Do you periodically take a fistful of dollars and burn them in your fireplace?
Nonsense, you say?Perhaps you've been sending your money up in smoke without knowing it. The last time the semiannual car insurance premium arrived in the mail isn't this what you did:
- Complain that it sure didn't seem like six months since the last premium notice.
- Complain that the six-month premium is approaching the level of your home mortgage - if it hasn't already exceeded it.
- Complain that the bill used to be a lot smaller before those kids got a lot bigger and started driving your family buggy.
What you probably didn't do, however, is review the bill to determine just what coverage you are getting for the amount of money you are paying - and whether you need all that protection based on what your car is now worth.
"People don't stop to look at what they're paying," said William Sirola, formerly regional manager of the Chicago office of the Insurance Information Institute and now a member of State Farm Insurance Co.'s public relations staff.
Sirola said each time the premium arrives a consumer should examine the coverage and the premiums paid, especially for comprehensive and collision.
Comprehensive coverage protects against theft, fire, flood or vandalism. Collision coverage pays for the repair or replacement of your car when it's in a crash. As a rule of thumb, these two kinds of coverage account for half a typical insurance premium.
"You should insure what you can't afford to lose," Sirola said. "But if you can afford the big money for one of today's cars, you usually can afford to go with a bigger deductible."
As a car ages, paying for complete coverage, including comprehensive and collision insurance, can be wasteful. Raising the deductibles or eliminating collision coverage may be preferable to paying for total insurance on an older car.
Insurance industry officials say that as a rule of thumb after five years you should consider raising the deductibles and after seven years consider dropping the comprehensive and collision coverage.
In evaluating premiums and coverages, the one thing you probably don't want to fool with is liability protection - unless you choose to raise the amounts of protection.