Investors will be realizing soon (if they haven’t already) that 401(k) contribution limits in the year 2011 haven’t changed from previous years.

This doesn’t come as much surprise given the lack of a stellar economy these days, but it’s undoubtedly going to upset many people.

For those unfamiliar with Individual Retirement Accounts, the limits placed on them are multiple.

First of all, there’s always a maximum contribution for 401(k)s.  These maximums depend on your annual income and age (among some other less common, less important factors).  For the most part it’s a safe assumption to believe that your personal maximum for your 401(k) is $16,500 per year (no exception for 2011).

It varies from plan to plan, but many plans don’t allow individuals to contribute past $6,000 per year, with exceptions for those over 60 years of age.  If the individual has more than one plan, their total 401(k) contribution for the calendar year of 2011 can’t surpass $16,500.

This has been the maximum for the past three years, when the total jumped up from $15,500.  It looks to hold true for the next several years, as well.

Furthermore, these retirement accounts face “catch-up” limits as well.  The circumstances surrounding the “catch-up” approach are extensive and detailed, but the bottom line:  they’re for people who started a 401(k) late or otherwise are trying to make up for lost time and money just short of entering into retirement.  Since 2004, the catch-up limits have been set at $5,500.  This means that there are two times a year when an individual can put in an additional $5,500 (assuming they meet a set criteria) that they otherwise wouldn’t have had the option to contribute.

Individuals aren’t the only ones faced with limitations when it comes to 401(k)s.  Those who have employers who match contributions—those employers are also going to face limitations.  Specifically, for those making less than $110,000 annually, their employer is only allowed to contribute $6,000.  This brings the total worth of a 401(k) up significantly, but it also means that (in theory) an employer cannot fully match the contribution of an individual for a 401(k) plan.

On top of that, if an individual is over 55 years old (or older), the situation is slightly different.  The individual then has the option of including an additional $5,500 into their 401(k) plan, in keeping with the “catch-up” rules.  In short, those over 55 have the potential to max out at $28,000 assuming they have an employer willing to contribute the maximum amount.

As well as their being contribution limitations, there are also withdrawal limitations.  No one setting up a 401(k) assumes they’re going to need the money they’re setting aside for retirement until the age of 55 or older, but in today’s unstable economy it’s entirely possible to need to take something out.

In short, there’s no method of withdrawing from your IRA that isn’t going to penalize you in some way.  There’s not a limitation in the form of how much you can take out (at least not one that’s government-imposed—your provider might have a different outlook, though) but whatever you take out is going to result in a large tax hit, no matter how you cut it.

There are government imposed penalties for withdrawing from your 401(k) early, plus it sets back the amount that accrues in your fund.

However, currently there exist a series of rules for hardship withdrawals.  In these cases, you must apply (using a federal form) for such a hardship, and if granted you’re able to withdrawal from your 401(k) with only a 10% tax penalty (you’ll face far worse if you don’t go the hardship route).

In these cases, foreclosure on one’s home or residence is considered the most pressing matter, allowing one to take money out at the reduced penalty rate.  Proof of eminent foreclosure is the deciding factor for a hardship withdrawal grant.

Fidelity Investments is one of the nation’s largest financial corporations.  They’re also a leader in 401(k) benefits.

Frequently their 401(k) benefits come through an employer and aren’t purchased by individuals.  They deal almost exclusively through corporations and small businesses and are forerunners in that particular industry in today’s economy.

Unlike several other 401(k) providers, Fidelity requires (in most cases) a minimum initial contribution of $2,500.  This amount can be rolled over from another IRA, though.  And keeping with traditional 401(k) regulation, there’s a $5,000 maximum contribution amount per year for investors under 60.  For those over, the maximum is $6,000.

Fidelity’s 401(k) plan fits into the big picture differently than many other IRAs.  It’s for more well-seasoned investors.  Since they deal almost exclusively with corporations, Fidelity’s IRAs aren’t necessarily set up to be individual-friendly.

This doesn’t mean it’s difficult (and certainly not intentionally so).  It just means it’s for a more professional setting.  They’re a well-established corporation whose business model is set up as such to be popular amongst more successful businesses.

