3 Things 10-03

Thing One Saving On Car Insurance A recent Wall Street Journal article noted that, “…car-insurance premiums have risen 8.3% on average compared with a year ago, according to S&P Global Market Intelligence…And premiums are expected to rise another 5% to 10% in 2023, Triple-I estimates…Driving those premium increases are higher costs for replacement parts, labor and the evolving technological sophistication, which makes repairs of new vehicles more expensive…” The author offered four ways to save as rates rise. We’ve summarized them below:

  1. Reduce your coverage. The author uses a rule of thumb that suggests multiplying your annual premium by by 10 and comparing that result to the trade-in value of your car. If the 10-year premium exceeds the value of your car, you might consider dropping your collision and comprehensive coverage according to their analysis. We’ll add that most insurers will itemize the cost of adding collision and comprehensive coverage for you so you could even do the math using just those portions of the annual premium if you’d like. Either way, the point is you should have a good reason for over-insuring an old vehicle.

  1. Raise your deductible. If you have a solid emergency fund, you might consider raising your deductible to reduce your overall insurance bill. The author gave an example where a consumer raised his $250 deductible to $2500 and saved almost $500 in annual premium payments. It may not make sense in your case but you should at least make the call to your carrier or agent and check it out.

  1. Shop around and demand discounts. A financial advisor mentioned in the article suggested spending 2 hours annually shopping around for your insurance and understanding all the discounts available to you. We’ll add that if you get you insurance from an independent agency (like us), they can do the shopping for you.

  1. Share driving data. Many drivers are reluctant to do so, but adding apps to your smartphone that allow insurers to track your driving habits (speeding, hard braking, fast accelerations, idle time, etc.) can result in significant savings over time if the data confirms you are a better underwriting risk as a result of being a safe driver. This is a case where invading your privacy through data collection can actually save you money.

All four suggestions make sense. In the very least you should consider number 3 and enlist an independent helper with your best interests in mind if you’d rather not tackle it yourself.

Thing Two An Option For Your Cash If you’ve been paying attention at all to what’s been going on in the market, you know that pretty much every asset class is down for the year. Cautious and weary equity investors have been either sitting it out all together, buying the dips (which has not really worked out so well so far), or “averaging in” by investing their money in chunks, periodically, regardless of whether the market is up or down. In any of those three cases, while that cash is sitting idle, it may make sense to take a look at money market mutual funds. See the excerpt bellow from the Intelligent Investor column in the Wall Street Journal for more detail: “…For years, money-market funds’ yields have been stuck near zero, and individual investors yanked $43 billion out of such funds last year, according to the Investment Company Institute. In recent months, though, these funds have finally begun to pay more income. The Crane 100 index of the largest money-market funds yielded 2.64% this week, up from only 0.02% in February and 2.01% at the end of August. “Money-market funds are worth a second look now,” says Harry Sit, who runs a blog called The Finance Buff. “Rather than having to wait for [online banks] Ally or Synchrony or Marcus to adjust their rates on savings accounts or CDs, your money-fund yields can adjust daily with the market.” Your brokerage firm may force you into its “cash sweep,” an account with an affiliated bank that is likely to pay much lower yields—a measly average of only 0.29% as of Sept. 23, according to Crane Data Sweep accounts are designed as a receptacle for the dividend and interest payments your stocks or other investments throw off. All too often, they function like a jail, imprisoning your cash where it earns punitively low returns. However, you should be able to transfer your cash balance out of any sweep accounts into money-market funds offering much higher income…” The sweep account is typically where all the uninvested cash in your IRA or brokerage account sits. While money market funds aren’t earning enough to offset inflation, it may still make sense to park the cash (that you already planned to have parked) in these funds rather than in the default sweep accounts given the significant gap in yields offered between the two.

Thing Three Just A Thought "Come what may, all bad fortune is to be conquered by endurance." - Virgil