My wife and I recently switched car insurance providers, cutting our bill from about $2,100 for six months of coverage for both our cars to just over $2,600 per year (for the exact same coverage). Although the savings in insurance costs are substantial, I know we’re still paying significantly more than average.
Although we can’t help the fact that our state is the third-most expensive state for car insurance, there are a number of things we can do to reduce our costs — and you can do them, too.
If you’re anything like me and want to know how to save money on car insurance without skimping on coverage, you’re going to want to try at least a few of these money-saving strategies .
1. Keep a good driving record
Your car insurance premium is the amount you pay in exchange for your insurance company to cover some or all of your losses in the event of an accident. No matter how much you consider yourself to be a good driver, you still represent some level of risk in the eyes of your auto insurance company. But the less of a risk you are, the less you have to pay for auto coverage.
A clean driving history is proof that you’re less of a risky driver and more of a safe driver. You’re likely to get offered a lower premium. On the other hand, a driving history that includes tickets and accidents will increase your auto insurance premium, and it can take years for your insurance bills to decrease again.
Who really has the cheapest auto insurance in your area? Check your zip code here. 2. Drive less often
Many car insurance companies ask for your annual mileage to gauge how often you’re on the road. This number directly correlates to your likelihood of getting into an accident. If you fall below a certain number of miles — what some companies call pleasure use — you’ll typically pay a lower rate for your insurance.
If you use your car to commute and drive above a certain mileage each year, you may pay more. The exact mileage thresholds vary from company to company.
If you're working from home or have reduced your commute, let your insurer know. You might qualify for a low-mileage discount.
3. Improve your credit score
Your credit score could help inform what you pay for car insurance. In some states, car insurance companies are allowed to give lower rates to drivers with excellent credit. In those states, information in your credit report, such as outstanding debt, payment history, and new credit applications, may be a part of calculating what’s known as an insurance score.
Your “insurance score” is a factor in determining the amount of your premiums. Your insurance score measures how well you manage your money, and, according to the Insurance Information Institute, studies show that how a person manages their money is a good predictor of how often they’ll submit an insurance claim.
If you live in California, Hawaii, Massachusetts, Maryland, Oregon, Utah, or Michigan, your state offers some protection in this department. These states currently prohibit or limit the use of credit scores to determine car insurance rates or deny coverage. So having a less-than-stellar credit score won’t hurt your car insurance premiums.
Avoid these money mistakes: 9 dumbest things smart people waste money on
4. Bundle your insurance coverages
Many car insurance companies reward you with savings if you hold multiple policies, such as auto and homeowners or auto and renters. For example, I was able to lower my renter's insurance bill by 30% by bundling it with my auto insurance. This is also true if you have more than one vehicle insured through the same company.
If you currently have several insurance policies spread across multiple companies, consider getting auto insurance quotes from each and consolidating your policies with one insurer. Before you switch, read through the quotes to compare coverage and prices to ensure you are saving money by bundling.
5. Pay in full
Making monthly installment payments on your auto insurance might be more practical than paying in full, especially if you’re paying more than $1,000 a year on average to insure your car. But many car insurance companies offer discounts for paying in full. If you have enough savings to cover the cost of a six-month or 12-month policy, paying upfront might be worth considering.
6. Have an anti-theft device
Your car insurer doesn’t want to pay for any claim, let alone a stolen car. If you have comprehensive car insurance coverage , your insurance will most likely cover the theft of your car — up to the actual cash value.
If your car has a market value of $15,000, your insurer will pay you $15,000 (minus your car insurance deductible) for this covered loss. However, it’s safe to say your insurer does not want to pay you $15,000.
For this reason, if you have certain safety features, such as an anti-theft device on your vehicle, there’s a good chance you can save some money. Many car insurance companies offer discounts if an anti-theft device secures your car. This reduces the chances your vehicle will be stolen, which reduces the chances your insurer will have to cut you a check.
