Originally published at: https://www.ohmydollar.com/2019/05/08/car-insurance-andrew-rose/
Figuring out car insurance can be an absolute hair-pulling nightmare. What is comp & collision? What does 50/100/50 mean? Do red cars really pay more? Guest Andrew Rose of Compare.com helps us make sense of it.
We answer these questions
- Collision vs. comprehensive: what’s the difference? How do you know which one you need?
- How can you tell if a car insurance company is “too good to be true”I know men generally pay more – and I know that economists generally pay less. What are some sneaky factors that affect your rates when it comes to car insurance?
- What are the 5 key things that car insurance base your rates on?
- Do red cars really pay more?
About Andrew Rose
Today’s guest is Andrew Rose, president & CEO of Compare.com, a comparison site for car insurance. In January 2012, Andrew founded Compare.com, bringing with him 12 years of experience working with high-profile insurance companies like Progressive, Countrywide, and Elephant Insurance.
Compare.com was built out of a desire to make finding the best price on car insurance a much easier, much quicker process. Before, if you wanted to find the best prices, you’d have to fill out multiple forms on several different insurance provider websites — and that could take you a while. The veteran insurance pros at Compare.com knew there was a better way to get free car insurance quotes and compare prices, so they set out to make it a reality.
A big Announcement is Coming Next week!
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Is $3,000 on an e-bike worth it? – in case you’re paying too much for your car 😉
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Transcript (provided by our listener supporters on Patreon)
How much should you pay for car insurance ft. Andrew Rose | Convert audio-to-text with Sonix
Will Romey:
This show is supported by generous listeners like you through our Patreon. This episode is underwritten by the Tamsen G Association. To learn more about ways to support Oh My Dollar! and get cool perks like exclusive livestreams and a fancy special icon on our forums you can visit ohmydollar.com/support.
Lillian Karabaic:
Welcome to Oh my dollar!, a personal finance show with a dash of glitter
Lillian Karabaic:
Dealing with money can be scary and stressful. Here, we give practical, friendly advice about money that helps you tackle the financial overwhelm.
Lillian Karabaic:
I’m your host Lilian Karabaic.
Will Romey:
I’m your other host, Will.
Lillian Karabaic:
I. Everybody knows we’re not experts on cars. I think – we do.
Will Romey:
I don’t know what cars are.
Lillian Karabaic:
Right. I think anybody would know that with like any degree of regularity listening this show.
Lillian Karabaic:
I have never owned a car.
Will Romey:
Me neither.
Lillian Karabaic:
I’ve never had to buy car insurance.
Will Romey:
Me neither.
Lillian Karabaic:
Which is really nice.
Will Romey:
I do watch Top Gear regularly which is always sort of a-
Lillian Karabaic:
So pretty much you’re an expert.
Will Romey:
A character exception. I don’t know. I don’t know why that show appeals to me as a non-car person but it does.
Lillian Karabaic:
I mean like I I feel like it’s very against brand, but I also like watching back episodes of Say Yes To The Dress.
Will Romey:
Yeah. Same concept.
Lillian Karabaic:
Even though I have no interest in the wedding industrial complex.
Will Romey:
I think it’s intrinsically satisfying watching experts talk about the fields in which they are expert.
Lillian Karabaic:
Yeah yeah.
Will Romey:
Bridal showers or cars
Lillian Karabaic:
Which I’ve not saying I’ll say yes-.
Will Romey:
Yeah I’m not – I’m not I’m not buying expensive Ferraris.
Lillian Karabaic:
Yeah.
Will Romey:
Just cheap ferraris.
Lillian Karabaic:
just cheap Ferraris.
Lillian Karabaic:
Right. But car insurance is important.
Lillian Karabaic:
It’s a really big expense for many people and beyond my general insurance knowledge. So I do have a fair amount of general insurance knowledge. I there’s a lot of factors that go into car insurance – your car type, your gender, your profession, your credit score.
Lillian Karabaic:
And it’s also really hard to figure out what you need until it’s too late. Right.
