clean driving record. The first has helped me in quoting for car insurance. The latter is to gauge risk and to set premiums.
    Jayson recently posted…CFD Online: A Guide to the Different Contracts of DifferenceMy Profile

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