Your Lifetime Auto Insurance Bill

Recently we looked at the annual costs of owning a motor vehicle.  A big chunk of those costs was the annual depreciation in value over time, but there were other significant costs such as fuel, maintenance, registration and insurance.     Today, we will look at lifetime costs as another concept that helps us to understand how we spend our money.  Lifetime costs are the total of costs relating to an object or service over its expected lifetime.  It includes the amount paid to purchase it and any ongoing costs to maintain or replace it.  For example, if you buy a hot water heater, its lifetime costs include the purchase price, the energy costs to operate it and the costs to dispose of it. It is not uncommon for the ongoing costs of service, maintenance or operation to be greater than the purchase price.  Ask anyone with a Smartphone.  

On average, a US resident will spend about $94,000 over a lifetime of driving according to carinsurance.com.  They figured this out by analyzing nearly 200,000 car insurance quotes for drivers of differing ages, with a mix of driving, claims and credit histories.  They calculated the driving “lifetime” to be 62 years – from 16 to 78 – making the annual bill an average $1516.  When you consider that a college graduate can expect to earn about $2.1 million in a lifetime, your auto insurance bill is a pretty big chunk of change – in fact, a bit over 4%.  

These numbers square pretty well with what we know about average auto insurance costs which insure.com estimates at $1510 for a national average and should cause those of us fortunate to have Washington auto insurance to smile a bit since our state ranks 43rd in the nation with an average around $1226.  That is about 80% of the national average and puts a Washington driver at a lifetime cost nearer $75,200.   

Don’t feel too bad about your insurance costs, however, there are likely to be a lot of other things in your life that add up to more.  For example a study in Great Britain looked at lifetime communication costs and reckoned that the total for calls, texts, telephone and broadband service as well as buying and replacing handsets, insurance and accessories added up to a US equivalent of $122/month or a lifetime cost of $99,070.  Since many of us can remember the days of a $15 monthly telephone bill, this is a pretty scary number. 

There are a lot of areas in your life where the analysis of lifetime costs can both bring you up short and suggest ways to save money.  Smoking, for example could cost you up to $116,000 over 60 years if you smoke a pack of cigarettes a day.  That leaves out ancillary costs such as potential doctor’s visits.  Even your morning Latte at $4 a drink adds up to $88,000 over 60 years.  

This lifetime costs analysis is beneficial in that it highlights not just how costs you may not have thought about add up over time, but they also help underscore the benefits of cost reductions.  As noted, simply living in Washington State results in an average rate reduction compared to other states.  When you work toward cost saving strategies such as bundling your insurance, maintaining a solid credit history and considering the insurance implication of your auto purchases, it adds up.  It might not be enough to support a $4 a day latte habit, but you could get close to the estimated $350 a year that soft drinks cost the average American.  

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