Will Romey:
YEA.
Lillian Karabaic:
If you go, if you go for the cheap insurance you might end up screwed later. So the good news is – I don’t need to be an expert on everything. We have friends here at Oh My Dollar! So people that know more about cars than me. So today we have on Andrew Rose to walk us through finding car insurance.
Will Romey:
Yes. What is it?
Lillian Karabaic:
How do you get?
Lillian Karabaic:
So today’s guest is Andrew Rose president and CEO of compare.com a comparison site for car insurance. In January 2012, Andrew founded compare.com, bringing him with him to 12 years of experience working with high profile insurance companies like progressive, countryride, and elephant insurance. Compare.com was built out of a desire to make finding the best price on car insurance a much easier, much quicker process, before if you wanted to find the best prices, you’d have to fill out multiple forms on several different insurance provider websites and that could end up taking you awhile. So the veteran insurance pros at compare.com knew there was a better way to get free car insurance quotes and compare prices so they set out to make it a reality. Andrew so happy to have you on.
Andrew Rose:
Thrilled to be here. Thanks for having me.
Lillian Karabaic:
As regular listeners of the show know I’ve never owned a car so I’m lucky, I’ve never had to buy car insurance. But let’s pretend that is changing. How do I go about figuring out where to get car insurance?
Andrew Rose:
Well I can turn about on this. Name me some auto insurance company.
Lillian Karabaic:
Progressive. USAA. That’s it I’m done I can think of no more that.
Andrew Rose:
Well there’s the thing most people can only name a couple auto insurance companies. But would it stun you to know that there are more than 300 auto insurance companies in the U.S.?
Lillian Karabaic:
Do they all operate in every state? Or are they very like –
Andrew Rose:
Great question. They do not. You only have a dozen to two dozen that actually operate countrywide, but you get lots of different insurance companies depending on where you are that specialize in those particular geographic areas. You have erie insurance for example that’s very big in the mid-Atlantic. Mercury is the big brand out in the in California and the western part, and you get different AAA companies that offer insurance in different geographies, so there’s lots of insurance companies out there to consider. And that’s part of the problem and part of the process that you have to go through when you think auto insurance. Uh oh where do I go next?
Lillian Karabaic:
We actually just had someone on the Oh My Dollar! forums recently say like she essentially just didn’t have enough spoons to function when she was eight months pregnant and they got a new car and she was just like I’m buying whatever insurance the dealership recommends, because I know that I’m probably paying more than I should but I like we’re just going to do a year up front and not worry about it because I can’t deal with shopping around. Like are you? What’s the best process for it? Like do you go to the individual companies? Do you go to a broker? Like what are the different ways you can get it?
Andrew Rose:
All of those are options and what you just heard from from that listener, from that person, was the reality for many many people. This is a product that you don’t want to actually buy.
Lillian Karabaic:
*laugs* All right.
Andrew Rose:
I’ll I’ll ask you there – you look for other products that you are legally required to buy. There’s not many of them. Auto insurance if you want to drive a car it’s something that you’re required to purchase. And it’s also a strange product. It’s one of the few products that both the buyer and seller hope it’s never used.
Lillian Karabaic:
Right.
Andrew Rose:
Most of the products you buy, the seller wants you to consume, it wants you to use it, wants you to enjoy it. Everybody wins. If the auto insurance product ultimately isn’t consumed.
Andrew Rose:
Now when you’re your listener there said you know “I’m going to buy the first one I find, whatever the easiest one is there just get it done.” You can do that and then lots of people say I’ll just let it ride for a year and that year turns into five years.
Lillian Karabaic:
Right.
Andrew Rose:
And in some cases 10 years.
Andrew Rose:
And our data says that over the lifetime of a kind of a driving consumer. So you’re very fortunate not to be an auto owner in this case – but over your lifetime you could be wasting between $20- $50,000 dollars by not shopping around.
Lillian Karabaic:
So a lot of money.
Will Romey:
It’s a ton of money.
