How To Save Money On Auto Insurance

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. Firstly, it's important to shop around and compare rates from different insurance companies, as prices can vary significantly. You can also increase your deductible, which is the amount you pay before the insurance company covers a claim. Another way to save is by taking advantage of discounts offered by insurance companies, such as those for safe driving records, low mileage, or certain occupations. Additionally, consider dropping any unnecessary coverage, such as collision and comprehensive insurance on older vehicles. Improving your credit score can also lead to lower insurance rates, as credit history is often considered when calculating premiums. Finally, bundling your auto insurance with other types of insurance, such as homeowners insurance, can often result in a discount. By following these strategies, you can keep your auto insurance costs under control.

Shop around for your car insurance

Shopping around for car insurance is a great way to save money. Prices differ from company to company, so it's worth putting in the time to find the best deal for you. Here are some tips to help you shop around for car insurance:

Get Multiple Quotes

It's important to get at least three quotes from different insurance companies and different types of insurance companies. This includes those that sell through their own agents, those that sell through independent agents, and those that sell directly to consumers via phone, an app, or the internet. By comparing quotes, you can find the best price and coverage for your needs.

Do Your Research

When getting quotes, make sure to ask informed questions and understand the different coverage options available. This will help you make an informed decision about which policy is right for you. Remember, you'll be relying on the insurance company if you ever need to make a claim, so it's important to choose a reputable company with good customer service.

Consider More Than Just Price

While price is important, it's not the only factor to consider when choosing a car insurance policy. The lowest price isn't always the best option. Make sure to also consider the company's reputation, the quality of service, and any discounts or incentives they offer.

Compare Apples to Apples

When comparing quotes, ensure that you're making a true cost comparison by including the same coverage options, limits, and deductible amounts across all quotes. This will help you accurately determine which company is offering the best value for your needs.

Review Your Policy Regularly

It's a good idea to review your car insurance policy at least once a year. Rates change frequently, and you may find that you're paying too much for your current policy. By shopping around and comparing quotes, you can make sure you're getting the best rate for your coverage.

Work with an Independent Agent

Consider working with an independent insurance agent, who can help you compare quotes from multiple companies and find the best deal for your needs. They can save you time and provide valuable expertise to help you make an informed decision.

By following these tips, you can effectively shop around for car insurance and potentially save hundreds of dollars on your premiums. Remember, it's important to find the right balance between price and coverage to ensure you're adequately protected in the event of an accident or claim.

Raise your deductible

Raising your deductible is a surefire 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 increasing your deductible, you can lower your insurance premium, which is the amount you pay for your insurance policy. Typically, the higher the deductible, the lower the premium. This is because you are assuming more financial responsibility in the event of a claim.

When choosing a deductible amount, consider your financial situation and driving habits. If you can afford to pay more for car repairs than for insurance, a higher deductible may be a good option. For example, increasing your deductible from $500 to $1,000 can lower your insurance rate by 10%, saving you hundreds of dollars a year. However, make sure you have enough money set aside to cover the higher deductible in case you need to file a claim.

It's also important to consider the value of your vehicle when deciding on a deductible. If your car is worth only $3,000, a $1,000 deductible may not be the best choice as you would end up paying a significant portion of the car's value in the event of a claim. Additionally, if you have a history of tickets and accidents, a higher deductible can help you manage costs.

Before making any changes to your deductible, be sure to shop around and compare insurance costs. Prices differ from company to company, and you may be able to find a better rate elsewhere. Review your coverage regularly to ensure it meets your needs, and take advantage of any discounts that may be available, such as low mileage discounts or safe driving discounts.

By raising your deductible and being a smart consumer, you can save a significant amount of money on your auto insurance. Just be sure you are comfortable with the higher out-of-pocket expense in the event of a claim.

Take advantage of low mileage discounts

One of the best ways to save money on auto insurance is to take advantage of low mileage discounts. If you don't drive a lot, you're less likely to get into an accident and file a claim, so insurance companies will often offer a discount for low-mileage drivers. Here's what you need to do to take advantage of these savings:

First, find out if your insurance company offers a low mileage discount. Not all companies do, but many of the major insurers do, including Metromile, Nationwide, Allstate, State Farm, USAA, Safeco Insurance, American Family Insurance, Farm Bureau, and PEMCO. The requirements for these discounts vary, but most are for drivers who travel fewer than 10,000 miles per year, with some as low as 7,500 miles.

