Maximizing Auto Insurance Savings: Strategies For Affordable Coverage

Auto insurance rates are increasing faster than inflation, but there are several ways to make your insurance cheaper.

Firstly, shop around for the best rate and don't just stick to the big-name insurers. You can get quotes from companies directly or online.

You can also ask about discounts and usage-based insurance programs. For example, you can get a discount for having a clean driving record, being a good student, signing up for auto pay, or bundling your auto insurance with other policies such as homeowners insurance.

If you have an older vehicle, you may be able to drop comprehensive and collision coverage. Increasing your deductible will also lower your premium, but be prepared to pay more if you file a claim.

Another way to make your auto insurance cheaper is to improve your credit rating. Insurance companies use credit-based insurance scores to determine insurance premiums, so establishing a solid credit history can cut your insurance costs.

Finally, consider the type of car you drive. Insuring a used car generally costs less than insuring a new one, and some insurers offer discounts for hybrid or alternative fuel vehicles.

Shop around for the best rate

Shopping around for car insurance is a great way to find the best rate. Each company has its own unique method for setting rates, and these methods change over time. Comparing rates from two companies may reveal vastly different results for the same driver.

When shopping for car insurance, you can choose to get quotes online from insurer websites, call insurers over the phone, or work with an independent agent or broker. It's important to gather multiple quotes to ensure you're getting the best rate.

• Don't assume any one company is the cheapest: No single insurer is the low-price leader for everyone. The cheapest company for one person in one place might be the most expensive option for a driver in a different state. Therefore, it's crucial to compare rates from different companies to find the lowest rate possible.
• Don't ignore local and regional insurers: While large insurers like Allstate, Geico, Progressive, and State Farm control a significant portion of the market, smaller regional insurers like Auto-Owners Insurance and Erie Insurance often have higher customer satisfaction ratings and may offer lower rates.
• Consider using an insurance comparison site: Online insurance comparison sites, such as The Zebra, Nerdwallet, Compare.com, Insurify, and Gabi, allow you to compare quotes from multiple companies at once. However, be cautious as some sites may sell your information to insurance companies, leading to unwanted spam and contacts.
• Understand what contributes to your insurance rate: Your insurance rate is based on various factors, including your age, gender, vehicle, location, credit history, driving record, and claims history. Understanding these factors can help you make informed decisions when comparing rates.
• Choose the right liability coverage levels: Liability coverage protects your assets in the event of a serious accident. Choose coverage limits that are equal to or greater than your net worth to ensure adequate protection.
• Collect the necessary information: To get accurate quotes, you'll need to provide personal information, vehicle details, driving history, and current or previous insurer information. Having this information readily available will make the process smoother.
• Compare the same types and amounts of coverage: When gathering quotes, ensure you're comparing the same levels of liability, uninsured/underinsured motorist protection, and deductibles to make an accurate comparison.
• Consider full coverage: Full coverage includes liability, collision, and comprehensive insurance. While it may be more expensive, it provides more comprehensive protection for your vehicle and yourself.
• Look beyond price: When choosing an insurance company, consider factors beyond just the price. Look for companies with strong financial strength, low complaint records, and extra offerings like a mobile app or accident forgiveness.

Ask about discounts

Discounts are a great way to save money on your auto insurance. While the majority of car insurance companies offer discounts, many people don't take advantage of them. Here are some common discounts to ask about:

Continuous Coverage Discount

Your insurer may reward your loyalty if you keep your policy with them when it's time to renew. You can save money by doing nothing more than calling your insurance agent.

Referral Discount

If a friend refers you to their insurer, both you and your friend can often save money.

Affinity Discount

Your employer, profession, membership organisation, or military service might make you eligible for auto insurance discounts.

Automatic Payment Discount

Enrolling in autopay can save you money on your premium.

Good Driver Discount

If you practice safe driving habits, your insurance company will reward you with extra savings on your premium.

Multi-Policy Discount

You can earn this discount when you purchase more than one insurance product from your insurance company, such as bundling home and auto insurance.

Student Discount

If you have a student on your policy who is a good student, has taken a driver's education course, or is away at college without a car, you may qualify for a lower rate.

Defensive Driving Course Discount

Insurance companies sometimes provide discounts to drivers who complete an approved defensive driving course.

Low Mileage Discount

Some companies offer discounts to motorists who drive a lower-than-average number of miles per year.

Group Insurance Discount

Some companies offer reductions to drivers who get insurance through a group plan from their employers, or through professional, business, or alumni groups.

Long-Time Customer Discount

Some insurers reduce the rates for long-time customers.

Anti-Theft Device Discount

You might be able to reduce your premiums if you install anti-theft devices.

Good Credit Discount

Establishing a solid credit history can cut your insurance costs. Most insurers use credit information to price auto insurance policies.

Homeowners and Auto Coverage Discount

Many insurers will give you a discount if you buy homeowners and auto coverage from the same company.