Andrew Rose:
You’re talking you know college tuition, fantastic vacations, another vehicle. It’s huge money – but most consumers go “this is auto insurance. I don’t understand it. I don’t want to go through the whole process. Let me just stick with where I am” And they leave a ton of money on the table. And that’s why we don’t compare.com – because if you can make that process easier.
Andrew Rose:
Imagine if you made auto insurance as easy to shop as it was for an airline ticket. I enter my details and once, I click the button all of a sudden I see all the flights, I can choose what I want. That’s what compare.com does. That’s why we created it.
Lillian Karabaic:
So I mean but that’s like a great example of something where you know 15 years ago it was hard to buy an airline ticket. Right? Like maybe 20 years ago now, but like that is a place where the industry has really changed.
Lillian Karabaic:
And the same is true with health insurance right. Like not only was it really challenging to find it and get it, if you were self-employed and didn’t get it through your insurer or were just not employed to insure that had it. But like literally comparing the different costs and everything without going to an individual it was just really challenging to know.
Lillian Karabaic:
And like it sounds like we’re only really starting to break with tools like compare.com that that kind of old school system of like you need to have the one person that has a relationships with the insurance providers.
Andrew Rose:
Exactly. It’s taken a lot longer for this category and part of it is just the low engagement nature of auto insurance.
Lillian Karabaic:
Nobody wants to deal with it.
Andrew Rose:
Exactly. I’ve got you know an opportunity to go to the Bahamas for a weekend. You’re excited about that shopping process. If I say hey it’s time to shop for your auto insurance. Oh you know don’t I have to go mow the yard, uh? You know something that I’m going to do anything other than task please.
Lillian Karabaic:
Yes.
Andrew Rose:
So it’s it’s a challenging category but when people start to realize how much money they’re leaving on the table, when they realize that when they’re done shopping for their auto insurance, they can then go on to one of those travel site and shop for the ticket to the Bahamas because they’ve saved enough to go for the weekend then they get excited about it.
Lillian Karabaic:
I like your optimism. OK. So let’s let’s extend this airline shopping, as someone who likes buying plane tickets.
Lillian Karabaic:
Let’s extend this kind of airline shopping analogy a little further. So like we’ve talked a lot before on the show about the difference between high and low deductibles on health insurance. And like the thing when you’re buying a plane ticket is you kind of know what you’re getting right. You’re gonna like you could get first or you could get business but you’re gonna get from point A to Point B. What do things like high and low deductibles and comprehensive and collision insurance.
Lillian Karabaic:
What does that mean when it comes to car insurance.
Andrew Rose:
And you’ve just hit the main point of why people don’t do that. Because you just listed off about five questions there that we could spend five minutes on each one.
Andrew Rose:
So I’ll try to unpick it there and give you the various pieces and parts.
Andrew Rose:
We’ll continue with the airline analogy as it seems to work for folks. You can buy you know the basic economy you can buy business you can buy first class and you know effectively you’ve got the same kind of idea in auto insurance. Now the first thing we’ll start with is insurance companies. There are so many of them. How do you tell the difference between them. It is amusing and I’m betting some of your listeners will say oh my insurance company is great. My usual response after they ask that question “Oh so you’ve had a bunch of claims right?” and they go “Oh no no no I haven’t.”
Andrew Rose:
Well then how do you know they’re great? So far all they’ve successfully done for you is taken your money well. Yeah. They go oh actually you’ve got a point.
Andrew Rose:
And that is the reality for most of your interactions with an insurance company, the average person has an accident once every 10 years.
Andrew Rose:
So if you think about that, you don’t really know what the experience is ultimately going to be like.
Andrew Rose:
Now the next people thing is OK well- how do I know which insurance companies are better than another? Well, they’re all licensed. They’re all approved by the Department of Insurance.
Andrew Rose:
And while it is theoretically possible for one of them to go out of business, the Department of Insurance still makes sure that any of their claims are paid. So you really can’t pick a terrible insurance company.
