There are certain things that almost everyone is forced to deal with that will cost you money and auto insurance is one of the big ones. It’s always good to save money when you can, but even better when you save on the big expenses in your budget. Today I’m going to talk about how to save on car insurance so you can keep more money in your wallet while still protecting yourself.
I haven’t talked about it much over the past five years, but every year I am forced to deal with my own auto insurance by doing my homework to try to save as much as possible on it. I simply hate making the payment for it, but we don’t have much of a choice as to whether to buy it or not since it is required by law in 48 of the 50 states. Only the states of New Hampshire and Virginia are exceptions, but even they have some requirements.* But if skipping on auto insurance sounds like a bargain, it isn’t. It’s time now to revisit car insurance and take a good hard look at the ways to save!
*New Hampshire residents are still responsible for damages resulting from a car accident and if they are not able to pay for damages in an accident they caused, they can expect to have their licenses and registrations suspended. Virginia residents can skip getting car insurance if they pay the state $500 per year, but that does not provide accident coverage of any kind. The driver who caused the accident is still liable for all damages. So, skipping on auto insurance may sound like a bargain, but it isn’t.
How to Save on Car Insurance
The first, and most important, way to save on your car insurance is to shop around. Every time your policy is up for renewal, or even more often, it pays to check out the competition and see who can give you the best rates. Insurers are tripping over each other to try to get your attention. They are continually refining the criteria for their rates and one company may give you a vast advantage over another at a given point in time.
Think about it for a minute: How many times a week do you see car insurance commercials on TV? Add to that the number of solicitations you get in the mail and you see in magazines and on the internet and, well, you get the picture. It is a fiercely competitive business that seems to have no bottom to it when it comes to what they will say and do to get you to switch your coverages to them!
My personal “sad story”
For example, I was with one insurance company for a couple of years covering my car and my home. Due to a couple of unrelated tickets and accidents within a short period of time (not my fault…really!), I found myself in the undesirable position of paying an enormous state surcharge on my car insurance. It had blown my premiums so far out of whack that I simply couldn’t shop around as I normally would because I was going to have to pay even more with my now impaired record if I were to switch. It took me three years of clean driving to finally get things back to normal.
When my policy finally came up for renewal, I began looking online and calling around to every well-known, reputable insurance company to get quotes. I found a couple that were lower than my renewal premium, but then I really hit the jackpot. I discovered a company that could provide better coverage than what I had before, and for hundreds less. I started saving $700 per year simply because their criteria were different and they offered a different set of discounts!
Reduce your coverages
A great way to reduce your auto insurance premium is to change your coverage. Raising your deductibles (which reduces your coverages) on liability and comprehensive insurance will always save money on your premiums. By raising your deductible to a higher number, say $1,000 from $250 you may be increasing your payment after an accident, but taking that risk saves on your premium.
Keep in mind that if you increase your deductibles, you’ll want to have emergency funds available in case of an accident. Also, if you have a loan on your vehicle you may be required to have specific insurance coverage which may limit the deductibles you can choose.
Drop the collision coverage on an older car
Collision coverage is insurance that covers damage to your car from a collision with another vehicle or object, regardless of who may be at fault. Comprehensive coverage is insurance that covers damage to your car from other incidents, such as fire, vandalism, theft, or weather incidents. Most states do not require these two coverages.
If your car is older, these insurances may not be worth it due to low value of your vehicle. Dropping one or both of these coverages will save a large amount of money from your premium (again, if you have a loan on your vehicle, the lender will likely require both collision and comprehensive coverage).
Each insurance company has their own set of discounts for insurance. Find out about all that your company offers and take advantage of as many discounts as possible such as safe driver or having taken a defensive/safe driver course, driving a low number of miles per year, having anti-theft systems or safety features like anti-lock brakes, good student discounts, or even having a newer or a “green” vehicle. There are also discounts for being a member of the military, a graduate of a specific college, or other special groups. Some companies offer an online sign-up discount or even offer an “early signing” discount for switching to a new insurer a specific number of days before your old policy lapses. The point is to always ask them what discounts are available and take advantage of as many as possible.
Bundling or combining coverages
Most insurance companies offer a discount if you combine policies with them. This could mean multiple cars and drivers on one policy, or you can bundle your car insurance with coverage for your home, life insurance, or other needs (such as boat insurance or motorcycle insurance). The more types of coverage you combine with one provider, the better the discount. However, you will need to weigh this discount against getting the cheapest coverage available.
The insurer with the least expensive auto insurance is usually not the same as the one with the least expensive homeowner’s or renter’s insurance. So you actually have to do the math and figure out if combining coverage is really your best deal.
There are many criteria that insurance companies consider that you cannot change easily, such as your age, gender, marital status, and place of residence. However there are a couple things you can change or influence, and one of them is your credit rating. If your credit score has suffered in the past, take appropriate steps to try and correct it. The first step is to know your credit score and to check your credit report for errors, make sure your bills are paid on time, and pay down your debts. Over time, as your credit score improves, your cost of car insurance will decline.
Before buying your car
The best time to save money on your car insurance is before you buy your car. That is because certain cars are less expensive to insure than others because they have a better safety record, are less expensive to repair, or are unlikely to be stolen. In addition, it is often the time when you decide on what features your vehicle will have such as anti-theft systems, anti-lock brakes, automatic seatbelts, daytime running lamps, and other features all of which may provide you a discount. It is a real opportunity to save!
One of the other criteria you can change is your driving habits. If you have a history of moving violations, accidents, or both, pay extra attention to driving safely. Consider taking a defensive/safe driving course. In almost every state your defensive driving certificate gets you a discount of at least 5% off your bill, a cost that more than pays for any course. I took the AARP course from home and paid just $15 and have received five times that in discounts over the past three years.
With time and good behavior, you may find yourself eligible for an extra discount, or at the very least, a lack of wallet-busting surcharges like I had to pay. Some insurance companies even provide a safe driving discount based on telematics, where they place a device in your vehicle to monitor driving.
How you pay your premium
Of course if you want your policy to go into effect, you need to pay your premium. But how you pay it can make a difference. Most insurers offer the convenience of equal monthly payments, but there is a charge (usually $2-3 per payment) for that privilege. Paying your premium as a lump sum like quarterly, semi-annually or annually will help you save if you can swing it. Likewise, there is often a discount for paperless billing or automatic payments (EFT). Talk to your insurance company to find out your best option.
Just like the other expenses in your budget, it pays to review your car insurance every year. Brand loyalty isn’t always the way to go and you should always shop around. Even if you decide to stay with the same company, review your coverage to make sure it’s still appropriate for your needs and always ask about discounts which may have changed since your last renewal. With just a few minutes of extra time, you could save quite a bit.
When is the last time you comparison shopped for car insurance? Did you find a better deal or stay with the same insurance company? What did you learn when you did your homework?