Lowering Auto Insurance: Effective Strategies For Quick Results

There are several ways to reduce auto insurance costs, and the time it takes to implement these changes varies. Some methods, such as shopping around for a new insurer or increasing your deductible, can be done relatively quickly, while others, like improving your credit score or driving record, may take longer. Here are some strategies to reduce auto insurance costs and the time frames involved:

- Shopping around for a new insurer: This can be done in a matter of hours by comparing quotes from multiple insurers online.

- Increasing your deductible: This can be done when purchasing a policy or adjusting an existing one and typically takes a short amount of time.

- Improving your credit score: This may take several months or even years, but it can lead to lower insurance rates.

- Improving your driving record: Driving safely and avoiding accidents or violations can lead to lower rates over time, typically within three to five years.

- Reducing coverage on older cars: This can be done when purchasing or renewing a policy and can result in immediate savings.

- Taking advantage of discounts: Insurers offer various discounts, such as for bundling policies, being a good student, or having safety features in your car, which can be applied immediately upon meeting the criteria.

Increase your deductible

Raising your deductible is a great way to reduce your auto insurance costs. However, it is important to understand what a deductible is and how it works before making any changes to your policy.

A car insurance deductible is the amount of money you pay out of pocket when you make a claim. For example, if you have a $500 deductible and your vehicle incurs $1,500 of damage, you will pay the first $500 and your insurer will cover the remaining $1,000. Typically, deductibles range from $250 to $2,000, with $500 being the most common choice.

By increasing your deductible, you can lower your insurance premiums. For instance, increasing your deductible from $200 to $500 could reduce your collision and comprehensive coverage costs by 15% to 30%. Opting for a $1,000 deductible could save you 40% or more. These savings are due to the inverse relationship between deductibles and premiums—the higher your deductible, the lower your premiums.

However, it is crucial to ensure that you can afford the higher deductible in the event of a claim. If you have sufficient savings to cover the higher deductible, then you can benefit from the reduced premiums. On the other hand, if a higher deductible would be a financial burden, it may be better to keep your deductible low, even if it means paying higher premiums.

Additionally, consider how often you make insurance claims. If you rarely file claims and can afford a higher deductible, it could be a good strategy to increase your deductible and pocket the savings. For example, if you increase your deductible by $1,000 and save $100 a year on premiums, you would break even in five years. After that, all the savings would be yours.

In conclusion, increasing your deductible can be an effective way to reduce your auto insurance costs, but it is important to carefully consider your financial situation and claim history before making any changes to your policy.

Reduce coverage on older cars

When it comes to auto insurance, there are a few things to consider if you want to reduce coverage on older cars. Firstly, it's important to understand that the value of your car decreases over time, while the cost of insurance may not decrease at the same rate. This means that as your car gets older, the insurance coverage may become less financially beneficial.

• Age of the car: As a general rule, when a car reaches around 10 years old, it might be a good time to consider switching from full coverage to liability-only insurance. This is because the cost of insuring an older car can become a significant proportion of its value. For example, insuring a 10-year-old car might cost around $1,758 per year, while the average value of the car is only $5,067.
• Cost of repairs: Older cars may be more expensive to repair due to harder-to-find parts. This can increase the cost of insurance, as the risk of higher payouts is greater. However, if you're comfortable with covering the cost of repairs yourself, you may want to reduce your coverage.
• Safety and security features: Newer cars often have more advanced safety and security features, which can help reduce the cost of insurance. Older cars may not have these features, which could result in higher insurance costs.
• Value of the car: The value of your car is a crucial factor in deciding whether to reduce coverage. If your car is worth less than 10 times the premium, the coverage may not be cost-effective. In this case, it might be better to consider dropping collision or comprehensive coverage.
• State requirements: It's important to check the laws and requirements in your state regarding car insurance. Some states may require comprehensive coverage, while others may only require liability insurance. Make sure you understand the minimum coverage you need to legally drive your vehicle.
• Driving record: If you have a good driving record with no recent accidents or violations, you may be in a better position to reduce your coverage. Insurance companies often reward low-risk drivers with lower premiums.

Remember, when considering reducing coverage on older cars, it's essential to weigh the potential risks and costs. While you may save money on insurance premiums, you also need to ensure that you have enough coverage in case of an accident or damage to your vehicle. It's a good idea to review your coverage regularly and compare quotes from multiple insurance providers to ensure you're getting the best deal.

Buy multiple types of insurance from the same insurer

One of the best ways to keep your auto insurance costs down is to buy multiple types of insurance from the same insurer. This is known as bundling or a multi-policy discount.