Andrew Rose:
Now you can pick insurance companies that have better service levels than other ones. You can pick insurance companies that have better known brands. Let’s be clear you mentioned Geico and USAA.
Andrew Rose:
Let’s add progressive, USAA. Let’s add Geico that they had Allstate that had State Farm on that list. You’re also paying for their advertisement.
Lillian Karabaic:
Right.
Andrew Rose:
So if you know them well, that means that part of your insurance premium is covering the fact that they do all the different advertising. That sort of spot one that you need to to start with.
Andrew Rose:
Now, let’s kick off into the specifics of auto insurance. There’s two big parts – one of it is liability, and the other is the stuff that covers your assets.
Andrew Rose:
Like the comprehensive and collision that you offered – or that you talked about.
Andrew Rose:
So we’ll cover both of those things. The liability covers others. Let’s be clear about what that does. So you’re driving along and you bump into somebody else. You don’t want to have to pull out your wallet and pay for what you just did to their car. And God forbid if they have any injuries, that’s the liability coverage that you had there, and you will choose limits when it comes to the liability on there.
Andrew Rose:
And effectively what that is is you’re setting a mark of how much the insurance company has to pay before you start having to pay out of your pocket. So that’s how the liability coverage is are you set a limit that they have to cover too. So if you caused a terrible accident and you had 50/100 limit- fifty thousand to one hundred thousand dollar limits – the insurance company would cover the first hundred thousand after that if there’s more damage, guess who they’re coming after?
Lillian Karabaic:
All right. And that’s that’s where the you know the so-called “crappy insurance” really comes in right. Because people will get what’s sort of the minimum required, and then if a bad crash happens and someone has to get medivacced, it will eat up that 50 or 100 hundred K liability limit, real quick.
Andrew Rose:
Gone in an instant. Yeah absolutely.
Andrew Rose:
And so most people out there will, you know you have to legally get the minimum limit – if you have more assets to cover, so the more well-off you’ve done – if you own a home you own some vehicles, you’ve got some savings, college. Those kinds of things. You want to better protect yourself and then you start getting into limits that are 100/300 or all the way up to 250/500 and some people will get something called an umbrella.
Andrew Rose:
But trust me we won’t go into the details that.
Andrew Rose:
Effectively giving yourself more and more protection should you cause an accident, caused harm to somebody or some other person’s property. So that’s the liability part.
Andrew Rose:
And just as you might expect the more coverage you wants the insurance company to have for you, the more you pay for it. Now the challenge when you’re out shopping for this, is making sure it’s apples to apples to get one more plug in there for compare.com. We make sure when we shop for you that you always get the same coverage that you truly are looking at Apples to Apples.
Andrew Rose:
That way you don’t end up saying wow I’m saving a ton of money, only to find out later on you saved a ton of money because you got really crappy coverage. You want to make sure that you get the right coverage for you at the best possible price.
Lillian Karabaic:
So all right. And this varies by state too, right. Because every state has a different requirement of what they say the minimum is set at. And some states will require essentially pretty high minimums to the point where you can’t really get “bad insurance” so to speak.
Andrew Rose:
It depends on your definition of bad. You’re absolutely correct that it’s a state by state system. So every single state has its own rules and regulations around auto insurance, which means if you lived in California then moved to Texas and moved to Florida then moved to New York. You get new insurance policies every single time. Even if you stay with the same insurance company.
Andrew Rose:
What we recommend most folks is = you got to be legal. Go get the minimum and then based on those assets and based on what you can spend. Because that’s the other part of it. It is more expensive. Get the right amount of coverage for you at the right cost if that balancing the equation.
Lillian Karabaic:
Yeah. So right now. Good. Oh wait. No go ahead. There’s more and more.
Andrew Rose:
There’s more.
Lillian Karabaic:
There’s more.
Andrew Rose:
Well we’re going to move to that comp & collision part that you asked about that sort of question three of those of five.