However, Fidelity does offer a self-employed 401(k) option, and it seems to come with many perks.  They don’t currently offer a Roth version of the plan and their 401(k) involves an extensive application process, but the good news is that the account comes with few maintenance fees (if any), is easy to set up, and comes with solid customer service.

That said, they receive mixed reviews from investors.  For example, one blogger outlines that this company didn’t set up a very effective 401(k) plan through Fidelity.  The company didn’t match investments and he went on to explain that only a small fraction of people he worked with even participated.

Checking farther into reviews, you’ll find similar situations.  But such is to be expected.  You’ll also find plenty of satisfied investors.  Particularly, people express their fondness for Fidelity’s customer service.  Fidelity’s IRA plans can get tricky, as they offer a wide variety.  Consumers report that Fidelity’s easily approachable with problems or concerns.

Despite the plethora of confusing terms that stem from Fidelity’s set up, investors report frequently that Fidelity’s customer service walks them through all of the steps easily.  Fidelity’s web site isn’t as user friendly as many, opting to take a more technical approach.  If you know what you’re looking for, it’s an easy set up.  It doesn’t come with many bells and whistles (which may not sell the customer initially).  But it’s a straightforward set up, giving you the basic form of information you need.

Unfortunately, with something as complicated as a 401(k), you need more concise, clear information to get the big picture.  Reviewers have outlined that Fidelity’s more technical approach leaves many in the dark, and masks their sometimes poor performances.

For example, one reviewer explained that his set up yields roughly $36,000 less than the average 401(k) and that he was led into this approach by a customer service representative.  He explains that the service rep was knowledgeable and gave him confidence but over time he realized he hadn’t been making the right choices.

To be fair, he explains that Fidelity’s customer service was always top notch, but that it wasn’t worth it to him to ultimately lose $36,000 in his retirement fund just for solid customer service.

That said, Fidelity is still ranked as America’s #1 provider of IRAs, according to Cerulli Associates Retirement Edition.  Based on information reported by retirement account providers in the third quarter of 2010, Fidelity is the forerunner.

Because of that it seems that Fidelity is facing a substantial amount of rollover from other prior 401(k) plans.  Presumably, their $2,500 initial investment plays a role in that—in today’s economy it only makes sense that people wouldn’t want to forego their savings to plan for retirement, but rolling over an existing retirement fund to a potentially better plan seems not only popular, but wise.

There are high odds you’ve heard of the Merrill Lynch Corporation.  They’re a front-runner in personal finance today.

Several factors play a role in Merrill Lynch’s success in today’s economy.  First and foremost, they’re owned by the Bank of America Corporation, which is another front-runner in the country’s wealth management field.  The pairing of the two has led to Merrill Lynch being the largest brokerage in the world.  Furthermore, Bank of America works with over 4 million small businesses in the US today.

Above and beyond the most promising factors, Merrill Lynch features a plethora of on-staff financial advisers.  They specifically pride themselves on helping their customers find the information that they need.  They work with their customers, outlining retirement goals and needs.  The Merrill Lynch approach attempts to bring the customer to an understanding of their own financial situation instead of straight-up trying to profit off of the customer.

As such, Merrill Lynch has a strong connection to the younger demographics in society.  Much of their approach is centered around educating those that are in their 20s and 30s on how retirement accounts work and what the smartest method of using one is.  Their popularity among this demographic is at least rising, although numbers on the matter have yet to fully surface.

Many retirement accounts have taken hits in the past few years as a result of the global economy.  But Merrill Lynch remains a strong option for small businesses.  Companies today take advantage of the several options for retirement accounts that Merrill Lynch offers.  When it comes to small businesses, Merrill Lynch even offers counseling on how to choose an effective plan for your company, wherein they walk you through the entire process and help you make an informed decision.

They also offer a wide variety of corporate retirement accounts which also feature the same counseling, but on a smaller scale.  This makes sense considering that corporations are likely more esteemed and have experience dealing with such matters.

