How To Lower Auto Insurance Costs

There are many ways to make auto insurance cheaper. One of the most effective ways is to shop around and compare quotes from multiple companies. It is also beneficial to ask about discounts, such as those offered for bundling policies, having a clean driving record, or being a good student. Increasing your deductible will also lower your premium, but it is important to ensure you can afford the higher amount in the event of a claim. Additionally, maintaining a good credit score and choosing a cheaper vehicle to insure can also reduce costs.

Shop around for the best rate

Shopping around for the best auto insurance rate is one of the most effective ways to save money on your premium. Each auto insurance company has its own unique way of pricing coverage, so it's worth comparing quotes from multiple insurers to find the cheapest option for you. Here are some tips to help you shop around for the best rate:

Get Multiple Quotes

When shopping for auto insurance, it's important to get quotes from at least three different companies. This will allow you to compare rates and coverage options to find the best deal. You can use online tools, such as comparison websites or insurance brokers, to get quotes from multiple insurers at once. However, keep in mind that some comparison sites may sell your information to insurance companies, so be cautious about which sites you use and the information you provide.

Compare Different Types of Insurance Companies

There are two main types of insurance companies: those that sell through their own agents, and those that sell through independent agents. Companies that sell through their own agents have the same name as the insurance company, while independent agents offer policies from several different insurance companies. Getting quotes from both types of companies will give you a wider range of options to choose from.

Consider Smaller, Regional Insurers

In addition to well-known national insurers, don't forget to consider smaller, regional insurance companies. These companies often have higher customer satisfaction ratings and may offer lower rates.

Look Beyond Price

While getting a low price on your insurance is important, it's not the only factor to consider. Be sure to also research the financial stability and customer service reputation of the insurance company. Check the financial health of insurance companies with rating agencies such as AM Best and Standard & Poor's. You can also consult consumer magazines and reviews to get an idea of the quality of their customer service.

Ask About Discounts

Insurers typically offer a variety of discounts, so be sure to inquire about any that may apply to you. For example, you may be able to get a discount for bundling your auto insurance with other types of insurance, such as homeowners or renters insurance. You may also be eligible for discounts based on your driving record, age, or membership in certain groups or organizations.

Understand Your State's Requirements

Almost every state requires a minimum amount of auto insurance to drive legally. When comparing insurance quotes, make sure that the policies meet your state's minimum requirements. Keep in mind that minimum coverage may not be sufficient for your needs, and it's worth considering additional coverage to protect yourself financially in the event of an accident.

Review Your Policy Regularly

It's a good idea to review your auto insurance policy annually or whenever your personal circumstances change. For example, if you get married, add a teen driver to your policy, or change your vehicle, you should update your insurance to reflect these changes. Shopping around for a new policy or asking your current insurer about any adjustments to your coverage may help you find a better rate.

Drop collision and comprehensive coverage for older cars

Dropping collision and comprehensive coverage for older cars can be a great way to save money on auto insurance. Collision coverage pays for repairs to your vehicle if you collide with another object, such as a car, guardrail, pole, or tree. Comprehensive coverage, on the other hand, covers damages to your car from incidents other than collisions, such as fire, theft, vandalism, or natural disasters. While these coverages are valuable for newer cars, they may not be worth the cost for older vehicles with low market value.

When deciding whether to drop collision and comprehensive coverage, consider the age and value of your car. If your car is over a certain age, typically around five to six years old, or has high mileage, it may be more cost-effective to drop these coverages. Additionally, if the cost of repairs or the value of your car is less than the annual premiums, it might not make financial sense to keep paying for collision and comprehensive coverage.

It's important to note that lenders and leasing companies usually require collision and comprehensive coverage if you have a car loan or lease. In this case, you may not have the option to drop these coverages until your loan is paid off or your lease ends.

Before making any decisions, it's recommended to assess your financial situation and consider the potential costs of repairs or replacing your vehicle. If you have sufficient savings to cover these expenses, you may be better off using those funds to purchase a new car instead of paying for comprehensive and collision insurance.

Another factor to consider is the deductible amount. If you have a high deductible, such as $2,000, the insurance payout may not be worth the annual premiums. For example, if your vehicle sustains $2,500 in damages and you have a $2,000 deductible, the insurer will only pay out $500.

In conclusion, dropping collision and comprehensive coverage for older cars can be a strategic way to reduce your auto insurance costs. However, it's important to carefully evaluate your specific circumstances, including the age and value of your car, your financial situation, and the potential costs of repairs or replacement. Remember to also consider any state requirements and the terms of your car loan or lease before making any changes to your insurance coverage.

Raise your deductible

Raising your deductible is a great way to make auto insurance cheaper. A deductible is the amount you pay out of pocket before your insurance policy kicks in. For example, if you have a $1000 deductible and a hail storm causes $3000 in damages to your car, your insurance provider will only cover $2000 of the damages. By increasing your deductible, you can lower your premium payments.

