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| 15 Tips and Ideas for Cutting Car Insurance Costs |
To ensure financial protection while driving, having car insurance is a must. It's important to review your options, whether you opt for basic liability coverage or full auto coverage, to make sure you're getting the most cost-effective policy. If you're looking to lower your car insurance costs, here are 15 strategies you can consider.
Here are some key takeaways:
- A bulk rate reduction for insuring numerous vehicles and drivers at once is one strategy to reduce the cost of auto insurance.
- If you have additional insurance policies with the same provider, you can potentially be eligible for lower vehicle insurance prices.
- Keeping a clean driving record is essential to get reduced auto insurance rates.
How Much Does Car Insurance Cost?
The cost of car insurance varies for each driver, depending on their state of residence, choice of the insurance company, and type of coverage. However, understanding the typical expenses can be helpful when trying to save on insurance costs.
Based on data from the National Association of Insurance Commissioners (NAIC), the average driver paid $1,190 for car insurance in 2018. Despite only a 7% increase in the number of insured vehicles between 2014 and 2018, car insurance premiums increased by 30%, as per the same data.
In 2020, AAA reported that the average cost of car insurance for new vehicles was slightly higher, at $1,202 per year. These figures indicate that drivers should consider allocating approximately $100 monthly for auto insurance when budgeting for a new car purchase.
NOTE: Some factors that impact the cost of car insurance, such as your driving record, are under your control, while others are influenced by factors like state laws and the frequency of accidents in your state.
TIPS TO REDUCE CAR INSURANCE COSTS
Various methods can be used to decrease car insurance expenses. Once you are aware of the estimated cost of car insurance, you may implement some or all of these techniques.
1. Take Advantage of Multi-Car Discounts
Inquiring about insuring several drivers or vehicles with an auto insurance company instead of insuring only one vehicle could result in a higher quote per vehicle. Insurance firms tend to offer a bulk rate as they want your business. They may be willing to give you a deal under certain circumstances if it means you will bring in more business.
Contact your insurance agent to check whether you qualify. In general, multiple drivers should live at the same residence and be related by blood or marriage. Two unrelated individuals may also receive a discount; however, they must typically co-own the vehicle.
Expect to pay a higher insurance rate for insuring a teen driver. However, if your child's grades are a B average or higher, or they are in the top 20% of their class, you may be eligible for a good student discount on the coverage, which typically lasts until your child is 25 years old. These discounts may vary from 1% to 39%, so be sure to provide evidence to your insurance agent that your child is a good student.
Some firms may offer an auto insurance discount if you have other policies with them, such as homeowners insurance. Allstate, for example, offers a 10% car insurance discount and a 25% homeowners insurance discount when you bundle them together, so see if these discounts are available and applicable.
2. Pay Attention on the Road
It is crucial to emphasize the importance of being a safe driver in today's world, where there are many distractions inside vehicles. By being more alert, you can prevent accidents and traffic violations that may lead to an increase in your insurance rates. Travelers provide discounts for safe driving, ranging from 10% to 23% based on your driving history. It is worth noting that drivers usually receive points for traffic violations, and accumulating more points may result in higher insurance premiums.
3. Take a Defensive Driving Course
Insurers often give discounts to policyholders who complete an approved defensive driving course. These courses may also help drivers reduce the number of points on their licenses that can lead to increased insurance premiums. However, it is crucial to confirm with your agent or insurance company if the discount is applicable to the course you plan to enroll in before signing up. The savings gained from the course should justify the effort and cost invested. Furthermore, it is necessary to ensure that the course is accredited according to your state's rules on defensive driving courses. GEICO provides a website where you can verify the accreditation of defensive driving courses in your state.
4. Shop Around for Better Car Insurance Rates
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 important, so make sure you understand it. Insure.com’s site bases its insurance company ratings on data assembled by Standard and Poor’s.
5. Use Mass Transit
When enrolling for insurance, a questionnaire is typically used by the company. The form may ask for the number of miles driven annually for the insured car. Generally, higher premiums are required for drivers who use their car for a long daily commute of three hours compared to those who drive only one mile per day. To reduce the number of miles driven, using mass transit might be a good option, though a significant mileage decrease is needed before getting a discount. To ensure your effort isn't wasted, ask your insurance company about the various mileage thresholds. Additionally, it's essential to check how many miles are currently recorded by your provider, as most can give you a better insurance quote.
6. Downsize Your Vehicle
While purchasing a large SUV might seem like a thrilling idea, insuring a high-end vehicle weighing 5,000 pounds can be costlier than insuring a small, less expensive car that is still safe. Some insurance companies might provide a discount for purchasing an alternative fuel or hybrid vehicle. For instance, Farmers offers a discount of 5%. Opting for an eco-friendly car could allow you to protect the environment and save money on insurance simultaneously. Before making a purchase, it is advisable to determine the precise insurance rates for the various vehicles you are considering.
