Smart Auto Insurance Savings

Auto insurance can be expensive, but there are ways to save money on your premiums. Firstly, shop around for car insurance and get at least three quotes from different companies and types of insurers. Compare insurance costs before buying a car, as premiums are based on the car's price, repair costs, safety record, and likelihood of theft. You can also raise your deductible, reduce optional insurance on older cars, and bundle your insurance with the same company or by purchasing multiple types of insurance from them. Maintaining a good credit history and taking advantage of low-mileage discounts can also help lower your premium.

Shop around for car insurance

Shopping around for car insurance is a great way to save money. Prices differ from company to company, so it's worth doing your research and getting multiple quotes. Here are some tips to help you shop around for car insurance:

Understand your coverage options

Firstly, it's important to understand the different types of coverage available. A policy with only auto liability coverage will be cheaper, but it might not provide the level of protection you need. If you lease or finance your car, your lender likely requires comprehensive and collision insurance. Even if your car is paid off, consider adding these coverages to avoid paying expensive repair bills yourself. Your car insurance limit is the maximum amount your insurance will pay out for a claim, and this limit will vary depending on the type of coverage. For example, selecting your state's minimum required coverage for liability insurance will reduce your rate, but it might not be enough to cover what you owe in the event of an accident.

Choose your deductible

Your car insurance deductible is the amount you need to pay toward a claim before your insurance coverage kicks in. Typically, you will only have a deductible for comprehensive, collision, and gap insurance coverages. While choosing a higher deductible will lower your rate, make sure it's not so high that you would struggle to pay for repairs.

Compare premium quotes

The car insurance premium is the bottom line – the total cost of your insurance per payment cycle. When comparing quotes, make sure each quote includes the same coverages, limits, and deductible amount so that you are making an accurate comparison. Remember, the cheapest option is not always the best, and it's important to find a policy that satisfies all your needs at the best rate.

When to shop for car insurance

It's beneficial to shop around for car insurance at least once a year, as rates change frequently. Additionally, if you're adding a teenager to your policy, you may be able to find an insurer that offers discounts for teen drivers.

Where to shop for car insurance

You can shop for car insurance online, over the phone, or through an insurance agent. Online comparison tools can save you time by allowing you to compare rates from multiple companies at once. When shopping around, be prepared to provide information such as your car's make, model, mileage, and your driving history, including any accidents or violations.

Compare insurance costs before buying a car

When it comes to saving on auto insurance, comparing insurance costs before buying a car is a crucial step. Here are some detailed instructions to help you navigate this process effectively:

Narrow Down Your Vehicle Choices

The first step is to select two or three vehicles that align with your budget, desired features, and lifestyle. Keep in mind that certain characteristics of a vehicle can increase or decrease insurance costs. Factors such as the car's price, age, make, model, body type, safety features, and anti-theft features will all play a role in determining your insurance premium. By narrowing down your choices, you can make more informed decisions about insurance costs.

Estimate the Coverage You Need

The next step is to determine the amount of coverage you'll require. At a minimum, you need to purchase enough insurance to meet the legal requirements in your state. However, it is often advisable to opt for higher coverage limits to protect yourself financially in the event of a severe accident. Consider purchasing coverage that is at least equal to your assets. Additionally, consider adding optional coverages like collision and comprehensive insurance, especially if you have a newer vehicle or if your lender requires it.

Get Quotes from Multiple Insurers

Insurance companies use different formulas to calculate rates, so it's essential to get quotes from several insurers. Contact insurers, captive agents, or brokers, or use online tools to gather pricing information. Provide detailed information about yourself and the vehicle(s) you're considering to get accurate quotes. Remember to get quotes for the same amount of coverage for each vehicle to make a meaningful comparison.

Compare Insurance Rates and Choose a Reputable Company

Once you have the quotes, compare the insurance rates and choose a company with competitive pricing and a solid reputation for customer service. Remember to consider factors beyond just the cost, such as the company's financial ratings and customer reviews. It's important to select an insurer that offers both affordable rates and reliable coverage.

Look for Available Discounts

Insurers often offer various discounts that can help lower your insurance costs. Ask about discounts for safety features, anti-theft devices, good student grades, bundling policies, or being a safe driver. By taking advantage of these discounts, you can further reduce your insurance premiums.

By following these steps, you can make an informed decision about insurance costs before buying a car, helping you save money and ensure you're getting the best value for your purchase.

Raise your deductible

Raising your deductible is a great way to save money on your auto insurance. A deductible is the amount you pay out of pocket before your insurance coverage kicks in. By choosing a higher deductible, you can significantly lower your premium costs.