Andrew Rose:
This is the part where you go Well I bumped into that guy and that really stinks and I’m going to cover his vehicle and repair his arm. But what happened to my bumper?
Andrew Rose:
Well that’s comprehensive & collision, that’s the stuff that covers you in this case it’s the collision coverage and very similarly, you have. “Well who pays what when?”.
Andrew Rose:
When deals with the insurance companies. Now it’s the reverse of what you had in a liability. You have something called deductibles and the deductible is effectively how much do you want to pay out of pocket before the insurance company starts paying? That’s your deductible. Now.
Andrew Rose:
The more the lower you want that number, the more you have to pay. So if you want the insurance company to pay dollar 1 of any accident, they’re going to charge you a fortune. Now if you say I’ll cover the first two thousand dollars on my own, thus having a two thousand dollar deductible it’s going to be far cheaper because the insurance company will know in many cases the claim the accident will be less than two thousand dollars, and so you really can’t make a claim to us anyway.
Andrew Rose:
And so that’s what varies with the comp conclusion that’s the stuff that protects you. And again it’s the decision that you have to make. How much do you have in your bank account? Out of your pocket, that you’re willing to pay before the insurance company starts to kick in.
Lillian Karabaic:
Right. OK so all of these things we’ve got this liability we’ve got we’ve got our own coverage for a car. This all, there is a bunch of factors that go into this but this is all represented by three numbers right. Three magic numbers you’re 50/100/or…
Andrew Rose:
Then you get the you’ll typically see the 50/100/50. As an example. And that 50. This is now we’re getting into the nuance of insurance. You have fifty thousand dollars of coverage per accident per person, up to one hundred thousand dollars. That’s for the bodily injury harm that you would do to people. And then the last fifty says this is how much I’ll cover for any physical damage you do to vehicles and such. That’s 50/100/50 So whenever you hear those numbers they are slashes in there and they apply the same way.
Lillian Karabaic:
I mean that’s good to just generally know because I feel like there’s a lot of numbers being thrown around at you. And it gets very tempting to only apply the one that you know it affects you. Right. So like that monthly payment or that semiannual payment that you pay in your car insurance like you’re like. I know what I can afford there but everything else seems just very mythical. Right. Like that because you’re hoping to never have to use it. And so it’s very it’s very tempting to just be like I don’t know 50/100/2, That sounds fine.
Andrew Rose:
So I’m sure I’ll never get into an accident so it won’t matter.
Lillian Karabaic:
Right.
Andrew Rose:
Yes of course the next day your luck comes due.
Lillian Karabaic:
Yeah exactly right. So one of the big things when you’re looking at kind of you know obviously, it varies by state what you’re kind of allowed to get but if you have a really old crappy car and like if someone else hits it you just want your medical bills covered but you like the car is gonna be toast no matter what. What kind of coverage would you be going for versus if you have like a nicer car, that maybe you would want the insurance company to pay out for.
Andrew Rose:
So I have an older car. I’m not a car guy. I don’t really care about my car so I got a nine year old car, and it isn’t worth having company collision on it because that vehicle gets hit – it is toast, it’s going to be you know a total loss, and I need to go get a new vehicle anyway so the cost of the insurance isn’t worth it, As you get an older and older vehicle.
Andrew Rose:
Now there are situations where you’re required to have it and those typically are when you have a loan or if it’s a leased vehicle. Because somebody else has an interest in that vehicle the bank or the auto company and those in lease cases and so they want to make sure that their assets are protected so they will require you to have proper conclusion. And if a vehicle is relatively young you probably want company closing on there yourself as well. The older it gets. And once it comes off of loan and lease, that’s when you really have to do the math yourself and go. “Is it worth it?”
Lillian Karabaic:
Yes. OK. All right. So there is a bunch of different factors in here and what kind of coverage you get is a big factor. But there are other factors. What are like the big five things that car insurance is basing your rates on?
Andrew Rose:
Great. That’s great question. So we started the very top. Where are you?
Andrew Rose:
It varies massively by states.
Lillian Karabaic:
Who is expensive?