The higher the deductible, the lower the premium will be, as you are assuming more financial responsibility in the event of a claim. For example, increasing your deductible from $200 to $500 could reduce your collision and comprehensive coverage cost by 15 to 30%. Going to a $1000 deductible can save you 40% or more. This is because, with a higher deductible, you are less likely to file small claims that could drive up premium costs.

However, there are some things to consider before raising your deductible. Firstly, make sure you have enough money set aside to pay the deductible in case of a claim. Additionally, if you have an expensive vehicle, raising your deductible may not significantly reduce your premium. Other factors such as your driving record, miles driven, location, and claims frequency can also impact your insurance premium. It's important to do the math and compare potential savings, as raising your deductible may not always make sense.

Raising your deductible can be a flexible option, and you can choose a deductible that fits your budget. You can also reevaluate and change your deductible as your circumstances change. Increasing your deductible can provide extra money from premium savings, which can be put towards an emergency fund or other financial goals.

In summary, raising your deductible can be an effective way to lower your auto insurance costs. By assuming more financial responsibility, you can reduce your premium payments. However, it's important to consider your budget and other factors that contribute to your insurance costs before making a decision.

Improve your credit score

Improving your credit score is a surefire way to get cheaper auto insurance. Here are some steps you can take to improve your credit score:

Make On-Time Payments

Late or missed payments can lower your credit score more than almost any other factor. Paying your bills on time is one of the best ways to improve your score. Set up autopay for at least the minimum amount due and set calendar reminders to ensure you never miss a payment.

Pay Down Revolving Account Balances

The amount you owe accounts for 30% of your credit score, and your credit utilisation rate is a major element. Aim to keep your credit utilisation rate below 30% by paying off any high credit card balances. If you regularly pay your credit card bill in full but still have a high utilisation rate, consider paying your bill shortly before your monthly statement date or making multiple payments to keep your balance low throughout the month.

Don't Close Your Oldest Account

The length of your credit history makes up 15% of your credit score and is influenced by the age of your oldest account. Closing a credit card, especially one of your oldest, can hurt your credit score. Consider using your oldest card every few months or putting a small recurring bill on it to keep it active.

Diversify the Types of Credit You Have

Your credit mix accounts for 10% of your credit score. In addition to credit cards, having other types of credit such as student loans, a car loan, or a mortgage can improve your score.

Limit New Credit Applications

Every time you apply for credit, the lender will run a hard inquiry on your credit report, which can knock a few points off your credit score. Only apply for credit when you need it and, if possible, check if the lender offers prequalification, which uses a soft credit check that won't impact your score.

Dispute Inaccurate Information on Your Credit Report

Inaccurate information on your credit report can negatively impact your score. Get your free credit report from Experian, Equifax, and TransUnion, and review it carefully. Dispute any inaccurate details you find.

Seek out other discounts

Seeking out other discounts can be a great way to save money on your auto insurance. Here are some additional discounts you may be eligible for:

Defensive Driving Courses

Some insurance companies offer discounts for drivers who take a defensive driving or accident prevention course. These courses can also help reduce the number of points on your license. Before signing up, check with your insurance company to see if the course is accredited and if the savings will be worth the cost.

Good Student Discount

If there is a student driver on your policy who maintains good grades (usually a B average or higher), you may be eligible for a good student discount. This discount can range from 1% to 39% and usually lasts until the student reaches the age of 25. Be sure to provide proof of good grades to your insurance agent to take advantage of this discount.

Low-Mileage Discount

If you drive fewer miles than the average, you may be eligible for a low-mileage discount. The definition of "low mileage" varies by insurer, but if you drive less than the national average of 13,500 miles per year, it's worth inquiring about potential savings.

Affinity Discounts

Some insurance companies offer discounts to members of certain professions, such as teachers or first responders, or to members of specific organizations, such as AARP or alumni associations. If you belong to any professional or affinity groups, be sure to ask your insurer about potential discounts.

Military and Veteran Discounts

If you or another driver on your policy is a member of the military or a veteran, you may be eligible for a discount. Many insurers offer these discounts as a way to honor those who serve. It's also worth looking into USAA car insurance, which is exclusive to members of the military community and offers some of the lowest rates available.

New Vehicle Discounts

Some insurers offer discounts for policyholders with newer vehicles. The definition of "new" varies by insurer, but if your car is less than three years old, you may be able to get a percentage off your premium. Be sure to ask your insurer about any potential savings.

Remember, the availability and eligibility requirements for discounts can vary by insurer and state. It's always a good idea to contact your insurer directly to find out what specific discounts you may qualify for and how to take advantage of them.

Frequently asked questions