Auto Insurance Too Costly? Try These Money-Saving Tips

Auto insurance can be expensive due to a variety of factors, including age, driving history, location, vehicle type, and credit score. However, there are several ways to reduce insurance costs. Firstly, shopping around for better rates annually and comparing quotes from multiple insurers can help find cheaper options. Increasing deductibles, reducing coverage on older cars, and taking advantage of discounts offered by insurers can also lower premiums. Improving credit scores, driving less, and choosing insurance-friendly vehicles are other effective strategies. Additionally, bundling home and auto insurance policies can lead to cost savings. It is important to maintain continuous insurance coverage to avoid negative consequences, such as higher future insurance costs and legal repercussions for driving uninsured.

Shop around for a new policy

Shopping around for a new auto insurance policy is a great way to find a cheaper rate. Here are some tips to help you shop around effectively:

Gather the Necessary Information

Before you start shopping for a new policy, make sure you have all the information you need to get an accurate quote. This includes personal information such as your name, birth date, address, and vehicle information such as the make, model, and year of your car. You will also need to know your driving history, including any tickets or accidents, as well as your current insurance information.

Decide on Your Coverage Needs

When shopping for a new policy, it's important to compare apples to apples. Decide on the level of coverage you need, including liability, comprehensive, and collision coverage. If you're not sure, you can start by matching your previous insurance coverages. You can also use online tools or consult with an agent to determine the right coverage for your needs.

Choose Your Shopping Method

There are several ways to shop for a new auto insurance policy. You can work with an agent from a single insurance company, an independent agent who works with multiple companies, or purchase a policy directly from an insurer's website. Each option has its own pros and cons, so consider your preferences and needs when making a decision.

Compare Quotes and Discounts

Once you've chosen your shopping method, gather quotes from at least three insurance carriers. Compare not only the prices but also the available discounts. Many insurers offer discounts for things like good grades for student drivers, bundling policies, signing up for automatic payments, or having safety features in your car.

Purchase Your New Policy

When you've found a new insurance provider and policy that meets your needs and budget, it's time to make the purchase. Pay the down payment, set up your monthly payment plan, and don't forget to cancel your old policy. Make sure there is no lapse in coverage by setting the cancellation date of your old policy for after the start date of your new one.

By following these steps, you can effectively shop around for a new auto insurance policy and potentially save a significant amount of money on your premiums.

Raise your deductible

Raising your deductible is a guaranteed way to lower the cost of your auto insurance. A deductible is the amount you pay out of pocket before your insurance coverage kicks in. For example, if you have a deductible of $500 and your insurance company quotes you $1,500 for a repair, you will pay the first $500 and your insurance company will cover the remaining $1,000.

You can choose a deductible amount when you first purchase auto insurance, and you can change it at any time while your policy is active. Typical deductible amounts range from $250 to $1,000, but they can go as high as $2,500.

If you are a safe driver with a good record and a low risk of accidents, raising your deductible in exchange for lower premiums could be a good idea. Before raising your deductible, make sure you have enough money in savings to cover the higher deductible in the event of a claim. You should also consider the value of your vehicle. If you have a car valued at only $3,000, a deductible of $1,000 may not make sense because you would be paying a significant portion of the car's worth in the event of a loss.

According to Elin Nozewski, vice president of communications and licensed insurance agent with Jerry, a car insurance savings app, increasing your deductible from $500 to $1,000 may lower your car insurance rate by 10%, although your specific savings will depend on factors like your carrier, location, and driving record. Deece Catanzaro, an independent insurance agent with Wallace & Turner Insurance, estimates that raising your deductible from $500 to $1,000 can result in an average savings of approximately $188 per year on comprehensive and collision coverage collectively.

Change your coverage

Changing your auto insurance coverage is a great way to save money. Here are some tips to help you modify your coverage:

Assess your current coverage

Before making any changes, it's important to understand your current coverage. Review your policy documents to identify the types of coverage you have, such as liability, collision, or comprehensive insurance. Consider whether you need all the current coverages or if there are areas where you can reduce or increase your coverage to better suit your needs.

Drop comprehensive and collision coverage for older cars

If you drive an older car, consider dropping comprehensive and collision coverage. These coverages only pay out up to the car's market value, minus your deductible. If your car's market value is low, the payout may not be worth the cost of these coverages. For example, if your car is worth $1,000 and your deductible is also $1,000, you won't receive any payout from a comprehensive or collision claim.

Opt for state minimum liability coverage

To significantly reduce your insurance costs, you can opt for state minimum liability coverage. This is the cheapest option available. However, it's important to note that minimum coverage only includes liability insurance, which pays for others' medical bills and expenses after a crash you cause, up to your policy limits. Any damage to your own car will not be covered, and you'll be financially responsible for those repairs.

