Auto insurance isn’t a fixed cost; there are things you can do both today and over time that will lower your auto insurance premiums. You may need car insurance, but you do not need to pay more than you have to!
Given that automobile expenses are such a high—and often overlooked—expense, it’s well worth the time and effort to try to reduce them as much as possible. Although you may not be able to shorten your commute or trade for a more fuel-efficient vehicle overnight, there’s one automotive expense on which you can—as incessant ads like to remind you—cut by hundreds of dollars a year in a matter of minutes.
Yes, we’re talking about car insurance. And yes, you can almost always reduce your auto insurance bill if you know where to look.
Here’s how to do it.
Shop around
Prices vary from company to company, so it pays to shop around. Get at least three price quotes. You can call companies directly or access information on the Internet. Your state insurance department may also provide comparisons of prices charged by major insurers. You buy insurance to protect you financially and provide peace of mind. It’s important to pick a company that is financially stable. Get quotes from different types of insurance companies. Some sell through their own agents. These agencies have the same name as the insurance company. Some sell through independent agents who offer policies from several insurance companies. Others do not use agents. They sell directly to consumers over the phone or via the Internet.
Take a Defensive Driving Course
Sometimes insurance companies will provide a discount for those who complete an approved defensive driving course. Drivers may also be able to reduce the number of points he or she has on his or her license by taking a defensive driving, accident prevention or other courses.
Make sure to directly ask your agent/insurance company about this discount before signing up for a class. After all, it’s important that the effort being expended and the cost of the course translates into a big enough insurance savings. It’s also important that the driver sign up for an accredited course.
Shop Around for Better Premiums
If your policy is about to renew and the annual premium has gone up markedly, consider shopping around and obtaining quotes from competing companies. Also, every year or two it probably makes sense to obtain quotes from other companies just in case there is a lower rate out there.
Remember, cheap doesn’t always mean good, and going with the lower-priced company isn’t always the wisest decision. That’s because the insurer’s creditworthiness should also be considered. After all, what good is a policy if the company doesn’t have the wherewithal to pay an insurance claim? To run a check on a particular insurer, consider checking out a site that rates the financial strength of insurance companies. The financial strength of your insurance company is important but, what your contract covers is also very important so, make sure you understand your insurance contract.
Move closer to work
When you apply for auto insurance, one of the first questions you’ll be asked is how many miles your daily round-trip commute is. Not surprisingly, the shorter your commute, the lower your auto insurance premium will be. This makes sense because it means you’ll be on the road less and reduces the possibility of being involved in an accident.
For people who have short commutes, or are looking to shorten their commute, there are insurance companies tailoring their offering to you. Metromile is a good example – you’ll pay only for miles driven. So if you’re not driving much, you won’t pay much.
Conveniently, most people look for a job that’s closer to home when changing jobs. The fact that auto insurance will be less expensive as a result should be an added incentive. The biggest discount will happen if you have a work-at-home arrangement. This will mean that you will have virtually no commute, ensuring you will get the biggest discount on commuting.
Improve your credit
Right or wrong, insurance companies take your credit score into account when pricing your car insurance policy. Although you probably won’t be able to call up your insurance company and ask for a premium reduction just because your credit score went up a few points, a better credit score is likely to result in at least a slight improvement in your premiums the next time you shop for car insurance.
Increase your deductible
According to the Insurance Information Institute, increasing your deductible from $200 to $500 can make you eligible for a 15- to 30-percent premium discount, while raising the deductible to $1,000 can save you up to 40 percent. But bear in mind this typically applies just to the comprehensive and collision portions of your policy, not the baseline amount you pay for the entire policy. And, your savings from hiking deductibles varies widely depending on the state in which you live, the cost of your coverage after taking any other discounts, your driving record and your car’s cost to repair or replace, so remember to keep that in mind should you decide to go this route.
Drop comprehensive and collision if you don’t need it
Collision and comprehensive coverages are optional. And while collision pays to fix your car if you have an accident, and comprehensive pays out for damage due to fire, flooding, animal strikes, hail, you may not need the protection if you don’t own a new car. If your vehicle is more than 10 years old or worth less than $3,000, you don’t need these coverages. Collision costs an average of $488 a year, comprehensive costs $172 annually, on average, according to the Insurance Information Institute.
Buy your homeowners and auto coverage from the same insurer
Many insurers will give you a break if you buy two or more types of insurance. You may also get a reduction if you have more than one vehicle insured with the same company. Some insurers reduce the rates for long-time customers. But it still makes sense to shop around! You may save money buying from different insurance companies, compared with a multipolicy discount.
Seek out other discounts
Companies offer discounts to policyholders who have not had any accidents or moving violations for a number of years. You may also get a discount if you take a defensive driving course. If there is a young driver on the policy who is a good student, has taken a drivers education course or is away at college without a car, you may also qualify for a lower rate.
Summary
There are plenty of strategies that could easily lower your auto insurance premium by several hundred dollars per year. Take into consideration your circumstances and choose which works best for you.
