Orlando Harmon
Car insurance is a necessary expense for drivers, but it doesn't have to break the bank. There are several ways to save money on auto insurance and get the coverage you need. Here are some strategies to lower your car insurance costs:
- Shop around for insurance: Compare rates from different companies and types of insurance providers. Get multiple quotes to find the best deal.
- Increase your deductible: Opting for a higher deductible can significantly lower your premium costs. Just ensure you have enough savings to cover the higher deductible in case of a claim.
- Reduce optional insurance: If your car is older and worth less than a certain multiple of the insurance premium, consider dropping collision and comprehensive coverage.
- Bundle your insurance: Many insurers offer discounts if you purchase multiple types of insurance, such as homeowners and auto, from them.
- Maintain a good credit history: Establishing a solid credit history can lead to lower insurance costs as insurers often use credit information to price policies.
- Take advantage of discounts: Ask about group insurance, safe driving records, student discounts, and other discounts that may be available.
- Choose a cheaper car to insure: Certain vehicles, such as small SUVs, tend to be cheaper to insure than others. Compare insurance rates for different car models before buying.
- Improve your credit: In most states, a good credit score can lead to cheaper auto insurance. Focus on making timely payments, keeping credit card balances low, and only opening new credit accounts when necessary.
- Review your policy regularly: Update your policy information after major life changes, such as moving, getting married, or changing jobs, to ensure your coverage reflects your current needs.
| Characteristics | Values |
|---|---|
| Shop around for your car insurance | Compare insurance costs and get at least three quotes from different insurance companies and types of insurance companies. |
| Compare insurance costs before you buy a car | Auto insurance premiums are based on the car's price, the cost to repair it, its safety record, and the likelihood of theft. |
| Raise your deductible | By choosing a higher deductible on your car insurance, you can lower your premium costs. |
| Reduce optional insurance on your older car | If your older car is worth less than 10 times the insurance premium, having collision and/or comprehensive coverage may not be cost-effective. |
| Bundle your insurance and/or stick with the same company | Many insurers will give you a discount if you purchase multiple types of insurance from them or have more than one vehicle insured. |
| Maintain a good credit history | Establishing a solid credit history can lead to lower insurance costs. |
| Take advantage of low mileage discounts | Some companies offer discounts to motorists who drive less than the average number of miles per year or carpool to work. |
| Ask about group insurance | Some companies offer reductions to drivers who get insurance through a group plan from their employers or other associations. |
| Seek out other discounts | There are various other discounts that your insurer may offer, such as for safe driving, being a student, or having safety features on your vehicle. |
| Drop car insurance you don't need | Evaluate whether you need collision and comprehensive insurance, especially for older vehicles, and consider choosing liability-only insurance. |
| Drive a car that's cheap to insure | Safe and moderately priced vehicles, such as small SUVs, tend to be cheaper to insure than expensive cars. |
| Improve your credit | Insurers often use credit-based insurance scores to calculate premiums, so improving your credit score can lead to lower insurance costs. |
| Don't drive a lot? Consider usage-based insurance | Usage-based or pay-per-mile insurance can lower your insurance costs if you don't drive long distances or commute daily. |
What You'll Learn
Increase your deductible
Increasing your deductible is a great way to save money on your auto insurance. A deductible is the amount of money you pay out of pocket each time you file a claim against your car insurance policy. For example, if you have a $500 deductible and your vehicle incurs $1,500 of damage, you will pay the $500 deductible and your insurer will cover the remaining $1,000.
Raising your deductible will generally result in lower premium costs. This is because the deductible and premium tend to have an inverse relationship. By increasing your deductible from $500 to $1,000, you can bring down your annual premiums by 20 to 25% on average. This could result in savings of $464 to $525 a year.
However, it is important to ensure you have enough money set aside to pay the higher deductible in the event of a claim. While the average motorist files a claim only about once every couple of decades, you should be prepared to pay for repairs if needed.
Before raising your deductible, review your emergency fund to ensure you can cover the higher costs. Increasing your deductible may be a good move if your emergency savings are strong, as you can dip into those funds if needed while also enjoying lower premium costs.
Additionally, consider the likelihood of filing a claim. If you don't drive often or believe you are less likely to get into accidents or sustain vehicle damage, a higher deductible may be a good choice.
Remember, the key to saving money on auto insurance is not just finding discounts, but also getting the lowest final price. Compare rates from different companies and consider factors like your driving record, credit score, and vehicle type to get the best deal.
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Drop collision and comprehensive insurance
Dropping collision and comprehensive insurance can save you about $1,165 a year. Collision insurance covers damage to your car if you're involved in a crash or if you're the victim of a hit-and-run. Comprehensive insurance covers damage caused by acts of nature (such as storms), vandalism, theft, fire, and more.
As your car ages and loses value, the cost of these coverages may no longer be justifiable. As a general rule, when the premium is more than 10% of the car's value, it's time to consider dropping collision and comprehensive coverage. You can find out the value of your car for free on websites such as Kelley Blue Book, the National Association of Auto Dealers (NADA), and TrueCar.
However, before making a decision, it's important to weigh your options and consider the pros and cons. If you drop collision and comprehensive coverage, you'll need to set aside money for car repairs or a down payment on a new car. Additionally, comprehensive coverage includes glass coverage, which can be useful if your windshield is cracked by a rock.
