I’m going to make my point here right at the beginning without my usual fun and games today. So straight up, here it is: There are certain things that almost everyone is forced to deal with that will cost you money and car insurance is one of the big ones. 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.
During this terrible pandemic, driving has changed for many of us. Instead of driving to work in your car every day and thus risking more miles and more accidents, you are most likely not doing that. Even if you are working, you are probably doing more work from home and only venturing out driving when absolutely necessary. If you can, you’re getting things like food and prescriptions delivered to your door to avoid time behind the wheel. That is actually saving you some money.
Because of all of this, auto insurance companies are now offering “huge” discounts for insured vehicles. Additionally, if you do the homework right now, you can switch insurers and find a better deal while people are putting driving to the back of their brains right now. They, the insurers, are saving tons of money due to the drop in driving and accident claims and now is a great time to take advantage of it!
The Need for Auto Insurance
I haven’t talked about it much over the past six 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 or skimping on auto insurance sounds like a bargain, it isn’t. So taking the time to revisit auto insurance and taking a good hard look makes sense to do and 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.
How to Save on Car Insurance
You simply must comparison shop. It’s the first, and most important, way to save on your auto insurance whether you like it or not. Comparison shop every time your policy is up for renewal, or even more often than that. There isn’t really any reason to wait when it can save you some money. 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 any given point in time.
How many pieces of junk mail a week do you get about auto insurance deals and savings for you? There’s a real reason for that and it’s because they are constantly soliciting and altering their rates to get your attention.
My Own Story
I had been with one insurance company for several 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 blew my premiums so out of whack that I simply couldn’t shop around as I normally would because I was viewed as Mr. Dangerous! But after three years of clean driving, I was finally able to get things back to normal and find a new, cheaper insurance company. My years in auto insurance hell were over.
With my policies up for renewal in February of that year, I began looking online and calling around to well-known, reputable insurance companies to get quotes. What I found was really amazing.
Shopping Around May Shock You
To my shock, I found a couple companies that were a little 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 hundreds of dollars a year less money. I’m now saving over $500 per year simply because their criteria was different in determining my rate. They offered a different set of discounts which I was able to qualify for that saved money, too! Besides shopping around and driving safe, there are a few other ways to save that you should know about.
Reduce Deductible Coverages
A great way to reduce your auto insurance premium is to change your deductible 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.
Just remember, 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, you may be required to have specific insurance coverage which may limit the deductibles you can choose, so check that out before you do anything.
Drop 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 coverages.
If your car is an older vehicle, these insurances may not be worth it due to the low value of your vehicle. Dropping one or both of these coverages will save a large amount on your premiums (again, if you have a loan on your vehicle, the lender will likely require both collision and comprehensive coverage).
I can’t tell you how many people insure old vehicles and if they are in an accident, it may actually have been cheaper to take the total loss than to pay the premiums for the coverage. A car worth very little due to age isn’t a prime asset that needs expensive coverage.
Take Advantage of All Discounts
Insurance companies have their own set of discounts for auto insurance. Find out which ones a 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 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 list goes on and on and the point is always asking your carrier what discounts are available and take advantage of them.
Bundle or Combine 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.
When you look at your budget and plan ahead for the year, you may think of car insurance as one of those “fixed items” and just resign yourself to it the way you think of rent or utilities. Don’t do that for several reasons. One, auto insurance rates vary greatly, so one man’s $1,000 annual premium is another man’s $500 or even less. It matters in the details. Second, if you are really brave, you can even decide to live without a car altogether! Public transportation, rapid transit and the rails or even Uber or Lyft can be a viable and often cheaper substitute than the cost of a car, insurance, maintenance, and gas.
It’s time to make changes and save, so start looking and making a few calls to see what you can do to save money without giving up anything to get it.
Are you sick of paying high auto insurance prices like I was? Have you shopped and gotten the best deal for you? Are you getting every discount you can from your insurer?