Car insurance keeps getting more expensive, with the average price nationwide being roughly $2,000 per year.
While much has been written about reducing your policy’s premiums, many people overlook all the pesky little fees that insurers can tack onto your bill. These fees are easy to avoid … so long as you know they are there in the first place.
To find where these fees might be hidden, we chatted with Erin Newell, an agent with Insurance Services Agency of Gun Lake in Wayland, Michigan.
Here’s a look at some common car insurance fees and how to stop paying them.
1. Broker fees
An insurance broker can help you find and compare auto insurance quotes from several companies, and a good broker can help you save money in the long run.
Obviously, brokers deserve to be paid for their work, and it’s common for them to receive a commission from an insurance company when a client purchases a policy. However, some brokers may also charge their clients a direct fee.
“As an independent broker, we don’t have fees,” Newell says of her agency. She most commonly sees broker fees charged by online auto insurance comparison websites.
State law may dictate how much can be charged in your area, and all broker fees should be clearly disclosed. Be sure to read the fine print or ask a broker up front about fees if you want to avoid them.
2. Roadside assistance fees
Many car insurance companies offer the option to add roadside assistance to a policy. This isn’t necessarily a bad idea — anyone who has been stranded on the side of the road can attest to the peace of mind these plans bring. But you might be able to get this same service cheaper or for free elsewhere.
Roadside assistance is often included in new car warranties, and some credit cards offer complimentary roadside assistance as one of their perks. Chase Sapphire Reserve, for example, will cover up to $50 for roadside assistance, four times per year.
Also, all Visa Signature cards come with roadside dispatch. You will pay for using this service, but unless your vehicle breaks down frequently, that may be less expensive than paying for an insurance add-on you rarely use.
If you do want to buy roadside assistance, look for ways to get a discount. For instance, AARP members can receive 20% off Allstate Roadside plans.
3. Gap insurance fees
Short for guaranteed asset protection, gap insurance will pay the difference between what you owe on a vehicle and how much it is worth in the event your car is totaled or stolen.
Car insurance companies may offer gap coverage to policyholders, but your lender may also roll the cost into your vehicle’s financing.
“It typically is much cheaper to go through a lender,” Newell says.
Before tacking on an extra car insurance fee, be sure you aren’t already covered elsewhere. Also, keep in mind that gap coverage isn’t needed if you own a vehicle outright or if the amount you owe is less than the value of the car.
4. Installment fees
Car insurance companies make it easier to pay premiums by offering monthly, quarterly or similar payment plans. But be aware that the convenience will cost you.
Companies often charge a flat fee with each payment, and this amount could only be a few dollars. However, many states, such as New York, don’t regulate these fees, meaning there is little legal ground to rein in how much insurers can charge.
If you are looking to save money, Newell advises skipping the payment plan, if you can. “Typically, if you pay your insurance in full, you’re going to get a substantial discount,” she says.
5. Credit card fees
Whether you pay monthly or in full, skip using your credit card and set up an electronic funds transfer from your bank account instead.
“If you set it up with an EFT draw, you can avoid a processing fee,” according to Newell.
Again, the credit card professing fee could be only a few dollars, but if paid monthly, that amount could add up.
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