Unless you live in an urban area with ample public transportation, having a car or truck is practically a necessity. And if you own a car or truck, having some car insurance is a necessity by law here in the United States. According to the National Association of Insurance Commissioners, in 2012 the average cost of auto insurance was $815. My home state of New Jersey was the most expensive with a whopping average of $1,220. While you can’t avoid paying for it, there are ways to save on car insurance premiums and shrink your bill.
How to Save on Car Insurance
The first, and most important, way to save on your auto insurance is to shop around. Every time your policy is up for renewal, or even more often, it pays to check the competition and see who can give you the best rates. Insurers 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.
For example, I have been 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 out of whack that I simply didn’t shop around as I normally would. But after three years of clean driving, I was finally getting things back to normal for 2015. With my policies up for renewal in February, I began looking online and calling around to well-known, reputable insurance companies to get quotes. I found a couple that were lower than my renewal premium, but then I hit the jackpot. I found a company that could provide better coverage than what I had before, and for less money. I’m saving $500 per year simply because their criteria is different and they offer a different set of discounts!
But interestingly enough, finding a better deal is not the only reason to shop around. Insurance companies have caught on to the fact that many consumers don’t bother to comparison shop, and are taking advantage of that by increasing rates in a process called “price optimization”. Even if they give you a loyalty discount for remaining a policy holder year after year, they may actually be increasing your rates by even more. If you want to stay with your current insurance company, do some comparison shopping and call your company armed with that information. Ask them to match the lower rates and see what they can do. At the very least, you’ve put them on alert that their price increases aren’t going unnoticed.
Another way to reduce your premium is to change your coverage. Deductibles are the amount of money you personally shell out for a claim (per year) before the insurance coverage kicks in. So if your deductible is $500 for example, and you get into an accident that requires $800 of repairs on your vehicle, you pay $500 and then the insurance company pays $300. By raising your deductible to a higher number, say $1,000, you are increasing your risk and decreasing the risk of the insurance company, and therefore saving on premiums.
If you increase your deductibles, you’ll want to be sure to have emergency funds available in case of an accident. Also, if you have a loan on your vehicle, the lender may require specific insurance coverage which may limit which deductibles you can choose.
Reduce Coverage on Older Vehicles
Collision coverage is the part of 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 the part of insurance that covers damage to your car from other incidents, such as fire, vandalism, theft, or weather incidents. Most states do not require these coverages, so if you have an older vehicle that may be worth only a few thousand dollars, you might consider dropping these coverages. Again, if you have a loan on your vehicle, the lender will likely require both collision and comprehensive coverage.
Take Advantage of Discounts
Each insurance company has their own set of discounts for auto insurance. Find out which ones your company offers and take advantage of as many discounts as possible. Examples include being a safe driver, taking a defensive/safe driver course, driving a low number of miles per year, having anti-theft systems or safety features like anti-lock brakes, being a good student, having a newer vehicle or a “green” vehicle, or being a member of the military or other special group. Some companies even offer an “early signing” discount for switching to a new insurer a specific number of days before your old policy lapses. Always ask your carrier what discounts are available.
Consider Insurance Before Buying Your Car
The best time to save money on your car insurance is before you buy your car. Certain cars are less expensive to insure 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 which may provide a discount.
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 auto insurance with coverage for your home, life insurance, or other needs (such as boat insurance or motorcycle insurance). The more types of coverage 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 do the math and figure out if combining coverage is your best deal.
Improve Your Credit Rating
There are many criteria that insurance companies consider that you cannot or would not 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 correct it. Check your credit report for errors, make sure your bills are paid on time, and pay down your revolving debt (such as credit cards). While this won’t get you an immediate savings, it will definitely save you money down the line and not only with insurance.
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. 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. Some insurance companies even provide a safe driving discount based on telematics, where they place a device in your vehicle to monitor your driving.
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 the privilege. Paying your premium as a lump sum will help you save. Likewise, there is often a discount for paperless billing or automatic payment. 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 from time to time. Always shop around, and even if you stay with the same company, review your coverage to make sure it’s still appropriate for your needs and ask about discounts which may have changed since your last renewal. With just a few minutes’ 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?