Increase your deductible

Increasing your deductible will lower your insurance premiums. A higher deductible means you'll pay more out of pocket if you need to file a claim, but if you're a safe driver with a good track record, this could be a worthwhile trade-off. Be sure to set aside enough money to cover the higher deductible in case of an accident.

Adjust coverage according to your life changes

Life changes, such as moving to a new location, adding a driver or car, getting married, or buying a home, can impact your insurance rates. Review your coverage periodically, especially after major life changes, to ensure it still meets your needs. You may find areas where you can reduce coverage or identify discounts you may now be eligible for.

Compare coverage options from different insurers

Shopping around is always a good idea. Compare coverage options and rates from multiple insurers to find the best fit for your budget and requirements. Use online tools or speak directly with insurance agents to get quotes. Remember to provide accurate information, including your driving history and vehicle details, to get precise quotes.

Improve your credit score

Improving your credit score is a sure way to lower your auto insurance costs. Here are some tips to help you improve your credit score:

• Make on-time payments: Your debt payment history accounts for a significant chunk of your credit score, so ensure you pay your bills on time. Set up autopay for at least the minimum amount due and create calendar reminders to alert you.
• Pay down revolving account balances: Aim to keep your credit utilisation rate, the percentage of available credit used on credit cards and other revolving credit accounts, as low as possible.
• Don't close your oldest account: The age of your oldest account and the average age of all your accounts influence your credit score. Keeping older accounts open, even if you don't use them often, can help your credit score.
• Diversify the types of credit you have: A mix of different types of credit, such as credit cards, auto loans, and mortgages, can improve your credit score.
• Limit new credit applications: Every time you apply for new credit, a hard inquiry is made on your credit report, which can negatively impact your score. Only apply for new credit when necessary.
• Dispute inaccurate information on your credit report: Inaccurate information on your credit report, such as late payments or high credit card balances, can hurt your score. Dispute any errors with the credit reporting agencies to get them corrected or removed.
• Become an authorised user: If you're new to credit or rebuilding your score, consider asking a loved one with a positive payment history and a low credit utilisation rate to add you as an authorised user on their credit card.

Seek out discounts

One of the best ways to lower your auto insurance costs is to seek out and take advantage of the various discounts offered by insurance companies. Combining individual discounts, no matter how small, can lead to substantial annual savings. Here are some of the most common auto insurance discounts that you may be eligible for:

Policy-Based Discounts

• Bundling Discounts: Also known as a multi-policy or multi-line discount, this is available when you purchase multiple types of insurance coverage (e.g., car, home, renters, etc.) from the same company.
• Multi-Vehicle Discount: Insuring multiple vehicles under the same policy and household can lead to significant savings.
• Loyalty Discount: Some insurers provide discounts if you remain with them for a certain period.
• Pay-in-Full Discount: Paying your annual premium in full can often result in a discount.
• Automatic Payment Discount: Setting up automatic premium payments through electronic funds transfer, a debit card, or a credit card may lead to savings.
• Paperless Discount: Opting for paperless billing and receiving policy documents electronically can sometimes lead to a discount.

Driver Profile Discounts

• Military Discount: Many insurance companies offer discounts for active-duty, reserve, and retired military personnel.
• Student Discount: Students with good grades (usually a B average or higher) in high school or college may be eligible for lower rates.
• Senior Discount: Some insurers offer discounts for drivers aged 55 and above.
• Affiliation or Organizational Discounts: Being affiliated with certain organizations or employers can lead to discounts.

Driving Behavior Discounts

• Good Driver Discount: Insurance companies often reward policyholders who maintain a clean driving record for a specified period, with no accidents or moving violations.
• Accident-Free Discount: Similar to the good driver discount, this rewards drivers who have gone accident-free for a set period.
• Usage-Based Insurance Discount: Insurers monitor your driving habits through a mobile app or tracking device and offer discounts for safe driving practices.
• Driving Course Discount: Completing a defensive driving or accident-prevention course can lead to savings on your insurance.
• Low-Mileage Discount: Driving fewer miles than the national average may make you eligible for this discount.

Vehicle-Based Discounts

• New Vehicle Discount: Insuring a car that is less than three years old may result in a discount of 10% to 15%.
• Anti-Theft Discount: Insurers may offer discounts for vehicles equipped with anti-theft devices, such as GPS tracking and vehicle recovery systems.
• Safety Features Discount: Features like airbags, anti-lock brakes, automatic seatbelts, and daytime running lights may lead to reduced insurance costs.

Remember to ask about available discounts and eligibility requirements when shopping for a new policy or renewing an existing one. Combining these discounts can lead to significant savings on your auto insurance costs.

Frequently asked questions