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I’ve run this for hundreds of people. And nine times out of ten, they’re paying for coverage they don’t need, or they’re underinsured on liability. Sometimes both.
A friend of mine – let’s call him Derrick – was paying about $1,800 a year for auto insurance on a 2012 Honda Civic with 160,000 miles. He had full coverage: collision, comprehensive, rental reimbursement, roadside assistance, gap insurance (yes, gap on a 13-year-old car), and a about $250 deductible. His car was worth maybe about $2,500. He was paying 72% of his car’s value every year in premiums. That’s financial insanity.
I asked him why he had all that coverage. He said “that’s what the agent recommended when I bought the car.” The agent recommended it because the agent makes a commission on every coverage. Not because it made sense for Derrick.
We sat down and ran the Auto Coverage Optimizer.
Derrick dropped them that day. His premium dropped to about $580 a year. He saved about $1,220 annually. He put that money into a “next car” savings account. Within two years, he had enough cash to pay for a newer car outright.
That’s the power of using the right tool.
So let me walk you through exactly how to use the Auto Coverage Optimizer to stop overpaying – and to avoid being dangerously underinsured.
Step one – enter your car’s details accurately.
Don’t guess the condition. If your car has dents, scratches, worn seats, or mechanical issues, select “fair” or “poor,” not “good” or “excellent.” The optimizer uses condition to estimate actual cash value. Overestimating your car’s value will make you think you need coverage you don’t.
Step two – enter your annual mileage.
If you drive less than 10,000 miles a year, you might qualify for a low-mileage discount. Some carriers offer it automatically. Others don’t. The optimizer will suggest you ask your carrier about it. Also, if you work from home most days, your commute miles might be negligible.
Step three – look at the collision and comprehensive recommendation.
The optimizer will tell you one of three things:
“Keep collision and comprehensive. Your car’s value is high enough that a total loss would be a significant financial hit.”
“Consider dropping collision and comprehensive. Your car’s value is borderline. Compare your annual premium to your car’s value.”
“Drop collision and comprehensive. You are overpaying for coverage you can self-insure.”
For most cars older than seven years or worth less than $5,000, the answer is drop. But there are exceptions. If you have a loan or lease, you’re required to keep full coverage until the loan is paid off. The optimizer checks for that too.
Step four – review the liability recommendation.
The optimizer does not recommend dropping liability. Ever. But it will suggest minimum liability limits based on your assets. If you own a home, have a decent savings account, or have future earning potential, you need more than state minimums. The optimizer will recommend about $100,000/$300,000 for bodily injury and about $100,000 for property damage as a starting point. If you have significant assets, it will suggest $250,000/$500,000 or an umbrella policy.
Step five – check uninsured/underinsured motorist (UM/UIM).
The optimizer always recommends keeping UM/UIM at limits equal to your liability limits. In Illinois, about 14% of drivers are uninsured. If one of them hits you, your UM coverage pays your medical bills. Without it, you pay out of pocket. The optimizer will flag this as a critical gap if you don’t have it.
Step six – look at add-ons.
Rental reimbursement, roadside assistance, towing, glass coverage, gap insurance. The optimizer will ask you if you have alternative coverage. For example, if you have AAA, you don’t need roadside assistance on your auto policy. If you have a credit card that covers rental car damage, you don’t need the rental coverage. If you have a new car with gap insurance through the dealer, you might still want gap on your policy – compare costs.
I remember a woman named Lisa. She was paying about about $150 a year for rental reimbursement on her auto policy. She had a second car in her household – her husband’s car. If her car was in the shop, she could use his. She didn’t need rental reimbursement. The optimizer flagged it as “potentially unnecessary.” She dropped it. Saved about $150. That’s a dinner out.
Step seven – consider raising your deductibles.
The optimizer will show you how much you’d save by raising your comprehensive and collision deductibles from $500 to about $1,000, or to about $2,500. For newer cars, the savings can be 20-about 30%. For older cars, it might be less because the coverage itself is cheap. But if you have a about $1,000 deductible and you cause an accident, you’ll owe about $1,000. Make sure you have that in savings.
Derrick had a about $250 deductible. That’s extremely low. The optimizer showed him that raising it to about $1,000 would save him about $80 a year. Not huge, but combined with dropping collision/comprehensive, every dollar helped.
Now, what about usage-based insurance (UBI)? Some carriers offer a discount if you plug in a device or use an app that tracks your driving. The optimizer asks if you’re interested. UBI is great for safe drivers who don’t drive late at night. But it’s not for everyone. I tried it once. My driving was fine, but I drive after 9 PM sometimes, and the app penalized me for “late night driving.” My rate went up after six months. I unplugged. The optimizer has a caution note about UBI: read the fine print. Some carriers can raise your rate. Others only offer discounts. Ask before you enroll.
The Coverage Gap Calculator works hand in hand with the Auto Coverage Optimizer.
Here’s a real example. A client – let’s call him Frank – drove a 2015 Toyota Camry with 120,000 miles. Value around about $7,000. He had full coverage with a about $500 deductible, about $1,200 annual premium. He also had low liability limits – state minimums. The optimizer recommended keeping collision/comprehensive because his car was still worth something, but raising his deductible to about $1,000 to save about about $150 a year. The gap calculator flagged his liability limits as dangerously low. He raised his liability to about $100k/$300k, which cost him an extra about $80 a year. Net change: premium down $70, but liability coverage increased dramatically. He’s now protected.
That’s the sweet spot. Not just paying less – paying less for the right coverage.
So here’s your annual auto insurance checklist.
First, run the Auto Coverage Optimizer once a year. Car values change. Your driving habits change. Your financial situation changes. What made sense last year might not make sense this year.
Second, if the optimizer says drop collision/comprehensive, drop it. Don’t get sentimental about your car. It’s a machine.
Third, keep liability and UM/UIM at about $100k/$300k minimum. If you have assets, go higher.
Fourth, raise deductibles to about $1,000 or about $2,500 if you have the savings.
Fifth, review add-ons every year. You might have joined AAA or bought a new car that includes roadside assistance.
Sixth, shop carriers every two years. Loyalty doesn’t pay. Use the optimizer to compare apples to apples – same coverage levels, different companies.
Derrick – the one with the old Civic – he saved $1,220 a year. He’s been saving that for three years now. He has about $3,600 in his car fund. He’s planning to buy a used SUV next year with cash. No loan. No comprehensive coverage needed. He told me “I never thought I’d say this, but I’m actually looking forward to car shopping.”
That’s what smart insurance management does. It frees up money for things that matter.
P.S. Lisa – the one who dropped rental reimbursement – she used the savings to upgrade her roadside assistance to a plan that covers her whole family, including her college-age son’s car. Better coverage for less money. That’s a win.
By Marcus
