Auto Insurance: Cheaper Rates Post-Retirement?

The cost of auto insurance is influenced by a variety of factors, including age, driving experience, and retirement status. While it is generally observed that insurance premiums tend to decrease as individuals get older and gain more driving experience, there comes a point, typically in the early 70s, when premiums start to increase again. This is because older individuals are considered to be at a higher risk of being involved in accidents and are more prone to injuries, resulting in higher medical expenses.

Retirement can also impact the cost of auto insurance. On one hand, retirees may no longer need to commute to work, resulting in lower mileage and a potential discount on their insurance. On the other hand, insurance companies may view retirees as having more free time to drive, increasing the likelihood of accidents. Additionally, retirees may experience age-related changes in their physical and cognitive abilities, which can affect their driving skills and lead to higher insurance rates.

To save money on auto insurance during retirement, individuals can take advantage of various strategies. These include taking a defensive driving course, increasing their deductible, bundling insurance policies, and comparing quotes from multiple providers. By being proactive and exploring these options, retirees can help minimize the cost of their auto insurance.

Ask for a low-mileage discount

If you're a retiree who no longer has a daily commute, you may be eligible for a low-mileage discount on your auto insurance. The more you drive, the more likely you are to get into an accident, and a significant portion of your car insurance premium is based on the number of miles you drive in a year and the reason for your travel. Insurers see daily commuting as a bigger risk factor than leisure driving because it typically occurs more frequently and during periods of heavier traffic.

Most auto insurers offer a low-mileage discount when your annual mileage drops below 7,000 or 7,500 miles, which is significantly less than the typical 12,000 miles most Americans drive a year. Some companies that offer low-mileage discounts include State Farm, Safeco, Geico, and USAA. With State Farm, you can save up to 30% on your insurance premium if you drive less than 7,500 miles a year.

To qualify for a low-mileage discount, you may need to provide proof of your annual mileage. This can be done through pictures of odometer readings or verification from a third party. For example, if you're participating in a safe driving program, such as State Farm's Drive Safe and Save, your insurer will likely use your mileage data from that program to automatically reward you with a discount.

It's important to note that the definition of a low-mileage driver can vary across insurance providers. While most insurers consider someone who drives between 0 and 7,500 miles per year as a low-mileage driver, some companies may have different thresholds. Additionally, the discount you receive may range from 5% to 30% of your base premium, depending on the insurance company and your individual circumstances.

If you've recently retired and your driving habits have changed, be sure to contact your auto insurance agent to inquire about a low-mileage discount. Ask them if you qualify and make sure your insurance company bases your rates on your current driving expectations, not the information you provided when you were still working. Taking this step can help you save a significant amount on your auto insurance premium during your retirement years.

Take a defensive driving course

Defensive driving courses are a great way to save on auto insurance premiums, especially for retirees who are looking to cut costs. These courses are designed to improve your driving skills and make you a safer driver by teaching you how to anticipate and react to dangerous situations on the road. While the availability and amount of discounts vary depending on your state and insurance provider, taking a defensive driving course is generally a worthwhile investment.

Benefits of Defensive Driving Courses:

These courses offer a range of benefits that go beyond potential insurance savings. Here are some key advantages:

• Improved Driving Skills: Defensive driving courses teach techniques that help you avoid accidents and make you a more confident and safer driver.
• Compliance with Court Orders: If you've received a traffic ticket or violation, taking a defensive driving course can help fulfil court requirements and may even result in the removal of points from your license.
• Discounts for Young and Senior Drivers: Insurance providers often offer significant discounts to younger and senior drivers who complete these courses, as these age groups tend to have higher insurance premiums.
• Online and In-Person Options: Defensive driving courses are offered in flexible formats, including online and in-person classes, making it convenient for individuals with different preferences and schedules.
• Enhanced Road Safety: By learning how to anticipate and react to potential hazards, you'll not only reduce your own risk but also contribute to making the roads safer for everyone.

Factors to Consider:

When considering taking a defensive driving course, there are a few important factors to keep in mind:

• State and Insurance Provider: The availability of discounts and eligibility criteria can vary depending on your state and insurance company. Be sure to check with your insurer and understand the specific requirements and discounts offered.
• Course Accreditation: Not all defensive driving courses are created equal. Ensure that the course you select is accredited by your state's Department of Motor Vehicles and approved by your insurance provider to qualify for any potential discounts.
• Age Restrictions: While defensive driving courses can benefit drivers of all ages, some insurance providers may impose age restrictions on their discounts. Check with your insurer to see if there are any age limitations.
• Course Format and Cost: Defensive driving courses can be offered online or in-person, with costs ranging from $15 to $100. Choose the format that best suits your learning preferences and budget.
• Regular Renewal: Defensive driving course discounts are typically not lifetime discounts. To maintain your discount, you'll need to retake the course every few years, as specified by your insurance provider.

Popular Insurance Providers Offering Defensive Driving Discounts:

• GEICO
• Allstate
• State Farm
• Farmers Insurance
• Esurance by Allstate
• Safeco
• American Family Insurance
• AAA
• AARP
• National Safety Council
• American Safety Council

Sample Savings Calculation:

Let's say you live in Texas, where the average annual auto insurance cost is $1,810. By taking a defensive driving course that offers a 10% discount, you could save up to $181 annually. Even with a smaller discount of 2%, you'd still save $36 per year. With the course fee being around $25, you can quickly recoup the cost and start enjoying substantial savings.