If you decide to keep comprehensive coverage but drop collision, remember that collision covers accidents caused by you, while comprehensive covers incidents beyond your control. Collision insurance is particularly useful if you're an unsafe driver, whereas comprehensive insurance is valuable if you live in an area prone to natural disasters or vandalism.
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Take a defensive driving course
Taking a defensive driving course is a great way to save on your auto insurance. Many insurance companies offer discounts to those who have completed a safe driving or defensive driving course. These courses can be taken online or in person and can save you hundreds of dollars on your annual premium. In New York, for example, where insurance premiums are nearly $3,700 per year, motorists can save around $370 annually by taking a state-approved defensive driving course that costs about $25 and takes just over 5 hours to complete. The course can be repeated every three years to maintain the discount.
Virginia offers a similar program, with an 8-hour course starting at $25, resulting in potential savings of $200 or more per year on insurance premiums. Other states have similar programs with varying prices and time commitments, so be sure to check what options are available in your state.
In addition to saving you money, defensive driving courses can also make you a safer driver. These courses teach valuable skills and techniques to help you anticipate and react to hazards on the road, reducing the risk of accidents and keeping you and other road users safe.
It's important to note that the availability and amount of the discount may vary depending on the insurance company and state regulations. Be sure to check with your insurance provider to see if they offer a discount for completing a defensive driving course and what specific requirements or restrictions may apply.
Taking a defensive driving course is just one of the many ways to save on auto insurance. Other strategies include increasing your deductible, bundling your insurance policies, improving your credit score, and comparing rates from different insurance providers. By combining multiple strategies, you may be able to maximize your savings and get the best value for your auto insurance.
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Report your mileage
The number of miles you drive each year can have a significant impact on your car insurance rates. The more miles you drive, the higher your risk of being involved in an accident, and consequently, the higher your insurance premium will be. Conversely, if you drive fewer miles, you are considered a lower-risk driver, and your insurance rates may be lower.
Insurance companies often offer low-mileage discounts to motorists who drive less than the average number of miles per year. To qualify for these discounts, you usually need to drive less than 7,000 or 5,000 miles annually. Some companies may even offer bigger discounts if your mileage is below 10,000.
It is important to accurately report your mileage to your insurance company. Misrepresenting your mileage could be considered a form of insurance fraud, as it affects the data insurers use to set your rates. Some insurance companies may request mileage checks if you report a lower-than-average number, so it is always best to be honest.
If your driving habits change and you start driving less, be sure to update your insurance company. They may be able to lower your premium to reflect your reduced mileage. Additionally, consider taking advantage of usage-based insurance programs, which track your driving behaviour and offer discounts for safe driving. These programs can help you save money on your insurance, especially if you don't mind your insurer monitoring your driving.
In summary, reporting and maintaining a lower annual mileage can help you save on your car insurance. Be sure to accurately report your mileage, update your insurance company if your habits change, and take advantage of usage-based insurance programs to maximize your savings.
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Bundle your insurance
Bundling your insurance is a great way to save money on your auto insurance. By purchasing multiple types of insurance from the same provider, such as homeowners and auto insurance, you can often get a discounted rate on both policies. Some companies also offer bundling discounts if you insure multiple vehicles or have a renters, life, or motorcycle insurance policy with them.
The amount you can save by bundling your insurance varies depending on your specific situation and the company you choose. On average, you can expect to save around $348 a year by bundling your auto and homeowners insurance. However, it's important to compare costs from different insurers before making a decision, as you may find a better deal by purchasing your policies separately from different companies.
In addition to bundling, there are several other ways to save on your auto insurance:
- Increasing your deductible: Opting for a higher deductible can lower your premium costs, but make sure you have enough money set aside to cover the higher deductible in case of a claim.
- Improving your credit score: Many insurers use credit information to price auto insurance policies, so improving your credit score can help you get lower rates.
- Taking advantage of discounts: Insurance companies offer various discounts, such as good student discounts, safe driver discounts, and group insurance discounts. Be sure to ask your insurer about any discounts you may qualify for.
- Shopping around: Rates can vary significantly between insurance companies, so it's worth comparing quotes from multiple providers to find the best rate for your desired coverage.
- Reducing optional insurance: If your car is older and worth less than your insurance premium, consider dropping collision and comprehensive coverage, which may not be cost-effective anymore.
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Frequently asked questions
Many insurance companies offer multi-policy discounts if you buy more than one type of insurance from them. For example, you could buy homeowners and auto insurance from the same company. You might also be able to save money by insuring all the vehicles in your household on one policy or insuring all your driving-age family members on the same plan.
Many insurers use credit information to price auto insurance policies. People who effectively manage their credit make fewer claims, so establishing a solid credit history can lead to lower insurance costs.
You can usually choose your deductible amount when you purchase your policy. A deductible is the amount you pay before your insurance coverage kicks in. The higher your deductible, the lower your premium will be. Just make sure you can afford to pay the higher deductible in the event of a claim.
Many insurance companies offer low-mileage discounts for people who drive less than the average number of miles per year or for people who carpool regularly. Ask your insurance provider if you qualify.
Some insurance companies will give you a discount if you take a safe-driving course. In New York, for example, motorists can get a 10% discount after taking a state-approved defensive driving course.
