Reducing Auto Insurance Costs: Tips For Lowering Your Bill

Auto insurance premiums can be high, but there are ways to lower the cost. One of the best ways to keep your auto insurance costs down is to have a good driving record. You can also reduce your auto insurance bill by shopping around for a better rate, increasing your deductible, reducing your coverage, bundling your policies, improving your credit score, and taking advantage of discounts.

Compare quotes from multiple insurance companies

Comparing quotes from multiple insurance companies is one of the best ways to reduce your auto insurance bill. Prices can vary significantly from company to company, so it's important to shop around and get at least three quotes to find the best price. Here are some tips to help you compare quotes from multiple insurance companies:

• Decide on the coverage you need: Before comparing quotes, determine how much coverage you require. Most states require a minimum amount of car insurance, but it's usually a good idea to get a full coverage policy. Consider adding collision and comprehensive insurance, and decide on your deductible amount.
• Gather information: Have basic personal information ready, such as your driver's license number, driving history, vehicle information, and current insurance details. This will make the process faster and help you get more accurate quotes.
• Use comparison tools: Utilize online comparison tools or insurance agents to get quotes from multiple companies. Websites like InsuranceQuotes.com, EverQuote, and CarInsurance.com allow you to compare policies and prices side by side.
• Compare identical coverage: When comparing quotes, ensure you are comparing identical policy coverage and limits across companies. This will help you make an accurate price comparison.
• Check company ratings: In addition to price, consider the financial stability and reputation of the insurance company. Check ratings from companies like AM Best and Standard & Poor's, and look for consumer reviews to ensure you're choosing a reliable insurer.
• Ask for recommendations: Don't rely solely on price. Ask friends and family for their recommendations and check with your state insurance department for information on consumer complaints by company. Pick a company or agent that is responsive and takes the time to answer your questions.

By following these steps, you can effectively compare quotes from multiple insurance companies and find the best policy that fits your needs and budget.

Take advantage of discounts

Taking advantage of discounts is one of the best ways to reduce your auto insurance bill. Here are some of the most common discounts offered by insurance companies:

Multi-Policy Discount

This discount is often applicable when you buy car insurance and another type of insurance policy, such as homeowners, renters, condo, life, motorcycle, boat, or RV insurance, from the same company. This is also known as "bundling" and can result in significant savings, typically between 5% and 25% off your premium.

Vehicle Safety Discounts

If your car is equipped with advanced safety features like anti-lock brakes, airbags, and daytime running lights, you may be eligible for a discount. Airbag discounts, for example, can be as high as 40% applied to your medical payments or personal injury protection coverage.

Anti-Theft Device Discounts

If your car has anti-theft features, you can usually get a discount on your comprehensive coverage. This discount can range from 5% to 25% depending on the insurance company and whether the devices are factory-installed or after-market installations.

Good Driver Discounts

Insurance companies often reward safe drivers with discounts. These discounts are typically offered to drivers who have been incident-free for a certain period, usually around three to five years. Good driver discounts can range from 10% to 40% off your premium.

Defensive Driver Discounts

Some insurance companies offer discounts to drivers who take approved defensive driving courses. These discounts are typically for qualified drivers above a certain age, such as 50 or older, and can range from 5% to 10% off your premium.

Good Student Discount

If you or your student driver is enrolled full-time in high school or college and meets certain academic requirements, you may be eligible for a discount. Insurance companies usually require the student to maintain at least a B average and be between the ages of 16 and 25. Good student discounts can range from 8% to 25% off your premium.

Student Away at School Discount

If you have a student on your policy who is away at school and does not have regular access to your car, you may qualify for a discount. The requirements vary, but typically the student must be under 25 years old, live more than 100 miles from home, and only use the insured car during school vacations and holidays.

Pay-in-Full Discount

Some insurance companies offer a discount if you pay your full policy term upfront. This discount can range from 6% to 14% off your premium, and you also avoid paying any monthly finance or service fees.

Electronic Funds Transfer (EFT) Discount

If you pay your insurance in installments, some companies may offer a small discount for using automatic payments through electronic funds transfers. The EFT discount can typically range from 3% to 6% off your premium.

Paperless Discount

Although less common now due to the widespread preference for paperless billing, some insurance companies may still offer a small discount if you opt for paperless billing and receive your policy documents and billing electronically.

Online Quote Discount

Some insurance companies will offer a discount if you get an online quote and then sign up for a policy. This discount can range from 4% to 12% off your premium.

Advance Quote Discount

Shopping around and buying a policy in advance of your current one expiring can also lead to discounts. The sweet spot is usually around seven to 14 days in advance, and the discount can range between 2% to 15% off your premium.

Occupational Discounts

Your occupation may also qualify you for a discount. For example, some companies offer special discounts for educators, military personnel, or members of certain professional organizations.