7. Increase Your Deductibles
The amount of money you are required to pay before your insurance company covers the cost of any accident, theft, or damage to your vehicle is known as a deductible. Typically, you can choose your deductible amount when selecting car insurance, and it usually ranges from $250 to $1,000 depending on the policy. However, the premium you will pay annually is typically higher when the deductible is lower. Conversely, a higher deductible means a lower premium.
To determine if raising your deductible will make a significant difference in your annual premium, ask your agent to explain the potential cost-savings percentage. If you're concerned about filing smaller claims and risking an increase in your premium, then raising your deductible is a sensible decision.
8. Improve Your Credit Rating
The driver's driving history is a significant factor that impacts the cost of auto insurance. This is because an individual who has been involved in several accidents is more likely to cost the insurance company a considerable amount of money. However, it may come as a surprise to some that credit ratings are also taken into account when determining insurance premiums.
According to Michael Barry, who is the Senior Vice President and head of media relations of the Insurance Information Institute, many insurers utilize credit-based insurance scores, although it is a controversial issue in some statehouses. Insurers argue that if an individual is responsible in their personal life, they are less likely to file claims.
While this may or may not be accurate, it is crucial to be aware that your credit rating can influence the cost of insurance premiums. Therefore, it is essential to do everything possible to keep your credit score high.
9. Consider Location When Estimating Car Insurance Rates
It's not probable that you would relocate to a different state just to pay lower car insurance premiums. However, if you're planning to move, you should consider the possible variation in your car insurance costs and factor it into your budget.
10. Review Your Coverage
When considering whether or not to drop certain types of coverage, it's important to weigh the risks and benefits carefully. While it's impossible to predict when an accident might occur, drivers of older, less valuable vehicles may choose to drop collision or comprehensive coverage in certain circumstances.
This decision depends on factors like the cost of coverage, the driver's history, and the value of the vehicle. For instance, if the car is worth only $1,000 and collision coverage costs $500 per year, it might not be worth keeping the coverage. This way, if an accident occurs, and the car is totaled, the insurance company would pay out very little if anything.
11. Get Discounts for Installing Anti-Theft Devices
Individuals can reduce their yearly premiums by fitting anti-theft equipment. GEICO, for instance, proposes a “potential savings” of 25% for vehicles with an anti-theft mechanism.
Your insurer should be able to identify which specific devices, when put in place, can lower premiums. Car alarms and LoJacks are a couple of devices you could ask about.
If your primary objective is to lower your insurance premium, before you add an anti-theft device, calculate if the expense of adding the device will result in significant savings that make it worthwhile.
12. Speak to Your Agent
When looking for ways to save money on your car insurance, it's important to keep in mind that there could be additional savings beyond what's been discussed. Therefore, it's recommended to inquire about any special discounts that the company offers, such as those for military members or employees of specific companies. You might be surprised at what discounts are available for your situation.
13. Switch to Pay-as-You-Go Insurance
If you're a cautious and infrequent driver, you might be eligible for a usage-based insurance program (also known as black box insurance) such as Allstate's Drivewise, Progressive's Snapshot, or State Farm's Drive Safe & Save. These programs allow your insurance provider to monitor your driving habits through a telemetric device in your vehicle, in return for potential discounts based on your driving frequency, timing, and skill. You could save money with this type of program if you drive less than 10,000 miles annually.
14. Research Additional Discounts
Insurance companies offer a range of discounts. Look for savings opportunities such as:
- Paying the entire annual or six-month premium upfront
- Opting for e-bills and documentation
- Belonging to specific organizations or groups that provide discounts
While it is tempting to be lured by a lengthy list of potential discounts, make sure to compare both discounted and regular prices from different insurers.
15. Ditch Coverage You May Not Need
It's possible that some components of an insurance policy, like roadside assistance or car rental coverage, may not be necessary for you. It's recommended to thoroughly review your insurance policy and inquire about excluding any coverage that you don't need.
The Bottom Line
It's expected that the cost of car insurance will increase in the future, but there are ways to lessen the impact. By following these 15 suggestions, you can take steps to mitigate the rising costs. Additionally, it's important to compare different car insurance providers to find one that offers the appropriate coverage for your needs at a reasonable cost.
DISCLAIMER: The information provided in this article is for educational and informational purposes only and should not be taken as professional or legal advice. Auto insurance laws and regulations vary by state and are subject to change. It is important to consult with a licensed insurance agent or attorney for advice on specific coverage needs and requirements in your area. The accuracy and completeness of the information provided in this article is not guaranteed and may be subject to errors or omissions. The author and publisher disclaim any liability for any loss or damage resulting from reliance on the information provided in this article.
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