If you meet the requirements, the next step is to provide proof of your low mileage. This can usually be done by submitting a photo of your odometer or providing service paperwork that includes your mileage. Some companies may also use mileage-tracking devices or telematics apps, or they may require periodic mileage updates or verification during policy renewals.

By taking advantage of low mileage discounts, you can save a significant amount on your auto insurance premiums. The potential savings vary depending on the company and your circumstances, but discounts typically range from 5% to 30% off the base premium. So if you're a low-mileage driver, be sure to ask your insurance company about this type of discount.

In addition to low mileage discounts, there are also pay-per-mile insurance policies and usage-based insurance programs that can save you money if you don't drive much. With pay-per-mile insurance, your rate is tied directly to your mileage, and you usually pay a base rate plus a per-mile rate each month. Usage-based insurance programs track your driving behaviour and mileage, and your discount is based on a combination of these factors. So if you're a safe, low-mileage driver, these types of programs can also help you save on your auto insurance.

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, on the other hand, covers damage caused by acts of nature (such as storm damage), vandalism, theft, fire, and more.

As your car gets older and its value decreases, you may want to consider dropping these coverages. A good rule of thumb is to drop collision and comprehensive insurance when the premium is more than 10% of the car's value. This usually happens when the car is around five or six years old or has over 100,000 miles on it.

However, it's important to note that some lenders or leasing companies require full coverage, which includes collision and comprehensive insurance, until the loan is paid off. Additionally, if you live in an area prone to natural disasters or collisions with animals, you may want to keep comprehensive insurance.

When deciding whether to drop collision and comprehensive insurance, consider your vehicle's age, value, and the likelihood of it being damaged. If your car is worth less than a few thousand dollars and has a high deductible, the insurance payout may not be worth the annual premiums. In this case, you may be better off paying for repairs out of pocket.

On the other hand, if you can't afford expensive repairs and the difference in cost is less than the potential repair bill, it may be worth keeping the coverage. Ultimately, the decision to drop collision and comprehensive insurance depends on your vehicle's value, your financial situation, and the likelihood of damage.

Improve your credit score

Improving your credit score is a surefire way to save money on auto insurance. Here are some tips to help you boost your credit score:

Make On-Time Payments

The single most important factor in improving your credit score is making timely payments. Your payment history accounts for 35% of your FICO score, and late or missed payments can remain on your credit report for up to seven years, negatively impacting your score. Set up autopay for at least the minimum amount due and create calendar reminders to ensure you never miss a payment due date.

Pay Down Revolving Account Balances

The amount you owe makes up 30% of your FICO score. Aim to keep your credit utilisation rate, or the percentage of available credit you're using, as low as possible. If you have high credit card balances, make paying them off a priority. Consider strategies such as debt consolidation loans or balance transfer credit cards to help manage your debt.

Don't Close Your Oldest Account

The length of your credit history accounts for 15% of your FICO score and is influenced by the age of your oldest account. Avoid closing old credit card accounts, even if you no longer use them. Consider putting a small recurring bill on the card to keep it active, or ask your card issuer if you can downgrade to a card that better suits your needs.

Diversify the Types of Credit You Have

Your credit mix, or the variety of credit accounts you have, makes up 10% of your FICO score. Having a mix of credit cards, loans, and mortgages can strengthen your credit score. If you're just starting, consider applying for a starter credit card and a credit-builder loan to improve your credit mix over time.

Limit New Credit Applications

Each time you apply for new credit, a hard inquiry is made on your credit report, which can knock a few points off your score. Only apply for new credit when necessary, and check if the lender offers prequalification, which uses a soft credit check that won't impact your score.

Dispute Inaccurate Information

Inaccurate information on your credit report can significantly harm your score. Regularly review your credit reports from Experian, TransUnion, and Equifax, and dispute any errors or fraudulent activity you find. Credit disputes are typically resolved within 30 days, and negative information can be corrected or removed.

Become an Authorized User

If you're new to credit or rebuilding your score, consider asking a loved one to add you as an authorised user on their credit card. This can have an immediate positive impact on your score, especially if the account has a positive payment history and a low credit utilisation rate.

Frequently asked questions