Are you paying too much for auto insurance?
(I know this sounds like the start of every insurance commercial you’ve ever heard, but stay with me here…)
If you’re a Baby Boomer, the chances are you answered yes. A recent survey by Expertise.com found that 41% of U.S Baby Boomers polled believe they are overpaying for car insurance.
And who could blame them for scrutinizing their premiums? Considering that the average Boomer spends $135 a month on auto insurance – nearly 9% of the average monthly Social Security benefit – that’s a substantial cost for retirees on a fixed income.
Unfortunately for Boomers, insurance rates begin rising for drivers over 65 and can jump significantly when they hit 80. This unofficial “age tax” is most likely imposed because older drivers might struggle with vision loss, slower response time, or decreased mobility.
A recent study by Jerry, an insurance compare-and-buy app, found that Baby Boomers and Gen Z (ages of 6 and 24) pay a higher average monthly premium than other generations. And they pay more regardless of violations. In fact, Boomers are statistically the safest drivers of any generation, with a national average violation rate of just 10%, according to the report.
Why are we talking about this now? Because being on the front lines of retirement during a pandemic and an era of inflation has Boomers scrutinizing every expense, including must-haves like car insurance. A Harris poll conducted on behalf of Nationwide Financial found that 40% of U.S. Baby Boomers worry more about their financial stability in retirement now than they did before the pandemic.
I wish the simple cost-savings advice could be “drop your insurance.” But that would require a perfect world without fender benders and state laws requiring drivers to carry coverage.
Fortunately, there are safe and sane ways Boomers can cut costs. After working 15 years in the car insurance industry, I’ve found these are the five most effective strategies to save money on auto insurance:
1. Shop around for better car insurance rates at least once a year.
That same Expertise.com survey that found nearly half of Boomers believe they are overpaying for car insurance also found that 27% of Boomers polled never shop around for better rates.
Well, they should.
Car insurance companies frequently change their rates, so set yourself a calendar reminder a few times a year to shop around for a better rate. (Just don’t let your car insurance lapse in the process.)
2. Shop for insurance with help from an independent agent.
When you shop for insurance, you can either buy directly from the insurance company (State Farm, Geico, USAA, etc.) or go through an independent agent. The benefit of working with independent agents is they have access to rates from many companies and can usually find the best deals. They do the comparison shopping for you.
Just be aware that your independent agent probably doesn’t represent all the insurers out there. You’re limited to the companies they work with. Also, agents earn commission on your purchase, so ask them to disclose if they have higher incentives to sell certain policies.
3. DIY – Comparison shop for car insurance online.
Some people love the convenience and low pressure of shopping for policies online. You either can request quotes directly from each insurers’ website or use a time-saving site that gathers and compares multiple auto insurance quotes for you. Digital independent agencies like The Zebra and Insurify can quickly and easily provide quotes online from many insurers.
4. Work those discounts.
Auto insurance companies offer all kinds of discounts, including senior discounts, so always ask what is available. (Allstate is one of the largest insurers offering mature adult discounts.)
Insurers most commonly reward low-mileage, good safety record, anti-theft device installation, and attendance in defensive driving courses for mature adults. About 30 states now require insurance companies to offer discounts ranging from 5%-15% for driving course graduates.
5. Don’t drive often or far or fast? Get a usage-based auto insurance policy.
Probably the most exciting development in car insurance is the advent of usage-based insurance (UBI) options. These can generate significant discounts for Boomers who aren’t heavy drivers, with savings ranging from 20%-60%. UBIs generally come in two flavors:
Behavioral-based – The insurer gives you a device to plug into your car that tracks driving behaviors such as speeding, braking, drive times (do you drive during rush hour on weekdays or quiet weekends?), and location (crowded city streets or rural roads?).
The better you drive, the better your auto insurance rates. On the other hand, some drivers don’t like sharing such private information and are concerned about cybersecurity.
Pay-per-mile – These insurers measure your mileage only and charge a monthly base rate plus a few cents per mile driven.
Be aware that some pay-per-mile insurers still use a tracking device or even a mobile app that captures additional data. If not having a “black box” in your vehicle is important to you, make sure to ask if it’s required before signing the policy.
Other companies rely on your smartphone and less invasive technology to monitor your mileage. For example, Mile Auto (my company) sends policyholders a monthly text and email reminder with a link. When the driver clicks the link from their smartphone, it opens the phone’s camera so the user can snap a picture of the car’s odometer. Once the Mile Auto app validates the photo, users receive a bill for the base rate plus a few cents for the miles driven since the last odometer photo.
I recently met a woman in her late 70s who was struggling with rising insurance costs for her and her husband. She’d been with a large traditional insurance company for decades and never shopped around. A friend recommended she talk to an independent insurance agent, who then looked at the couple’s driving habits. Because they didn’t drive much (4,000 miles per year for her, 2,500 miles for him), the agent helped them switch to a pay-per-mile program, saving more than $3,800 per year combined.
If you’re wondering if a UBI policy is right for you and not sure how much you drive, dig up your oil change and service records for the last year. They usually capture your odometer readings.
Also, note that UBI policies aren’t widespread in the U.S. yet, so ask your independent agent or do some Googling to see if programs are available in your state.
The bottom line
With COVID-caused remote work, reduced travel, and stay-at-home lifestyle choices, the old auto insurance rate standards of a couple years ago are no longer valid.
Boomers need to advocate for themselves to ensure they get the best coverage at the best price for these times.
Fred Blumer is the CEO and co-founder of Mile Auto and Porsche Auto Insurance based in Atlanta, Georgia, USA. He also is the former CEO and co-founder of Vehcon, Inc., a connected vehicle data company, and inventor on more than 10 patents in automotive telematics, auto insurance, and connected vehicle data.