Andrew Rose:
Listeners in North Dakota – relatively cheap insurance. If one of your listeners is in Connecticut – quite expensive insurance. Just varies geographically. That’s the first thing.
Lillian Karabaic:
Oh OK. So hold on I just want to spend more time with this. because I – so I’m trained as an economist and so I love to like look at the risk factors, and all I hear and that is that Connecticut has a lot of traffic and North Dakota has not that many cars.
Andrew Rose:
Absolutely. Think about it this way the more interaction opportunities there are for vehicle on vehicle, the greater the opportunity for collision. You go out to the Great Plains and I’ve had the pleasure of visiting out there, beautiful long roads, where you can drive for hours and not come into contact with any other vehicles.
Lillian Karabaic:
I mean god love North Dakota but would you really describe those roads as beautiful?
Andrew Rose:
You know I’m not going to offend my North Dakotans out there. I think they are wonderful people, just as the wonderful people of Connecticut. However those in Connecticut tend to run into each other more often than those folks in North Dakota.
Lillian Karabaic:
Yup
Andrew Rose:
So you know when if you’re gonna have more accidents you’re going to end up paying more insurance and you also have the other dimensions of it. I bet you there’s more cars stolen in metro areas than there are in rural areas.
Lillian Karabaic:
Yeah definitely.
Andrew Rose:
So you’re going to pay more in metro areas, than you are in rural areas on average. So where you are makes a big difference.
Lillian Karabaic:
OK what’s next.
Andrew Rose:
What you drive if you drive a Lamborghini versus the entry level Kia. Two guesses which one is gonna pay more. And the first one doesn’t count. You know the vehicle has a big component to this.
Andrew Rose:
And then what kind of driver you are you know, if you like to collect speeding tickets and run into stationary objects, you’re going to pay more than the next guy. And we talked about it.
Andrew Rose:
We’re not going to belabor it again but what coverages you choose, and how much coverage you select.
Andrew Rose:
Those are sort of your five points where you are, what you drive, what kind of driver you are, what coverages you select and how much coverage you select for each of those coverages are your big five.
Andrew Rose:
Now. Now that that’s what it gives you the umbrella look, when you start looking inside you said you’re an economist. So from this standpoint now let’s get into the math.
Andrew Rose:
The really biggest thing that influences your price once you’re inside the state, inside the vehicle. The thing that moves one person versus another something called your insurance score.
Andrew Rose:
Now what the heck is an insurance score? Well it uses the same credit information that your credit score is derived from. Now it uses it differently. They’re not exactly the same thing but effectively it tries to use that information to assess responsibility.
Andrew Rose:
And there happens to be a correlation, not a causation – a correlation between your financial responsibility and what you tend to demonstrate on the road.
Lillian Karabaic:
Right.
Andrew Rose:
And that was the single biggest rating variable for most insurance companies.
Lillian Karabaic:
And there’s a bunch of factors that are in that that aren’t controlled in the way that they are in the credit score right. So like we’ve talked we’ve talked ad nauseum about credit scores on on this show, and one of the the big things is that credit scores were meant to design the system to actually be fairer. All the, all the regulations that we passed around what could be used in the credit score – you know you can’t use gender, you you can’t use employment you can’t use how much money is in their bank account, in in credit scores and there’s ways to model that without actually doing it – that they’re allowed to include – some of which they use in very discriminatory ways.
Lillian Karabaic:
But like insurance scores are not regulated in that same way, they are regulated. Insurance is a highly regulated industry, but insurance scores are not regulated with the same kind of rules which is why like men pay more For example,
Andrew Rose:
Well if you look overall at men have a higher frequency. So if I put my just my insurance actuarial hat on, and you know you can always find exceptions to any of these men get into accidents more often.
Lillian Karabaic:
Right.
Andrew Rose:
We deserve to pay more. I mean this is it’s a basic math or an insurance company. Whoever causes them to pay more money, they want to charge more money. Now when you get back to the insurance score, there is a lot of regulation around it. But you’re right it is not as regulated as your credit score.