Bundling your insurance policies can save you money and simplify your policy management. You can bundle your auto insurance with homeowners insurance, renters insurance, condo insurance, or insurance for motorcycles and boats.

Most insurance companies provide bundling discounts when policyholders purchase more than one policy type with the same carrier. The discount is typically applied to both policies, allowing you to save money on your total cost of insurance.

The amount you can save by bundling insurance policies varies depending on the company and your location. For example, State Farm cites average savings of $1,073 annually, while Progressive says new customers can save more than 20% on average. Allstate reports that the average customer saves 25% by bundling, but its customers in California save just 2% on average. Indiana Farm Bureau offers a discount of 28% for bundling home and auto insurance.

In addition to reducing your insurance rates, bundling your insurance policies can also help simplify account management. You can set up just one account, download one company's mobile app, and schedule automatic bill payments in one place. With bundled coverage, you only need to call one company if you have a claim.

However, there are also some potential disadvantages to bundling insurance policies. You may not be able to find an insurer that offers the combination of coverage you need. Separate policies might also be cheaper, depending on the discounts available. Bundling your insurance policies may also make it less likely that you will shop around for better rates in the future.

Maintain a good credit record

Maintaining a good credit record is an effective way to reduce your auto insurance costs. Most auto insurance companies use credit scores to determine insurance rates. A higher credit score generally leads to lower insurance rates.

• Pay your bills on time: Paying your bills on or before the due date can positively impact your credit score and, consequently, your insurance score. Late payments or credit delinquencies may indicate a higher risk of claim submissions to insurance companies.
• Keep hard credit inquiries to a minimum: Too many hard inquiries can negatively impact your credit score. Hard inquiries occur when you apply for a loan or line of credit, and the company pulls your credit report. When insurance companies review your credit during the quoting process, this is typically a soft inquiry, which does not affect your credit score.
• Monitor your credit score regularly: Regularly checking your credit score can help you identify errors or signs of identity theft. This allows you to promptly correct any inaccuracies and maintain an accurate credit record.
• Maintain old lines of credit: Keeping long-standing credit accounts can benefit your credit score. The length of your credit history is a significant factor, contributing 15-20% to your overall score. Instead of closing unused credit cards, consider using them occasionally and making timely payments.
• Manage your credit utilization ratio: Your credit utilization ratio is the percentage of your available credit that you are currently using. While there is no set rule, it is generally recommended to keep your credit utilization below 30%. Paying off some of your debt can help improve your credit score and, in turn, your credit-based insurance score.

By following these steps, you can improve your credit score and potentially reduce your auto insurance costs.

Take advantage of low-mileage discounts

One of the best ways to lower your auto insurance costs is to take advantage of low-mileage discounts. Some companies offer discounts for driving under a certain number of miles per year. The Federal Highway Administration reports that drivers put an average of 13,500 miles on their cars per year, so anything under that number is considered below average. However, to see lower rates based on your mileage, you’ll need to drive about 8,000 miles or less per year.

There are two types of low-mileage auto insurance policies: low-mileage discounts and pay-per-mile insurance. Low-mileage discounts offer reduced rates for those who drive fewer miles, usually under 7,500 or 8,000 miles per year. Pay-per-mile insurance policies track your mileage and determine your rate based on how many miles you’ve driven. These programs usually include a base rate and a per-mile rate each month, and they set a maximum number of billable miles per day. This means you can take a road trip without worrying about a huge insurance bill.

Some leading pay-per-mile insurance providers include:

• Metromile: People who drive 2,500 miles per year save about $947 with its pay-per-mile program compared to standard insurance.
• Allstate Milewise: Low-mileage drivers can save up to 50% with Milewise compared to standard policies.
• Nationwide SmartMiles: A driver who previously paid $133 per month on a traditional policy now pays $95 per month for driving 500 miles monthly.

Some companies that offer low-mileage discounts include:

• USAA: The low-mileage car insurance discount is based on annual mileage.
• Safeco Insurance: Low-mileage discount requirements aren’t published.
• American Family Insurance: Get a discount for driving under 7,500 miles.
• Farm Bureau: Get a discount for driving under 7,500 miles (depending on the state).
• PEMCO: Get a discount for driving under 8,000 miles.

To get a low-mileage discount, you may need to submit your mileage and a photo of your odometer, or provide service paperwork that’s at least 90 days old plus a photo of your current odometer. An agent can calculate your average mileage from those documents.

Frequently asked questions