How to Reduce the Cost of Your Car Insurance

11.07.2019

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The strategy for paying less for automobile insurance is straightforward. In order to get the lowest rates, you’ll need to shop wisely among companies that offer insurance. After that, it’s important to compare costs, look for discounts, opt for higher deductibles, maintain good credit, group your car and home coverage, use electronic billing and reduce coverage on any older cars you own.

Shop Around

If you’re not familiar with how insurance works, you’ll need to do a bit of research before you can begin to shop around for policies from different carriers. Unlike many other types of insurance, auto insurance is rather uncomplicated.

For individuals who own vehicles, there are annual premiums to be paid. Most companies allow you to pay these charges on a monthly basis if you wish, but there is usually a small fee for the convenience to do so.

Typical insurance for cars consists of either comprehensive or liability protection. If your car is still owned partially by a bank or other lender, you will need to purchase comprehensive coverage. When shopping around for coverage, be sure to ask about the price differences for each type of coverage.

Even if you are set on purchasing comprehensive, it helps to know the company’s rates for liability. After you’ve paid your car off, you will possibly want to switch from comprehensive to liability coverage, as many people do.

In all, there are five qualities consumers should look for when deciding on the best carrier for their automobile insurance needs:

  • Prices of Policies: Don’t make this one aspect a deal-breaker. Price is important but it’s not everything. However, note the general prices for average policies when comparing companies. Pay special attention to the types of insurance you may need.
  • Types of Coverage Offered: Some companies offer many different types of insurance while others only have bare-bones coverage for car owners. Find a company that offers the type of insurance you want. If you have young teens who might be using your car, look for policies that allow you to add them to a policy at a low cost.
  • Reputation in the Industry: Spend a few minutes doing basic online research to see what other consumers and industry professionals think about the companies you are considering.
  • Bonuses Offered: Are there “accident forgiveness” bonuses or special rates for good drivers? Insurance companies offer lots of flat-rate bonuses and bonus programs, so see what’s available that might fit your needs.
  • Customer Service: Here is an area where it pays to do some simple research. Consumer agencies rate insurance companies. Use this data as a guide to help you make your decision.

Before You Buy a Car, Compare Insurance Costs

The time to do comparison shopping for auto insurance is before you purchase a car. Here are some of the most effective ways to engage in smart shopping for an auto policy:

1. Choose Your Three Top Companies – Research several of the top auto insurance companies based on reputation, the range of policies offered, customer feedback and any other parameters you think are useful. Narrow your company choices down to three or four that meet all your criteria.

2. Call and Ask About Discounts – Contact each one of the companies and be ready to enter all the data onto a spreadsheet. Ask about discounts for people your age, special rates for students (if you are a student), senior discounts, and any seasonal specials or new customer specials.

3. Collect Data for Each Model – Explain to each insurance rep that you are undecided on the model you intend to buy. Car insurance rates can vary widely between models, so be sure to list each specific type of car you are considering. Enter all the data, along with what you collected above about discounts, onto your spreadsheet. It should now be possible to make a decision on make and model based on insurance rates you’ve collected from the reps.

4. Seek Discounts – Insurance companies offer a wide variety of discounts for their customers. Here are some of the most common discounts.

  • Multi-Policy – By having your home and auto policies with the same company, you can not only earn a nice discount but have the ability to easily manage both accounts with the same carrier.
  • Multi-Car – If you own more than one car and choose to insure them with the same company, you can earn a discount. A third or fourth car will earn even higher discounts.
  • Low-Mileage – If you are a low-mileage driver, typically defined as someone who logs fewer than 7,000 miles per year (though the threshold differs from company to company), you can earn discounts of up to 12 percent on your policy.
  • Pay in Full – By paying your annual premium in full in one lump sum, most insurance companies offer a substantial discount. There are similar discounts for semi-annual payments. Monthly payments are the most expensive way to pay for auto policies.
  • Electronic Billing – You can save a substantial amount of money by using electronic billing and direct withdrawal on your auto policy. Some electronic billing options simply notify your when a payment is due. You have to go online and pay it manually after the notice. Others use an automatic withdrawal from your bank account each month or quarter. Whatever form of e-billing you use will help you save on your total premium expense.