Andrew Rose:
But they try to take out certain things like you know medical events and those kinds of things so that they don’t ultimately influence. But if you have a very good insurance score you will have very low insurance rates. If you have a terrible insurance score, you will pay a ton.
Lillian Karabaic:
And so there’s some sneaky ways that you can try to not necessarily influence your insurance score, but at least what you’re paying on a basis, which might then be factored into it right?
Lillian Karabaic:
Like if you’re a college student you usually are going to pay more because you’re young. Right. And we know that young drivers are more likely to get in crashes, because they have less experience driving.
Lillian Karabaic:
But if you get a good GPA, you can try to get a discount based on your you know your good GPA, and you have to send in your records.
Lillian Karabaic:
I know that like of course because economists are very good at making arguments about what about you know why they’re good risks, economists pay less if you tell them like I’m an economics professor, they’ll be like oh you’re a good risk and lower the amount that you pay.
Lillian Karabaic:
So are there like sneaky every day ways that you can try to get a discount like you know things like “good driver” discounts right?
Lillian Karabaic:
Theoretically it’s just kind of everybody pays for it overall, right?
Andrew Rose:
Yup. All right. So I’ve got to put my my white hat on here and I’ll say “Be honest be truthful in everything you disclose there”.
Andrew Rose:
Because what you don’t want to happen at coin time is them to come back and saying, “wait a minute you told us you were married to get the discount there, and lo and behold you’re not married or you told us you had a good – or good grades and you don’t have good grades.”
Andrew Rose:
So you don’t want to end up at a claims situation where they’re starting to challenge the authenticity of your application.
Lillian Karabaic:
Mmm
Andrew Rose:
Now that said most insurance company don’t no longer ask you to send in your grades. Oh you tell them you’re a good student. They’ll take your word for it. I guarantee you, I have not seen an insurance company in decades ask you to send in a marriage certificate, and you will get a discount if you are married.
Lillian Karabaic:
Interesting.
Andrew Rose:
You know in many cases until you’ve got those that are there another one that is very difficult for the insurance companies to validate that they will tend to give you lower prices is miles driven.
Andrew Rose:
Particularly in California where it’s required primary rating variable. That’s another one where you brought up the economist – occupation and education are really big deals for some insurance companies. Geico is one that continues to use education and occupation, and the right occupations can give you quite big discounts.
Andrew Rose:
So one of the things that you can do is say I’m an economist, and they go oh hey your price is a thousand dollars. Well, I’m an economics professor. Oh well that’s a nine hundred dollars. Am I I work for a university that’s eleven hundred.
Andrew Rose:
It depends on what they put in the system that they’ve heard from you. So as you’re doing it as an example you do it online, you can give yourself three or four different titles. They have to still describe you, but you can do that to say hey which definition of me for this insurance company.
Lillian Karabaic:
Is going to work.
Lillian Karabaic:
Gives me the best price.
Lillian Karabaic:
Yeah it’s gonna be the best one. All right. So it sounds like there’s a lot of different ways that you can shop around and like try to figure this out. How do you how do you know if what you’re getting is a good rate?
Lillian Karabaic:
It’s like like you in all of this research you you still are only comparing against your own pool of of money, but like this is one of those things where weird – we don’t talk about it enough like all money things. And like how do you know that Jack around the corner isn’t paying half as much as you?
Andrew Rose:
I wish there was a giant thing where you can go on Zillow and see what all your neighbors houses are worth. There should be the same thing for auto insurance. So you go wait a minute why? He also drives a Honda Accord, we live around the corner from each other, what the heck why am I paying double?
Andrew Rose:
The reality of it is there isn’t such a thing. What you can do is before you tire out – most people once they start this shopping process, only shop two or three insurance companies and then they tire out, because the process is terrible.
Andrew Rose:
Don’t. If you’re going to tire two or three make sure a comparison site like compare.com is on your list because we will return back to you. Half a dozen, a dozen, sometimes a whole lot more than that different insurance companies with the exact same coverages and you can see. For some people it’s going to be incredibly validating. Huh. Look at all these prices.