When choosing a deductible, it is important to consider your financial situation and driving habits. If you can afford to pay a higher deductible in the event of a claim and want to lower your premium, a higher deductible is a good option. However, if you prefer lower out-of-pocket expenses, you may want to opt for a lower deductible. It is also important to make sure you have enough savings to cover your deductible in case of an accident.

The amount of money you can save by raising your deductible depends on various factors, including your insurance carrier, location, and driving record. On average, drivers who increase their deductibles save between 7% to 28% per year. For example, increasing your deductible from $500 to $1,000 may lower your car insurance rate by 10%, resulting in average savings of approximately $188 per year.

In addition, the savings you accumulate from raising your deductible can be used to build your emergency fund. This fund can then be used to cover your deductible in the event of a claim. However, it is important to ensure that your emergency fund is well-stocked before making the switch to a higher deductible.

Raising your deductible can be a smart financial decision, but it is important to carefully consider your personal circumstances before making any changes to your insurance policy.

Take advantage of low mileage discounts

Taking advantage of low mileage discounts is a great way to save money on your auto insurance. Low mileage drivers are less likely to crash and file an insurance claim, so insurance companies incentivize driving less with lower premiums.

The definition of a low-mileage driver varies across insurance providers, but it generally refers to those who drive under a certain number of miles annually. Most auto insurance discounts for low-mileage drivers are given to policyholders who drive fewer than 7,500 miles per year. However, some companies, like Auto-Owners Insurance, set the threshold at 10,000 miles per year.

To qualify for a low mileage discount, you will need to provide your insurance company with accurate information about your annual mileage. You may also need to submit a photo of your odometer each year to qualify. Some insurance companies may also request periodic mileage updates or verify your mileage during policy renewals.

Low mileage discounts can lead to significant savings over time, especially if you consistently maintain low mileage. The potential savings depend on the insurance company and your individual circumstances, but discounts typically range from 5% to 30% off the base premium. For example, State Farm offers a low mileage discount of up to 30% for driving less than 7,500 miles annually. USAA, which offers insurance exclusively to members of the military community, has the lowest average annual rate for low-mileage drivers at $1,247 per year for those who drive 6,000 miles or fewer per year.

In addition to low mileage discounts, insurance companies may also offer pay-per-mile policies or usage-based insurance (UBI) programs, which can further lower your insurance rate. UBI programs use a telematics device or app on your phone to monitor your driving habits and base your rate on factors like mileage, in-car phone use, braking habits, and speeding.

Improve your credit score

Improving your credit score takes effort and patience. There is no one-size-fits-all solution to improving your credit score, but there are several strategies you can use to boost your score over time. Here are some detailed and direct tips to improve your credit score:

Pay Your Loans and Bills on Time

Making on-time payments is one of the most influential factors in improving your credit score. Your payment history accounts for a significant chunk of your credit score, and late or missed payments can significantly impact your score. Set up automatic payments or due-date alerts to ensure you never miss a payment.

Keep Your Credit Utilization Rate Low

Your credit utilization rate is the amount of revolving credit you're using divided by your total available credit. Lenders generally view a credit utilization rate of 30% or lower favourably. You can lower your credit utilization rate by paying down your credit card balances, increasing your credit limit, or a combination of both.

Diversify Your Credit Mix

Having a variety of account types, such as credit cards, student loans, mortgages, and other loans, can improve your credit score. Lenders view a diverse credit mix as a sign that you understand the fundamentals of credit management.

Limit New Credit Applications

Each time you apply for new credit, a hard inquiry is made on your credit report, which can negatively impact your score. Limit your applications for new credit accounts, especially if you have a short credit history.

Keep Old Accounts Open

Avoid closing old credit accounts, even if you no longer use them. Keeping old accounts open helps maintain the length of your credit history, which is a positive factor in your credit score calculation.

Dispute Credit Report Errors

Review your credit reports from the three major credit bureaus (Equifax, Experian, and TransUnion) and dispute any inaccuracies or errors. Correcting mistakes on your credit report can help improve your score.

Become an Authorized User

If you have a thin credit file or limited credit history, consider becoming an authorized user on a family member or friend's credit card account. Their positive payment history and low credit utilization rate can benefit your credit score.

Use a Secured Credit Card

If you're building or rebuilding your credit, consider using a secured credit card. These cards require a cash deposit upfront, which serves as your credit limit. By making on-time payments, you can build a positive credit history.

Get Credit for Rent and Utility Payments

Services like Experian Boost and UltraFICO can help you get credit for on-time rent and utility payments. Including these payments in your credit history can improve your score, especially with VantageScore credit scoring models.

Frequently asked questions