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How to Pay More Than You Should: Stop Paying Attention

This article was written by in Insurance. 9 comments.


In March, I wrote about reducing the amount of automation in handling personal finances. Leaving your payments on auto-pilot is asking for trouble. Leaving your brain out of the decision-making process is a sure way to rack up overdraft fees when you don’t have enough funding to pay an automatic bill.

Also in March, I canceled collision coverage on my auto insurance. With a hefty emergency fund and a car that is no longer valued beyond $10,000, this is something I should have done a long time ago. My car insurance is deducted from my checking account every month, so I had not been focusing on this particular expense.

At this time, however, I decided to write an article about car insurance and that forced me to examine my own. I saw I was paying for unnecessary collision coverage, so I canceled it. The process was simple. I logged into my insurance company’s website, found the customer service phone number, and canceled the extra coverage within minutes. It was a surprisingly easy process.

I later received confirmation in the mail. My coverage was adjusted as promised.

Yesterday I received my renewal documentation in the mail, and somehow, collision coverage was back on my plan, and my total premium was higher than ever. Not knowing whether this was an error in the paperwork, I called customer service. Somehow, collision coverage was included in my renewal. The customer service representative suggested that by the time I removed collision coverage in March, and even though my renewal date wasn’t for another three months, my renewal paperwork had already been processed.

He was happy to remove collision coverage from the renewal and I should receive new paperwork in seven to ten days.

If my finances were fully automated, I might not have opened my renewal documentation and would have instead filed it away with the rest of my documentation. I knew that I had made a change recently, and when I received the mailing, I wanted to verify I the company renewed the plan as expected. I was surprised to find it did not, but glad I checked.

By the way, my insurance company, Liberty Mutual, is not a public company; I’m a customer and a stakeholder. Interestingly the company announced just yesterday that its property and casualty insurance subsidiary has filed for an initial public offering to access an influx of capital.

Published or updated May 11, 2010. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @ConsumerismComm on Twitter and visit our Facebook page for more updates.

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About the author

Luke Landes, also known as Flexo, is the founder of Consumerism Commentary. He has been blogging and writing for the internet since 1995 and has been building online communities since 1991. Find out more about him and follow Luke Landes on Twitter. View all articles by .

{ 9 comments… read them below or add one }

avatar Money Funk

I love having my bills on automation. Of course, I just realized I sent $20 too much to my charter bill (thank you to my husband who reads our mail) because my bills are automated. However, even though I don’t usually look at my monthly emailed/mailed bills, I do agree its important to read renewal notices; like the auto insurance coverage.

And I love when customer service is a live person. Hope you didn’t need to push a million buttons to reach a real live human being. ;)

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avatar Apex

Wow, you consider 10K to be the not needing collison coverage line (When I drop coverage I drop both collision and comprehensive by the way). I usually consider it to be around the 5K area. I could easily stand a 10K loss on a car. I could easily stand a full loss on a brand new car. But both would feel a little painful.

So I would be interested in hearing why 10K is your cutoff. Both of my cars are currently worth probably about 7K and have collision with $1000 deductibles. Maybe I need to re-think my rationale. My philosophy on insurance is to pay only to prevent large losses and catastrophe. I don’t insure for coverage of small things (it encompasses my philosophy on medical insurance too). So I guess the question is at what point does the loss of the car move from the large loss to the small loss. So I would be interested in how you came to your 10K number, still feels a little painful to me.

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avatar RetirementInvestingToday

I’m about half manual and half auto. One thing for sure though is that I never opt out of the paper statements so that I also get a chance to review the bill before the direct debit. Here in the UK there is also on occasion a good reason for setting up a direct debit – it is sometimes possible to get a % reduction in the bill by having it automatically deducted.

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avatar Alexis

I guess I will be looking into my insurance policies just in case…thank you for this post! :)

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avatar megscole64

Oh my gosh. This article is incredibly timely because I also am a Liberty Mutual customer and they have now screwed up our Auto insurance billing for about three months. And I think we’ve been overcharged for those three months. It’s NOT our fault because I did my job and talked to everyone I needed to, but somehow they have continued to screw up. The premium is supposed to come out of my hubby’s paycheck and yet we just got a bill in the mail yesterday for our full premium. I am NOT happy. :(

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avatar Monevator

I’ve got mixed feelings about this unautomate trend sweeping the PF-sphere on the back of Adam’s book.

The fact is most things are better done in batching. I think batching a whole load of stuff onto the best deals you can find then checking them out and if required getting new deals in another big update round in 1-2 year’s time will deliver more bangs for the buck.

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avatar Luke Landes ♦127,380 (Platinum)

While Adam’s recent book is good, I’ve been writing about the benefits and dangers of automation for a few years.

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avatar Squirrelers

With respect to the title – and overarching theme to the article – yes, I agree that you should pay attention to the detail and avoid losing money that way.

Taking a different spin on the idea of paying attention, I think its important to read the fine print of purchases, particularly recurring ones. Often times, you could find your credit card hit for charges related to things you didn’t purchase or thought you cancelled. Pay attention indeed!

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avatar Jeremy Schaedler

Nice post! This actually happens a lot because most insurance companies generate renewals 45-60 days in advance. I completely agree regarding automation. While I set most all of my bills on auto pilot, it’s really important to glance over the previous month’s statement to make sure everything is in line. It’s also a lot easier to detect fraud this way.

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