Make an informed decision and secure the best auto insurance deal.
While inflation has begun slowing down, the cost of many things – including car insurance premiums – has continued to remain stubbornly high. Between greater repair costs and an alarming increase in car crashes, some drivers have seen their rates jump over 50% in just the past few years.
So, what can you do to slash costs without sacrificing coverage?
Navigating the labyrinth of auto insurance savings can feel like decoding ancient hieroglyphics written in a language only actuaries seem to understand. Thankfully, there are still plenty of easy discounts to tap into, as well as a few other clever ways to help lower your monthly premiums.
Get Your Head Out of the Sand
The first step to saving on your auto insurance is to understand your auto insurance. Dig out that policy paperwork or download an online copy and start reading. Examine your coverage, deductibles, and premiums to better understand what is and isn’t covered – and if you’re paying for things you don’t need.
It’s wise to perform a review like this at least once a year, so you can see if any recent changes in government or company policy – or in your own life – are affecting your rates. Getting a new job, changing zip codes, entering retirement, getting married (or divorced), and of course, getting in an accident will all change how your insurance premiums are calculated.
Additionally, many car insurance companies offer introductory rates. So, just like that new credit card or cable package, those discounts will run out after a set time period – and if you’re not prepared for the rate change, it could come as a nasty surprise.
Don’t Be Afraid to Jump Ship
While there are formulaic ways that insurance companies assess your rates, many of them weigh factors such as location, age, and driving history differently. Heck, even your credit score can positively or negatively influence your auto insurance rates. These costs can actually vary by as much as hundreds of dollars annually, so the importance of “dating other people” when it comes to your insurance company can’t be overstated.
Shop around and compare quotes from several different agencies online and even from your local agent. But beware: the cheapest insurance isn’t necessarily the best insurance, so don’t base your decision solely on price point.
When it comes to ways to lower car insurance, it’s not just about lowering your monthly premium. You want to make sure you’re not sacrificing valuable coverage when you need it.
Bundle, Bundle, Bundle
Most insurance companies offer impressive discounts on annual premiums if you combine your auto policies with your homeowner’s or renter’s insurance. In fact, this is one of the simplest and quickest steps you can take to boost your auto insurance savings.
If you’re like many families with more than one car, insuring all your cars through one agency on top of adding a home policy can save you up to hundreds of dollars per year. Not to mention the time you’ll save by only having to log onto one website or call one agency when it’s time to make a claim or pay your premiums.
Sign Up for Safe Driving Programs
Many insurance companies are beginning to offer savings and discounts if you allow them to monitor your driving habits using a smartphone app and a tracking beacon installed on your vehicle. The program assesses your safe driving habits, which in turn allows your insurance company to offer discounts for those good habits.
A program such as this may also make you more cognizant of your driving habits, which can make you a more cautious and safer driver. (And hey, that’s better for everyone on the road, right?) The downside to safe driver monitoring is that you have to be amenable to sacrificing a certain amount of privacy, since you’re allowing your insurance company to track your every move. It’s a good idea to dig into the meat and potatoes of these programs before signing up.
Find out what is the exact data that your insurance company will be using in order to calculate your discounts. Can negative driving behavior increase your rates at all? Does your insurer sell your data to any other companies?
Improve and Maintain a Good Driving Record
The longer you go without having an accident, avoiding speeding tickets, or other negative incidents, the better your insurance costs will be. Maintaining a spotless driving record and a claims-free history is one of the best ways to lower your car insurance rates. While the penalties range among providers, a recent NerdWallet analysis found that drivers with a recent at-fault accident could expect to pay nearly $1,000 a year more for a full coverage policy than comparable drivers with a clean record. What’s more, that one accident can increase your auto insurance rates for three years!
Even something as simple as a speeding ticket can have dire consequences when it comes to assessing your auto insurance premium – raising your rate by 22%–33% or more, according to Insurance.com.
If you are unlucky enough to get caught breaking the speed limit and don’t want that violation on your record, see if you can take advantage of attending traffic school in order to get the ticket dismissed or at least reduce the number of violation points that will count against your license.
Take a Defensive Driving Course
You may have passed Driver’s Ed with flying colors, but that doesn’t mean you’ve learned everything you need to know. In fact, many insurance companies offer discounts for policy holders that complete additional defensive driver or accident prevention courses.
In many cases, these courses can even be done online without ever getting behind the wheel. They’re relatively inexpensive, but can save you as much as 10-15% on your premiums. In states with steep insurance rates, those savings can be a game-changer. Bear in mind that you will likely have to retake the course every couple of years in order to continue to receive your discount.
Choose Your Next Car Purchase Carefully
When it comes to insurance premiums, the car you drive can have one of the biggest impacts on the overall cost. It’s a no-brainer to think that a fancy and fast sports car is going to cost you significantly more to insure than a sensible and safe minivan. Even among similar-style vehicles, however, there are many factors that can affect the cost of coverage.
In addition to a vehicle’s year, make, model (YMM), insurance companies consider size, weight, age, and trim level. They also factor in how expensive the vehicle would be to repair, what kind of onboard safety equipment it has, and whether it is gas-powered, hybrid, or electric.
Suffice to say, it’s important to research several different makes and models before rushing out to your nearest car dealer. If you’re in the market for a new ride this year, Bankrate says SUVs and trucks are generally cheaper to insure than sedans – with the Subaru Outback taking the cake for most affordable vehicle to insure.
Axe Coverage You Don’t Need
It makes sense to have a policy with all the bells and whistles if you drive a new or newish vehicle. Car prices are high, and you want to protect your investment. Besides, if you financed through a bank or lending institution, you’ll likely be required to carry comprehensive insurance and auto collision coverage. (Collision insurance covers you if you’re involved in an accident or a hit-and-run, while comprehensive insurance steps in if your vehicle is damaged by acts of nature, theft, vandalism, etc.)
However, as the age and mileage of your car increases, its value decreases. So, if you’re insuring an older car with over 150,000 miles or 15 years on it, it may not make fiscal sense to carry higher coverage like this.
Generally, if the premium for these extra types of coverage is greater than 10% of your vehicle’s value, you should consider dropping the add-ons. That said, if you do decide to downsize your coverage to liability-only, make sure you have enough to cover property damage to someone else’s vehicle as well as their medical expenses, so you don’t get stuck having to pay out of pocket yourself.
A Final Note
By implementing these 8 tips, you'll be well on your way to securing the best coverage at the most affordable rates. But if you’re looking for some easy ways to start lowering car insurance prices immediately, consider these hacks:
- Go paperless. Many companies charge for paper billing statements – and the ink used to print them.
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Pay upfront. Switching from monthly payments to once or twice a year lump-sum payments means you’ll cut a bigger check in the short term, but can save hundreds of dollars in the long run.
- Increase your deductible. This will increase what you pay out of pocket should you need to file a claim, but will quickly lower your monthly premium.