In conclusion, taking a defensive driving course is a smart decision for retirees looking to reduce their auto insurance costs. Not only will you become a safer driver, but you'll also be rewarded with insurance discounts and enhanced driving skills that will benefit you for years to come. Be sure to do your research and select an accredited course that meets the requirements of your insurance provider and state regulations.

Take advantage of telematics discounts

Telematics programs are a great way to save on auto insurance if you're a safe driver. These programs use technology to monitor your driving habits and behaviour and, depending on the findings, can offer you a discount on your insurance premium.

Telematics insurance is also known as usage-based insurance (UBI) and comes in two forms: mileage-based insurance and behaviour-based insurance.

Mileage-based insurance

Mileage-based insurance sets rates based on how much you drive. This type of insurance works on the idea that the less you drive, the less you should pay for car insurance. Instead of paying a fixed rate every month, you'll be charged a base rate plus a per-mile fee.

Behaviour-based insurance

Behaviour-based insurance offers discounts based on safe driving. Insurance companies will track your driving behaviour using a plug-in device or a mobile app. The data generated will help set your car insurance rate.

Advantages of Telematics Insurance

• More affordable rates for low-risk drivers
• More accurate data for insurance companies to process claims
• Usage-based rates for drivers

Disadvantages of Telematics Insurance

• Privacy concerns for drivers
• Potential insurance cost increase for riskier drivers
• Potential for unwanted tracking of activity and location

Tips for Choosing a Telematics Program

• If you have a long commute, consider options that don't take distance travelled into account, such as USAA's SafePilot or American Family's KnowYourDrive.
• If you often drive late at night, avoid programs like Allstate's Drivewise and Liberty Mutual's RightTrack, which reduce discounts for driving during these hours.
• Be aware that some insurers will raise your premiums if you drive poorly while enrolled in their telematics programs. These companies can include Allstate, Geico, Progressive, and Travelers, depending on the state you live in.
• Pay close attention to the feedback you get from the companion app and try to minimise behaviours that may increase your premium.

Final Thoughts

Telematics programs can offer considerable savings on your auto insurance, but they also come with extensive surveillance and the risk that your data will be used for purposes other than cutting your premiums. It's important to carefully consider the trade-offs before enrolling in a telematics program.

Increase your deductible

Auto insurance can be expensive, and retirees are often looking for ways to reduce their monthly financial obligations. One way to do this is to increase your deductible.

A car insurance deductible is the amount of money you pay when you make a claim before your insurance coverage kicks in. For example, if you have a $500 deductible and file a claim for $1,500 of damage to your car, you will pay the first $500 and your insurance company will cover the remaining $1,000.

By increasing your deductible, you can lower your insurance premium, which is the amount you pay for your insurance policy. The two have an inverse relationship, so a higher deductible will result in a lower premium. For example, increasing your deductible from $200 to $500 could reduce your premium by 15% to 30%, while a $1,000 deductible can save you 40% or more.

Before increasing your deductible, it's important to consider whether you can afford to pay the higher deductible amount if you need to file a claim. Make sure you have enough money set aside in an emergency fund to cover the higher out-of-pocket expense.

It's also worth noting that a higher deductible may not always be the best option. If you drive frequently or are more likely to get into accidents or sustain vehicle damage, you may be better off with a lower deductible and higher premium.

Increasing your deductible can be a great way to reduce your auto insurance costs, especially if you are a retiree with a safe driving record and a lower risk of getting into accidents. Just be sure to weigh the potential savings against the increased out-of-pocket expense in the event of a claim.

Shop around for the best rates

Shopping around for the best auto insurance rates can be a tedious task, but it is well worth the effort to ensure you get a good deal. Here are some tips to help you navigate the process and find the most competitive rates:

• Compare quotes from multiple insurers: Request quotes from at least two or three companies, including major insurers like Allstate, Progressive, and State Farm, as well as regional insurers. This will allow you to see how rates differ between companies and find the most affordable option for your needs.
• Use a trusted insurance comparison site: Sites like The Zebra and NerdWallet allow you to compare rates from multiple insurers at once, making it easier to find the best deal. These sites also provide valuable information about customer satisfaction, claims handling, and financial strength, which are important factors when choosing an insurer.
• Get personalized quotes: When comparing rates, ensure that you provide accurate and detailed information about yourself, your vehicle, and your driving history. This includes your age, gender, driving record, vehicle make and model, safety features, and mileage. By providing personalized information, you will receive more accurate quotes that reflect your specific situation.
• Consider your coverage needs: Determine the level of coverage you require, such as liability, collision, and comprehensive insurance. Keep in mind that full coverage insurance is not a standard type of coverage but typically refers to policies that include liability, collision, and comprehensive insurance. Choose the coverage limits and deductibles that best suit your needs and budget.
• Factor in discounts: When comparing rates, be sure to ask about any available discounts. For example, many insurers offer discounts for safe driving records, low mileage, defensive driving courses, telematics usage, or bundling multiple policies. Taking advantage of these discounts can help lower your premium.
• Check financial strength and customer satisfaction: In addition to price, consider the financial strength and customer satisfaction ratings of the insurer. AM Best and other rating agencies can provide information about an insurer's financial stability. You can also check customer complaint records on the National Association of Insurance Commissioners' site to gauge their responsiveness and handling of issues.
• Get quotes regularly: It is a good idea to compare insurance rates periodically, such as every few years, as rates can change over time. This will help you stay informed about the latest offerings and ensure you are getting the best value for your money.
• Understand state requirements: Different states have varying minimum car insurance requirements. Make sure you are aware of the mandatory coverage levels in your state and comply with the regulations.

Frequently asked questions