Ask for Higher Deductibles

Asking for a higher deductible level can significantly cut your auto policy expense. Insurance carriers typically offer several different deductibles for you to choose from. Think carefully about which level to choose. It’s tempting to choose the highest deductible and get the lowest policy rate, but that’s not always the best choice.

Sometimes, depending on your budget and how much you can afford to spend on car repairs, you might want to opt for the second-highest or third-highest deductible.

Everyone likes the idea of paying next to nothing when they have to pay repair costs after an accident. A high deductible might cost you more in the event of a crash and subsequent repair, but you’ll likely save as much or more by paying lower premiums month after month. Do the math, and seriously consider opting for something other than the lowest deductible offered by the carrier.

Reduce Coverage on Older Cars

Many two-car families miss out on this way to save on auto policy costs. Sometimes it makes perfect sense to keep comprehensive coverage on your best car, or the one you use most often. Likewise, it can be wise to reduce coverage on older cars and cars that you don’t use very often.

By opting for liability-only coverage on that second-hand car you keep in the garage for just a few trips per month, you can reduce your auto policy rates by a lot.

It always pays to do an annual review of the cars you have, based upon how often you use them, how old they are and how much it would cost to repair them in the event of an accident. A quick look at depreciation charts can reveal a lot about whether to keep full coverage on an older car. In most every case, cars seven or more years old are not worth repairing after a major accident. That means anything more than liability coverage really doesn’t make sense.

Buy Your Homeowners and Auto Coverage From the Same Insurer

Of course, insurers want you to buy all of your different types of coverage from them. That’s just good business sense on their part. But for you, the consumer, this desire by insurance companies can pay off in terms of significant policy discounts.

That means you can enjoy not only lower auto coverage expenses but lower rates on homeowners policies as well. Bundling is a technique used in many industries that benefits both the seller and buyer of a product or service. Insurance is no different.

Especially if you own a home, consider buying both your car and home insurance from the same carrier. And it’s not just homeowners who can save. If you bundle your renters insurance or condo insurance with auto coverage, most companies will offer you a discount, sometimes as much as 10 percent overall.

Another advantage of buying auto and home policies from the same carrier is convenience. If you want to change deductibles, add another type of coverage, add a driver, ask about coverage for storm damage to your roof, inquire about young-driver policies for your teen, you can make one phone call to an agent and have access to all the information you need. There’s a lot to be said for convenience, which is why so many people opt for multi-policy coverage from the same carrier.

Maintain a Good Credit Record

Good credit means lower rates on auto policies as well as other types of insurance. If you bundle your home and auto policies, for example, the amount of money you save by maintaining good credit is magnified. The more policies you have with a carrier, the more you’ll save by having a good credit rating.

What does it take to maintain good credit? Here are the five key things to remember to keep your score where it is, or even improve it over time:

  • Pay All of Your Bills on Time. This is the biggie, but there are other pieces to the good credit puzzle. Paying bills on time is the foundation for building a solid credit rating, and will show all who view your scores that you are a good risk.
  • Keep Balances Under 30 Percent, of Available Credit, on any Credit Cards You Have.┬áThe credit reporting agencies put a lot of stock in whether you are using cards “responsibly.” Their definition of that word typically means you stay under the all-important 30 percent threshold.
  • Don’t Apply for New Sources of Credit Unless You Absolutely Must.┬áThat’s because each new application means there’s a “hard pull” for a credit check. After that, if you are approved for the credit you applied for, it means you’ll have another outstanding account to keep an eye on.
  • Watch Your Credit Report by Viewing it at Least Twice Per Year. You can get one FREE credit report from each of the three major credit agencies (Equifax, Experian, and TransUnion) each year, but you can obtain additional reports at shorter intervals for a small fee. It’s worth it to know exactly what your scores are with the “Big Three” agencies.
  • Take the Time to Understand How Credit Scoring Works. Then, you’ll be on the way to having a good score for life. There are dozens of great online resources, especially with the main pages of the three large credit reporting agencies. Know what goes into credit scores and you’ll be less likely to do anything that causes problems for your score in the future.

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