Reviews of the Merrill Lynch 401(k) system vary, as is to be expected.  The company typically gets good reviews regarding accessibility and user friendliness.  Donations are fully outlined and confirmed, records are accessible and easy to follow.  But many people feel like there’s too much fine print involved with the company and that their advisers skim over it, not giving you the full run down.

On top of that, many people feel like the company is too flashy.  Many gave the review that Merrill Lynch is all bells and whistles and that they catch you with small print situations.

In many of the cases detailed online, the customer service surrounding an individual plan seemed to lack in comparison to those who were on a company plan.  Many people whose companies chose to take advantage of the Merrill Lynch services felt their representatives were well-informed and helped them make the correct choices with their finances.

In any situation, the approach for an individual plan versus that of a company plan is going to be different.  For example, companies often choose to match 401(k) contributions while individuals don’t have such a luxury.  This can simultaneously complicate things—as there’s an increased amount of input and vested parties—and to make things easier—your company will usually have an employee on staff who deals specifically with 401(k) questions or they’ll have easy access to a Merrill Lynch employee with the same priorities.

Although many reviews omit these specific details, it’s an inevitability that customer service reactions will vary.

That said, the company can’t be doing much wrong—they’re still the leader in wealth management and global lending.  And their 401(k) plans specifically drive in a large chunk of their business.

Reader Question:

Hello! I quit my job and have not gotten another one (by choice, but I am way too young to retire). I have heard that since I am not going to be taking my 401k earnings and putting them into a new account (with a different employer) they will mail me what I had earned (which was not a whole lot, again I’m very young). How long does it take to get that check, and is there anything I need to do in the meantime?

PFA Answer:

The job market can be competitive and many people have been put into situations that are less than ideal. The short answer is that it will typically take at least a couple of weeks: understandably, an employee that is no longer with the company will not be the highest priority for an overworked HR department. This can be further complicated by the speed of the investment company that holds your 401(k) plan.

With this said, you need to understand the implications of your premature withdrawal. The first thing that you need to realize is that, with very limited exceptions, any time a 401(k) or IRA is cashed out prior to 59 1/2 years — you will be not only be responsible for the income tax, but also a 10% penalty on that income. While this may not seem like much at the time, it can be quite daunting when you go to file your taxes for that year and end up owing Uncle Sam.

The second realization is that, unless you take appropriate measures, you could be put into the same situation in the future. I generally recommend that a family should have an easily-accessible cash reserve that could cover 6 months worth of expenses. This reserve should be a priority because, lets face it, we never really want to ACTUALLY believe that we are expendable from our jobs.

For example, let us assume that your expenses are $4000 per month…

Checking: $2400
Savings: $9600

The money in both your checking and savings account will be readily available and will have no penalty for withdrawal. However, you will sacrifice the potential for earning interest.

Short-to-Mid Term CD: $12,000

This money would be able to earn a small amount of interest until you would need it. While the idea is to have the money from the checking/savings cover any catastrophes such as losing a job, this money would still be available to you at short notice (with a small penalty) if you need to cash it out prior to maturity.

There is no question that the idea of printing grocery coupons is becoming more and more popular as people need to save money. The other reason for the popularity are television shows such as “Extreme Couponing”. These shows highlight people who supposedly get hundreds of dollars worth of groceries for what seems to be pennies.

You can spend your Sunday afternoon clipping dozens of coupons out of the newspaper or you can find printable manufacturer’s grocery coupons online. However, you have to know where to look so that you don’t end up on a website where you are signing up for things that will wind up bringing nothing but spam to your e-mail inbox. In fact, some of these sites can be a little scammy and spammy themselves. So, in an effort to save you from spinning your wheels, let’s talk about the top 10 websites to find printable manufacturer’s grocery coupons.

1. www.CouponMom.com: CouponMom has become a very popular place for people to go in the last few years. A lot of that has been due to the fact that she was on Oprah and has gotten a lot of great press for her website. The site is really good because it offers links to many other sites where legitimate coupons are offered. It also gives you up-to-the-minute information on the best sales at local grocery stores and drugstores.

2. www.SmartSource.com: This site offers free coupons and discounts for many top brands as well as online coupons. They are very easy to print using the site’s online coupon printing software.

