Car insurance can be a pain in the neck to understand, but failing to do so can cost you big bucks. Not all policies are the same, and small changes can add up to big savings.
The new year is almost here, so it’s time for a year-end review of your auto insurance policy. Here are some tips that can help you reduce car insurance premiums.
1. Increase your deductible
You can save 10 to 15 percent on comprehensive and collision coverage by raising your deductible from $250 to $1,000. Afraid you won’t be able to meet that amount if you’re involved in a car accident? Create an emergency fund to cover the cost so that if you file a claim you will not have to wreck your budget.
2. Choose the pay-as-you-drive option
With Progressive Snapshot, you could save on your premiums by plugging a small device into your car’s diagnostic port to track your driving, including how many miles, how often you slam on the brakes and how often you drive between midnight and 4 a.m.
State Farm’s Drive Safe & Save program uses your car’s OnStar, In-Drive or Sync communication system to collect your driving information.
Allstate’s Drivewise device plugs into the diagnostic port.
Will you save money? Perhaps, depending on the program and how you drive. Besides tracking mileage, insurers may check to see if you brake hard, if you make jack-rabbit starts, if you speed, or if you regularly drive late at night.
Check to see if pay-as-you-drive programs are available in your state. Often you can try it out for a month to see how much you’d likely save.
3. Comparison shop
Prices change, so it’s important to compare what you’re paying now with rates at other companies.
The lowest price doesn’t always mean the best policy for you. You want a company that’s not only financially stable but also offers dependable and timely service. The Insurance Information Institute recommends that you ask for recommendations from friends and family, get online quotes, call local providers, review consumer guides and search your state insurance department’s website.
You’ll want to compare quotes from no less than three insurance companies. You can find quotes with our insurance tool.
4. Ask about discounts
Insurance companies offer a variety of discounts to qualifying policyholders. For example:
- Over-50 discount
- Multivehicle discount
- Teenagers with GPA of 3.0 or higher discount
- Loyal customer discount
- Antitheft devices discount
- College student discount
- Accident-free discount
- Moving violation-free discount
- Low annual mileage discount
Check with your insurance company to make sure you’re getting all of the discounts you qualify for. Some won’t offer them unless you ask.
How much you drive in a year is a factor in how much you pay for insurance. Ask your insurance company if you can save by reducing your mileage and by how much. Carpooling could significantly reduce the mileage you put on your wheels, saving you money on premiums as well as reducing the wear and tear on your car.
6. Purchase only what you need
If you own an older vehicle, you may not need to carry comprehensive and collision coverage.
The Insurance Information Institute says:
If your car is worth less than 10 times the premium, purchasing the coverage may not be cost-effective. Auto dealers and banks can tell you the worth of cars. Or you can look it up online at Kelley Blue Book.
But keep in mind that if you have an accident that’s your fault, you’ll be on the hook for the full value of your car. This is another instance where a healthy emergency fund is critical.
7. Bundle up
You could get a better rate on your car insurance if you also buy your homeowners and other types of insurance from the same company.
8. Notify your provider of any changes
Changes in your driving patterns can yield large savings. If your daily mileage decreases because of such factors as carpooling, relocation or a shorter commute — or you no longer drive to work because you now work at home or have retired — your rates will likely follow suit, because you will be less likely to be involved in a crash. Also, removing drivers who no longer operate your vehicle from the policy will reduce your premiums.
9. Maintain good credit
Like it or not, many insurance companies equate bad credit with a higher likelihood of filing claims. That means a bad credit score could result in higher premiums. See “10 Steps to Build Your Credit Score Fast.”
10. Don’t pay monthly
Your car insurance company likely offers a discount for paying your bill all at once instead of in monthly installments. The savings can be substantial.
Do you have tips for saving money on car insurance? Share with us in comments or on our Facebook page.