Usage-Based Insurance Discount

Some insurance companies offer usage-based insurance (UBI), which adjusts rates based on your driving behaviour. These programs typically offer a discount for enrolling (between 5% and 10%) and then provide an additional discount based on your actual driving habits. The UBI discount is usually applied at policy renewal time and can be anywhere from 5% to 40% for good drivers.

Remember to regularly review your policy and ask your insurance agent about any other discounts you may qualify for, as not all discounts are automatically applied.

Increase your deductible

Increasing your deductible is one of the most effective ways to lower your auto insurance costs. A deductible is the amount you pay out of pocket before your insurance policy kicks in. For example, if your vehicle incurs $1,500 of damage, and your deductible is $500, you'll pay that amount, and your insurer will cover the remaining $1,000.

By requesting a higher deductible, you can lower your insurance costs substantially. For instance, increasing your deductible from $200 to $500 could reduce your collision and comprehensive coverage cost by 15 to 30%. Going to a $1,000 deductible can save you 40% or more. This is because a higher deductible means you're assuming more of the costs if you file a claim, so you pay a lower premium.

However, it's important to ensure you have enough money set aside to pay the higher deductible if you need to file a claim. Before choosing a higher deductible, be sure to have sufficient funds in your emergency savings to cover the higher costs. This is because you'll need to pay more each time you file a claim with your insurance.

Additionally, consider your driving habits and the likelihood of getting into accidents or sustaining vehicle damage. If you don't drive often and feel you're less likely to get into accidents, a higher deductible may be a good option. On the other hand, if you're frequently on the road or drive in an area prone to accidents, a lower deductible might be more suitable.

In conclusion, increasing your deductible can be a strategic way to reduce your auto insurance bill, but it's important to ensure you have the financial means to cover the higher deductible when needed.

Reduce your coverage

One way to reduce your auto insurance bill is to reduce your coverage. If you have an older car, it may not be cost-effective to maintain collision and/or comprehensive coverage. You can use resources like Kelley's Blue Book to assess whether the worth of your car is less than 10 times the premium. If so, you may want to consider dropping this type of coverage.

You can also reduce your coverage by lowering your policy limits. However, it is important to ensure that you are still complying with your state's insurance laws and any coverage requirements from your lender or lessor.

Another option is to opt out of full coverage insurance if you have paid off your car or no longer need it. Full coverage may be required if you lease or finance your vehicle, but you may be able to lower or cancel it if you own your car.

Reducing your coverage can help lower your auto insurance bill, but it is important to weigh the benefits of a lower premium against the loss of protection. Consult with your agent or provider to ensure that you are still getting the right protection based on your needs and circumstances.

Improve your credit score

Improving your credit score takes time and patience, and there is no one-size-fits-all solution. However, there are several strategies you can employ to boost your credit score:

• Pay on time: Paying your debts on time and in full is one of the most important factors in improving your credit score. Payment history accounts for a significant chunk of your credit score, and late or missed payments can negatively impact your score. Set up automatic payments or alerts to help you stay on top of your bills.
• Keep credit utilisation rate low: Aim to keep your credit utilisation rate at or below 30%. This rate is calculated by dividing the amount of revolving credit you're using by your total available credit. You can lower your utilisation rate by reducing your spending or asking your credit card company for a credit limit increase.
• Limit new credit applications: Applying for new credit accounts will usually result in a hard inquiry, which can negatively affect your credit score. Opening new accounts can also decrease the average age of your credit history, another factor considered in calculating your score.
• Keep old accounts open: Avoid closing old accounts that have been paid off, even if you no longer use them. Keeping these accounts open helps maintain the length of your credit history, which is positively viewed by lenders.
• Review your credit reports: Obtain your credit reports from the three major consumer reporting agencies (Equifax, TransUnion, and Experian) and review them for any inaccuracies, signs of identity theft, unpaid balances, or accounts that have gone into collections. Dispute any inaccurate information and tackle any negative information by paying off old debts.
• Understand what factors affect your credit score: Your credit score is influenced by five main factors: payment history, amounts owed, length of credit history, credit mix, and new credit. Understanding these factors and how they impact your score can help you prioritise your efforts to improve your credit history.
• Become an authorised user: If you know someone who uses their credit cards responsibly, consider asking them to add you as an authorised user on their account. This can help improve your credit score, especially if you're new to credit or have a thin credit file.
• Pay off credit card debt: Paying down large credit card balances can significantly improve your credit score, especially if your utilisation rate was previously high.
• Get credit for on-time bill payments: Services like Experian Boost allow you to add your utility, phone, rent, insurance, and streaming service payments to your credit file, which can positively impact your score.
• Dispute credit report inaccuracies: Regularly check your credit report for any inaccurate or unsubstantiated information, as this can damage your credit score. You have the right to dispute such information with the credit bureaus, who will investigate and resolve the issue within 30 days.

Frequently asked questions