3. www.GroceryCoupons.com: This site has a free program that allows you to print your own coupons from thousands of name brands, but it also offers a coupon clipping service and local coupons as well as a deal finder.

4. www.RedPlum.com: Many people will know Red Plum from their circulars in the Sunday newspaper each week. They offer grocery store coupons as well as restaurant and drugstore discounts.

5. www.CoolSavings.com: Cool Savings offers printable name brand coupons as well as online coupon codes for consumers who want to save more money.

6. www.PPGazette.com: This site offers coupons from a variety of sources that you can print such as Valpak, SmartSource, RedPlum and Coupons.com. The site says that you can print them all from one convenient location.

7. www.Coupons.com: No list would be complete without a site called Coupons.com, right? The site is a virtual clearinghouse of coupons from a variety of different sources.

8. www.CouponDivas.com: This site is for the coupon diehard who wants to learn how to save big money using coupons. They have a retail coupon list, kids eat free list and coupon database as well as 70 hours a free tutorial videos.

9. www.GrocerySmarts.com: This site is for someone who likes a much simpler method for finding coupons as they are laid out by the week according to the manufacturer name. The site is definitely not hard to maneuver like many of the other coupon sites.

10. www.Kroger.com: Surprisingly, many of the grocery store chains have manufacturer’s coupons right on their websites. Some of them also have customer loyalty cards where you can electronically load coupons on your card so you do not even have to clip them and bring them with you. Kroger is just one grocery store at that has this option. You can certainly check at your local grocery stores to see what kinds of deals are offered on their websites and whether or not they have a loyalty card where you can load your coupons.

Couponing does not have to be the hard and arduous task that it used to be. You don’t necessarily have to carry a big envelope or binder full of coupons as long as you are careful in your planning before you make any shopping trips. Knowing in advance what you’re going to get and what coupons you have can save you a lot of time and money.

Finding a car for under $1,000 isn’t as arduous of a task as it might seem, but it’s going to involve some research.

The easiest way to start is with the Kelley Blue Book.  The Kelley Blue Book is the automotive benchmark for used car prices.  When you trade in a car to a dealership they usually assess its value based on its ranking in the blue book.

Checking this source should always be your first move.  The book sets the standard for resale values for automotive vehicles.  So before purchasing any used car the book should be consulted.  That way you know what the estimated price should be and you don’t get taken by someone trying to get more for their car.

On the other hand, if you know what the value of a car is before you buy you’ll be more likely to spot a bargain or to deduce if the car might have problems with it.  If someone’s selling for substantially below the market value it’s an indication that something’s wrong.  If they can’t get the market price, there’s clearly a reason.

Fortunately, there are specific websites guiding you in the right direction.  For example, there are sites specifically aimed at listing cars for less than $1,000. The site not only points you towards cars for sale under $1,000 but it provides you with a variety of finance options depending on the state of your credit.  You’re not often going to find a set up like this from most used car vendors.

Similarly, there’s a website featured on several major national news sources which also advertises cars for less than $1,000.  It also gives finance options for those with less-than-stellar credit.

Looking in a more localized fashion, Craigslist.com is always a great starting point.  The website serves as local classified ads for people selling property from person-to-person.  Although there isn’t specifically an option to search in a given price range, the advantage is that you know the car is going to be in your area, making for an easier transaction.  In these cases it’s imperative to search the Kelley Blue Book value before buying.

It’s more of a shot in the dark, but you can occasionally find cars within this low price range at Carmax, but they typically specialize in slightly pricier cars.  The plus, however, is that Carmax features extensive documentation on the previous ownership of the car.  Before taking in a used car, they research it in depth and make sure it’s in tip-top shape.

Therefore, it’s possible that they could find a cheap, older car that’s in acceptable condition and resell it for under $1,000.  If you’re fortunate enough to find one of these you’re likely in luck because you know it would only be in the best of shape or they wouldn’t have it in the first place.

At the same time, AutoTrader.com specializes in person-to-person used car vending.  It offers all the information necessary on market values, needed tune-ups, and so on.  It serves as an exhaustive source for crucial information surrounding used cars so that each party knows what they’re getting and what they should be looking for.

