5 Ways to Cut Your Auto Insurance Rates Today

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If the recent cost increase of auto insurance has taken a bite out of your checking account, you're not alone. Prices have risen across the board since the early days of the pandemic. Whether higher rates will stick around forever is up for debate.

Fortunately, there are various ways to take control and cut your auto insurance rates. Here are five of them.

1. Increase your deductible

A deductible is the amount of money a driver is expected to pay toward an auto insurance claim. Let's say you have a $500 deductible and get into an accident that will cost $5,000 to repair. You pay the first $500 (your deductible), and your insurance company is responsible for paying the remaining $4,500 worth of repairs.

Increasing your deductible means you agree to take on more of the risk. And since you're taking on more risk, your insurer rewards you with a lower annual premium.

2. Bundle coverage

Insurance companies would love it if drivers had all their policies with them. Carrying two or more policies with the same company is called "bundling."

Let's say you rent a home and own a boat. You're practically guaranteed to save money if you switch your renters insurance and boat coverage to the same company that insures your vehicle.

3. Double-check the need for collision and comprehensive coverage

As the name suggests, collision insurance covers damage to a car as a result of an accident or a hit-and-run. Comprehensive coverage takes care of damage caused by acts of nature (like a falling tree), theft, fire, vandalism, and other events outside the driver's control.

As the years pass and your vehicle gets older, it decreases in value. Eventually, you may find yourself paying for collision and comprehensive coverage that you don't need -- particularly collision coverage.

Here's an example of when it may make sense to drop collision coverage:

• Imagine that you've had a vehicle for years, and while you've taken great care of it, it's currently worth just $3,000.
• Under the terms of your auto insurance policy, you have a deductible of $1,000.
• You look at your policy and realize that you're paying $50 per month for the collision portion. That's $600 per year.
• You realize that if you're involved in a collision -- even if your car is totaled -- the most the insurance company will pay out is $2,000 ($3,000 minus the $1,000 deductible). $2,000 would not be enough to get the car back on the road or replace it with a dependable vehicle.

Dropping collision coverage is a highly personal decision. Some people would rather keep it "just in case," while others would rather put that money in a high-yield savings account each month to save up for a new car. Before making the final decision, imagine the worst possible case scenario (a car that's totaled) and consider whether you have a plan for handling it.

4. Only pay for the miles you drive

If you drive less than 10,000 miles annually but you're paying as though you drive 50,000, speak with your insurance agent about scoring a lower premium. Some companies offer programs that even give drivers a deeper discount if they're willing to report their odometer reading on a scheduled basis.

5. Consider monitored driving

Some insurers offer a discount based on driving habits. It works by allowing the company to monitor your driving using a smartphone app or a device that's plugged into the vehicle. With that monitor, a company can learn whether drivers routinely drive the speed limit, make complete stops at stop signs, and practice other safe driving habits. If so, it rewards them with a lower insurance rate.

Before signing up for a monitored driving program, ask your insurer what data it will use to calculate your discount. For example, if you work at night and drive after dark, you want to ensure you're not dinged for it. You also want to ask if the insurer shares data with other companies. If privacy is essential to you, you'll want to work with an insurer that doesn't share your data.

Finally, make sure negative driving behavior won't increase your rate. Let's say you accidentally exceed the speed limit. It's important to know that the company won't use it as an excuse to charge you even more.

It's fair to assume that no one enjoys paying more than they have to for auto insurance. The good news is there are many ways to keep a lid on your final policy costs.

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