Drop comprehensive and collision coverage for older cars

Dropping comprehensive and collision coverage for older cars can be a good way to save money on auto insurance. Here are some detailed tips and considerations to keep in mind:

• Age and Value of the Car: The standard rule used to be to drop comprehensive and collision coverage when a car was around five to six years old or had reached 100,000 miles. However, it now depends more on the value of the car and the cost of replacement parts. For older cars with significant depreciation, dropping this coverage makes sense as the maximum payout may be very low compared to the insurance cost over time.
• Financial Considerations: Assess your financial situation and whether you could afford to repair or replace your car if needed. If you have sufficient savings to cover these expenses, it may be more cost-effective to use those funds to purchase a new car instead of paying for comprehensive and collision insurance.
• Usage and Ownership: If you rarely use your older car or plan to sell it soon, comprehensive and collision coverage may not be necessary. In such cases, consider switching to liability-only or minimum coverage insurance.
• Alternative Options: Instead of comprehensive and collision coverage, you can explore alternative insurance options. For example, special considerations apply to classic and vintage cars, which often have agreed-upon values for insurance purposes.
• Weighing the Deductible: Consider the potential insurance payout by evaluating your deductible. If your deductible is high and your car's value is low, the maximum payout may not be worth the cost of comprehensive and collision coverage.
• Insurance Company Requirements: Note that if you have leased your car or have an outstanding loan, your leasing company or lender will typically require you to maintain comprehensive and collision coverage until the loan is paid off.
• Alternative Cost-Saving Measures: If you decide to keep comprehensive and collision coverage, there are still ways to save money. You can shop around for better rates, increase your deductible (if you're comfortable with the financial risk), or take advantage of various discounts offered by insurance companies, such as those for safe driving, bundling policies, or installing anti-theft devices.

Raise your deductible

Raising your deductible is a great way to make your auto insurance cheaper. A deductible is the amount you pay out of pocket before your insurance policy kicks in. By increasing your deductible, you can lower your insurance costs significantly. For example, increasing your deductible from $200 to $500 could reduce your collision and comprehensive coverage costs by 15% to 30%. Moving to a $1,000 deductible can save you 40% or more. Before choosing a higher deductible, ensure you have enough money set aside to pay it if you need to make a claim.

When you select car insurance, you can typically choose your deductible amount, which usually ranges from $250 to $2,000, with $500 being the most common choice. A lower deductible means higher auto insurance rates because your insurance company will need to pay out more if you make a claim. Conversely, a higher deductible means cheaper premiums because you assume more financial responsibility in the event of a claim. For instance, if you have collision insurance with a $500 deductible and cause an accident that leads to $4,000 in damages to your car, your insurance claim payout would be $3,500. If your deductible were $2,000 instead, your insurance company would only pay out $2,000 for the same claim.

Drivers who increase their deductibles can save between 7% to 28% a year on average. The biggest savings are available to drivers who make a substantial change to their deductible, such as jumping from $250 to $2,000. The amount you save depends on your current deductible, your new deductible, and your auto insurance company. For example, with USAA, you can save $145 by raising your deductible from $500 to $1,000, but only $4 more if you increase it to $2,000. Therefore, it's wise to price out the savings at different deductible levels before changing to a higher amount.

Raising your deductible can help you save several hundred dollars annually on auto insurance, but there are some things to consider. Firstly, ensure you can afford the new deductible. If the answer is yes, increasing your deductible can unlock savings. If not, the money you save may not be worth the financial hardships that could follow an accident claim. Secondly, consider if you need immediate auto insurance savings. If raising your deductible will help you keep car insurance coverage or manage other necessary household bills, it's worth thinking about. Lastly, evaluate the risk versus the reward. Increasing your deductible means a higher financial obligation after a claim, so weigh up how long it would take for your annual savings to exceed this increase. For example, increasing a $500 deductible to $1,500 saves an average of $278 a year, but your financial responsibility after a claim increases by $1,000. It would take approximately 3.5 years for the savings to exceed this amount.

Improve your credit rating

Improving your credit rating is an important step in getting cheaper auto insurance. A higher credit score typically leads to lower insurance rates, as insurance companies view individuals with better credit history as less likely to file insurance claims.

• Pay your bills on time: Payment history is a significant factor in determining your credit score, so make sure to pay your loan and credit card bills on time.
• Don't max out your credit cards: Keep your credit utilization ratio below 30%. For example, if you have a credit card with a $1,000 limit, try to maintain a balance of no more than $300.
• Monitor your credit score regularly: This allows you to identify any errors or potential identity theft and take corrective actions promptly.
• Maintain old lines of credit: Keeping long-standing credit accounts can positively impact your credit score. Consider using an old credit card sparingly and making timely payments to build your credit history.
• Be mindful of hard credit inquiries: Hard inquiries occur when you apply for a new line of credit and can negatively impact your score. Try to minimize these inquiries while working on improving your credit.

Frequently asked questions