Many dealerships that accept trade-ins use older, cheaper cars for parts instead of reselling them.  This makes it difficult to get cheap cars specifically from the dealer.  However, many cities have local used car dealerships that function in the same fashion.  The cars they can’t sell they scrap for parts.

Although many of the cars will likely be over $1,000, they’re still going to take in older vehicles with the intention of vending the parts if they can’t sell it.  This makes it entirely worth checking out these lots on a regular basis.  If you can find a car under $1,000 when it first comes in you can buy it before it has a chance to sell for parts.

Overall, there are several resources for finding used cars for under $1,000, most of which are online-based.

American Fidelity Assurance company ranks among the nation’s top health insurance benefit providers and has for years.  Decades even.

The Oklahoma City-based company founded in 1960 has been on Fortune’s 100 Best Companies to Work For list for the past eight years straight, expanding its business through 49 states in the country.

The awards and recognition don’t stop there, with the company placing on the Ward’s Top 50 list of life-insurance providers and the Weiss rating system determined the company ranks in the top 2.8% of companies in its field.  (The list continues).

American Fidelity Assurance has the track record to prove its dominance, consistently competing with companies like Aflac, Hartford Life and the Unum Group, managing to still insure over one million customers worldwide.

American Fidelity specializes in prominent and crucial forms of personal insurance including life, health and disability.  They offer a wide variety of services, including cancer coverage, flexible spending accounts, health reimbursement plans (which are increasing in popularity in the present day, due to their lower cost) and health savings accounts.

Although the company’s services are popular among individuals, it also offers employer group plans. Their services are used most frequently in the fields of Education, Municipality, Auto Retail and in the Health Care Industry.  As any group plan does, theirs works in a tax deductible fashion towards the employer (while many companies are soon to be required to delve out insurance to employees).

The company also boasts a wide variety of supplemental insurance, which is also growing in popularity given the large number of people reaching Medicare status.  Think of it as insurance for your insurance:  if the plan you have doesn’t cover something, you can purchase an American Fidelity plan to step up to the plate.

This is growing enormously in popularity as benefits have been cut or otherwise reduced during the recent recession.  Companies are offering smaller and less inclusive plans leaving a lot of workers on their own to face certain struggles.

As mentioned, there’s also a large number of Baby Boomers reaching retirement age and turning to Medicare, which is known to leave issues out of its coverage.

As a result, supplemental insurance plans are becoming more and more common.

Even so, the company wasn’t immune to the economic downturn seen from 2000-2009, but their annual report outlines that they’re strong, on track and more-than-prepared for the new decade.

That said, the overwhelming response regarding employment at Fidelity comes from their IT department.

Former employees frequently site that department as the strongest.  According to sources, the company’s IT department hires most frequently and offers reasonable (although not great) pay, along with benefits.  Employers say that moving up takes time (likely a result of the present economy and lack of professional opportunity) but positions are secure.

Like with any personal insurance corporation, consumer reviews can be mixed.  Insurance is and always has been a tricky industry.  When people aren’t given the treatment they believe they’re entitled to, they’re rightfully unhappy.

For example, the company gets low rankings on health insurance review site, HealthInsuranceProviders.com. Complaints span from unclear date of insurance coverage, not receiving proof of insurance cards and simple lack of coverage for prescriptions to poor customer service—likely things that could happen for any reason or at any company (which isn’t to say it’s forgivable).

On the other hand, the company holds good standing with the Better Business Bureau, who has no record of any substantial government action being taken against the company.  Specifically, they have only ever received a small handful of complaints, most of which center around customer service issues.

In summary, American Fidelity mostly exhibits strength in the current market.  It’s high in demand, as its numbers show.  It holds its own in a strong market with fierce competitors, and there are no notable complaints or lawsuits surrounding the company.  And as far as employment goes, there’s a glimpse of opportunity, which is more than can be said for many companies these days.

New legislation that’s come into play since the beginning of the year is certainly going to make the flow of information regarding a consumer’s credit score more prominent.