Andrew Rose:
Mine is already cheaper than that. Great. Now you know and six months from now you come back and with one push of a button you can check again – because insurance prices do change. Or you come in and say wow it’s me my wife or two teenage drivers and we’re paying $4,500 a year. It’s not as crazy as it sounds. And you come onto our site and find out you could be paying $2000 a year.
Lillian Karabaic:
Which is a big deal.
Andrew Rose:
That’s twenty five hundred dollars can go a long way toward a lot of difference.
Lillian Karabaic:
More more fun things than insurance.
Andrew Rose:
A whole lot more fun things. Let’s go back to the travel Web site to keep checking in on the Bahamas.
Andrew Rose:
That’s what you want to be spending your money on. Don’t overspend on auto insurance. So the easier way to do it just shop.
Lillian Karabaic:
So that’s actually another question that I just generally had about this was that – these are not legal in all states – but the new trend, especially among like my generation, which generally drives less is this pay per mile auto insurance.
Lillian Karabaic:
And like how how do you factor out if that makes sense beyond like generally knowing what your mileage is? Do you have like opinions on that like even just your own personal opinions on the pay per mile insurance?
Andrew Rose:
Absolutely. It’s not for everybody but it is an absolute homerun for others. And we include them on compare.com as well. It’s a great opportunity if you look at this thing and go you know what my car sits around there I drive 2,000 a year. And the insurance company is treating me the same as somebody who drives 10,000 miles a year. Well you do the math.
Andrew Rose:
What’s it going to cost for you, if you go to that per mile insurance. There’s still going to be a base underlying cost and then on top of that is the per mile. You should be able to do it and say man if it’s if it’s close- just leave it how it is, because from that standpoint if you end up driving more then you’re certainly covered. But if you know for sure that you are not going to drive more than 2000 miles, and the break even on that equation is 10,000 miles save yourself the money.
Andrew Rose:
Now you get the same coverages when you’re driving. It’s just a smart way for those that don’t drive much, to just get cheaper insurance.
Andrew Rose:
Well OK Andrew it’s been a delight. You’ve taught me a lot for sure. I have one last zinger of a question for ya.
Lillian Karabaic:
Do you red cars really pay more?
Andrew Rose:
No but the people that buy red cars may have risk character with that and that meaning that those people have other things that result in them paying more. So you could. It’s the beautiful part of economics. You can find that there’s not a direct causation of red cars are more expensive, but there is a correlation between those two.
Lillian Karabaic:
That was answered like a true economist right there.
Lillian Karabaic:
Well it’s been a delight to have you on. Thank you so much for joining us and filling people in. I don’t think I’ve driven in like over 8 years so I am not the I’m not the person to give advice on this.
Andrew Rose:
Now we’re happy to be here and we hope folks will about their save money on their auto insurance at compare.com. Great. But don’t use that money for something a whole lot more fun.
Lillian Karabaic:
All right. Well thanks a lot Andrew. And if folks are interested in talking more about car insurance we will always continue this discussion on the ohmydollar forums. Maybe we can start that crowdsourced list of how much so-and-so is paying. Thanks a lot.
Andrew Rose:
Thank you.
Lillian Karabaic:
Well I learned a lot from that episode. I hope that you did too and learn a little bit about comparison shopping for what is a really unpleasant task. I feel like we’ve talked about health insurance a lot on the show, but even more people have to shop for car insurance then have to go on to healthcare.gov to shop for their health insurance. So.
Lillian Karabaic:
We love hearing from you. Remember to e-mail us your financial worries or successes questions@ohmydollar.com. Come find us on the forums or tweet us at @anomalily or @ohmydollar Our intro music is by Aaron Parecki, and your host and personal finance educator is me Lillian Karabaic
Lillian Karabaic:
Thank you for listening until next time. Remember to manage your money so it doesn’t manage you!
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