If you’re adding an anti-theft device, confirm with your insurance company that it offers discounts for after-market anti-theft devices. Or purchase a car with anti-theft features in the first place.
Get Out of Debt for Good: Try these 6 clever ways to crush your debt 7. Investigate available auto insurance discounts
Insurance companies offer lots of discounts, but they won't always advertise them. Some common ones include:
- Good student discounts (this one is super helpful if you have a young driver in the home driving up your insurance rates)
- Military service discounts
- Defensive driving course discounts
- New car discounts
- Automatic payment discounts
- Safety feature discounts
Do some sleuthing and ask your insurer about every possible discount. You might be surprised at what you qualify for. And be sure to save the documentation for those discounts so you can submit them to the insurer.
8. Drop unnecessary coverage
A car insurance policy is made up of several types of car insurance that help make sure you’re sufficiently covered while on the road. This includes liability coverage, coverage for your and your passenger’s medical expenses, and coverage to help pay the cost of repairs to your vehicle, among others.
While it's crucial to have adequate coverage, you might be paying for things you don't need. For example, if you have an older car, comprehensive and collision coverage might cost more than the car is worth. Review your policy and cut unnecessary add-ons like rental car coverage if you have a spare vehicle.
9. Switch to a higher deductible
A deductible is what you pay out of pocket before certain car insurance coverage kicks in. Opting for a higher deductible can significantly lower your premium. For instance, according to the Insurance Information Institute, increasing your deductible from $200 to $1,000 could save you 40% or more on your comprehensive and collision coverage.
“The best way to save money on auto insurance is to review your deductibles …. ” says Addie McHale, certified financial planner and founder of Moneyfull . “I recommend calling your insurance company or agent and reviewing your deductibles on each coverage and then getting the prices on a higher deductible. You might find that you cover the cost of a higher deductible in a year or less by the premium savings.”
The short story is: If you have enough savings to cover the cost of a higher deductible, you may consider increasing your deductible to save on your monthly auto insurance costs.
Important: Only increase your deductible if you have the funds to cover it. Increasing your deductible to $1,000 only makes sense if you have $1,000 to cover your insurance costs. If you don’t, paying a bit more per month could be a worthwhile trade-off.
Grow Your $$: 11 brilliant ways to build wealth after 40
10. Comparison shop
Don't settle for the first quote you get. Use online insurance marketplaces to compare multiple quotes at once. This saved me nearly $2,000 a year on coverage for two vehicles. Remember, the goal is to find the best coverage at the best price, not just the cheapest option.
Now, you can take an entire day of inputting the same information over and over to receive a car insurance quote from the numerous insurers out there. However, there are better uses of your time. Instead, consider using an online insurance marketplace.
Many websites offer a way to receive multiple car insurance quotes after providing your information just once. This allows you to save time and money by comparing quotes for the coverage you need at the best car insurance rates available.
Bottom line
Car insurance is a necessary expense, but it doesn't have to break the bank. By implementing these strategies, you can potentially save hundreds or even thousands of dollars a year. Remember, the key is to balance cost savings with adequate coverage. Don't sacrifice protection just to save a few bucks – your future self will thank you.
Money tips that can work for everyone
No matter what your bank account balance is, there's always an opportunity to optimize and improve your finances. Here's a quick checklist of things you can look at today.
Focus on paying off your debt. Debt can hold you back from making progress with your overall financial well-being. Aside from cutting expenses, there are tools that can help you pay off debt faster like balance transfer credit cards and debt counseling.
Earning extra income can give you breathing room. If finances are tight, earning some extra money to supplement your income can make a huge difference. A new job is one option to consider, but if you're not ready to make a big change or already retired, a part-time side job could be a better choice.
Cut your expenses. It sounds painful and so not fun, but it doesn't have to be. Take a look at your biggest expenses because that's where you'll probably find the biggest savings. For example, auto insurance rates have been soaring so shopping around for a new insurance company can be the fastest way to cut your bill. Also, look for ways to cut your grocery bill (despite rising inflation).
Local News
Comments / 0