But its usefulness is in question.

It’s no secret that credit has been hard to come by the past few years as our economy continues to trudge through a steep downturn.  Credit scores have come down as a result of overextension, foreclosure and maxed out credit lines.

And although there’s no guarantee that it’s bouncing back anytime soon, the Federal Reserve and Federal Trade Commission are at least going to throw us all a bone next time we’re applying for our next credit line or loan.

As of January 1, there are certain circumstances (too extensive to outline) when a consumer applies for some form of credit that they’ll receive a notice with information surrounding their credit score or credit report.

Most commonly, people will receive a simple notice entailing their score and comparing it to that of the majority of consumers. (This likely applies for a mortgage, auto loan, or credit card.)

In the event that one has applied for credit under certain terms (say, an APR of 12.99%) and the source isn’t able to give you credit at these terms, you’ll receive a “risk-based pricing notice.” What this notice likely explains is (a) the reasoning why your credit wasn’t approved at the aforementioned rate and (b) what your new rate will be.  This occurs in a case when one’s credit is less than favorable but not detrimental.

Furthermore, anytime a current creditor reviews your credit (which many do on a six month basis) and determine they need to make a change, you’ll receive an Account Review Notice, which is exactly what it sounds like:  it’s the company explaining that they reviewed your account, and made a change.

Ultimately, this keeps the consumer less in the dark and it gives everyone a better feel for what their score is like.  The FTC isn’t holding your information in some dark abyss any longer, but they’re not offering it up easily.

But at the very least, it’s increasing communication flow between consumers and creditors, which is a step in the right direction for financial recovery of both the country and its citizens.

Previously all consumers could bank on was their free annual credit report (from www.annualcreditreport.com) and other credit reporting services like Experian, Equifax and TransUnion.

Now it’s less of a wild guess.  Consumers are going to see tangible feedback when they go to apply for auto loans, mortgages and credit cards, complete with references to their own credit report.

I can’t stress enough that this is a good thing overall.  And although I approve this movement, the practicality is questionable.

Let’s think—what exactly is this going to do for consumerism?  Will this make people more likely to apply for credit?

People aren’t necessarily going to rush out to their regional credit union as soon as they hear this information and apply for a card.  If they really needed one by now and couldn’t get it, this isn’t changing that.

There’s no direct correlation between this legislation and the availability of credit.

But does it have long term affects?

I think so.  I think what’s going to happen is that within the next year more people are going to become more financially stable as a result of (a) more job opportunities (hopefully) and (b) continuing to pay down current debt/climbing out of debt.  When that happens, people are going to want to get better credit cards, bigger credit lines, to refinance their mortgage, to finally get a new car, and so on.

So when they walk into a store to apply they’re still gambling, but if it doesn’t work out it’s not a complete shoot-down.

Consumers will be able to take the feedback they’re provided and make necessary adjustments to get their credit score back on track over time.

What does this mean big picture? It means that the next year might be a rebuilding year.  It means that consumers might finally be fixing or improving their credit and these helpful hints are going to push them in the right direction.

It might even mean that we’ll see a rise in consumer credit within the next few years.

That’s assuming the laws stay in play that long.

If you haven’t looked at your policy statement in a while, you may be surprised at what features are actually included in your policy. We all live hectic lives. It is not difficult to join organizations over the years that provide similar benefits. Car insurance may not come to mind when you think about duplication, but the potential is there. These are some of the add-ons you may want to check:

Emergency Road Assistance

How often do you find yourself in need of emergency towing? Not too often, but it is nice to know that you are covered when you need it. The organization that has done the best job of making the public aware they offer this service is AAA. However, emergency towing is actually a feature on many car insurance policies. If you joined AAA because you like their services in general, you already have emergency roadside coverage through AAA and you could save yourself some money by dropping the emergency road assistance coverage from your car insurance policy. However, if you aren’t already a member of an organization like AAA and don’t plan to join one, you may find that the coverage is actually cheaper as a part of your car insurance.

Rental Car Coverage

This coverage used to be included in many car insurance policies, but has become rarer. For a while many credit card companies would include this coverage with their premium cards if you used their card to rent the car. If you have one of those credit cards, you certainly don’t need to pay for it with your car insurance. Credit card companies have cut back on this benefit in the last few years, so make sure they are still offering it before you cancel your coverage. Another reasonably priced rental car insurance is being offered as an add-on to credit cards. If that is available, you should check which one turns out to save you money based on your rental patterns. Personally, I have saved hundreds of dollars using the premium car rental insurance offered by American Express.

Collision Coverage and Comprehensive Coverage

These coverages pay for damage to your vehicle in an accident. If you own a fairly new vehicle and are accident prone this coverage is indispensable. However, if you missed the government subsidized program to trade your old gas guzzler in for a new vehicle, your vehicle may not be worth as much as the annual premium for collision and comprehensive coverage. Check with your agent. Assuming you have the appropriate coverage to cover the other vehicle in an accident you may cause, you may not want to carry the coverage for your own vehicle and save the money to purchase a new vehicle instead. Just make sure you are saving the money you are not spending on insurance, because you will need it if you have an accident.

Many of us pick up car insurance when we first purchase our car and never look at it again until we sell the vehicle or trade it in. What we forget is that our circumstances change, our cars age and we join clubs, associations and add new credit cards to our collections. Even some professional associations offer insurance coverages to their members. Membership dues in many of these organizations aren’t cheap, but if you are joining it anyhow, because it is beneficial for your job, then you might as well look into what else is included in the membership and potentially reduce your insurance premiums somewhere else. The point is to keep up with your coverages and avoid duplication.

In case you haven’t heard, California approved legislative changes that allow insurance companies to offer car insurance based on the number of miles you drive. This isn’t a completely new idea. Insurance companies have asked their customers for years how many miles they drive, but now there is a direct highly visible connection between your insurance and the number of miles you drive.

California legislators looked at a Brookings Institute study that concluded that this tie would result in a 8% reduction in the number of miles traveled in California by light duty vehicles. The potential savings for the state of California are impressive, both in terms of finances as well as the environment.

The question is: How will it impact you?

Potential cost savings

State Farm is calling their program Drive Safe and Save. They are teaming with OnStar in this program. As a participant in this program you agree to let OnStar report your mileage to State Farm, so they will have an accurate mileage of your annual driving. If you already are a State Farm customer, you will have noticed that on your annual statements, one of the ways you have been classified is by the number of miles you drive annually, generally below or above 7500 miles per year.

If you were classified as driving less than 7500 miles per year but have changed your driving habits and now fall over that limit, OnStar will report that too and you will actually see your premium increase. However, if your classification was accurate you should see a discount of 1 to 45%. The first year the discount appears to be 5% until enough data is available to accurately classify you.

With State Farm it seems you are required to have OnStar to participate in this program, so if you aren’t a current OnStar subscriber, you will not see any savings, since the cost of OnStar will be higher than the insurance discount. The Automobile Club of California is supposed to start offering such a policy as well.

Potential change in your habits

Most of us react to incentives and the above study showed that the savings in insurance premiums did result in a reduction in driving, so this one does work. If you have heard any lectures on time management, you are likely to have heard that you should combine errands. Well, here is yet another incentive to get you motivated to do what you know you should do.

Most of us would rather have fun, spend time with our families and enjoy recreational activities than run errands, so why do so many of us still run to the grocery store in the morning, only to drive to the post office in the afternoon? Even though large chunks of time off do motivate people, little quantities of time saved aren’t usually equated with a high priority, but even the smallest amount of money saved seems to make a difference.

Potentially less traffic on the roads

This is California we are talking about. Traffic has been horrendous for decades. Taking almost 10% of the vehicles off the roads will make a big difference. Just imagine 10% fewer accidents, fewer waits on backed up highways, fewer detours because of outright closures due to accidents. You may even see the difference in the air quality. This category of benefits will affect you whether you actually participate in this way of insuring your vehicle or not.

Not many programs benefit society as a whole like this one does, so even if you personally will not get a discount on your insurance premium, this is a worthwhile experiment. If the study was correct, everyone in California will see the difference.