Introduction
Auto insurance is an expense, but that doesn’t equate to having to pay more than necessary. Some drivers unwittingly spend more than necessary just because they don’t know the tactics that can save them money. Good news is you can save money without compromising vital coverages. What follows will reveal to you the best ways to save money on auto insurance without compromising your protection.
Why Auto Insurance Rates Differ
Auto insurance premiums are not arbitrary. Insurers estimate premiums based on a range of variables, such as
Your driving history Accidents and tickets result in higher premiums, while a good record can qualify you for discounts.
Your age and sex Younger drivers, particularly teenagers, tend to pay more. Statistically, males under the age of 25 pay higher premiums than females.
Your neighborhood Urban locations tend to have higher premiums because there is more traffic, theft, and accidents.
Your car’s model and make Luxury vehicles, sports cars, and cars with expensive repair costs usually have higher premiums.
Credit score In most areas, a better credit score means lower rates.
Understanding what impacts your rate will allow you to discover ways to reduce it.
- Shop Around for the Best Rates
One of the easiest ways to save money is by comparing quotes from multiple insurers. Prices can vary significantly between companies for the same coverage.
Get at least three quotes Use online comparison tools or work with an independent insurance agent to compare options.
Look beyond the premium Make sure you’re comparing coverage levels, deductibles, and discounts — not just the price.
Shop smaller, local insurers Big-name companies aren’t always less expensive. Sometimes regional insurers are cheaper and more personalized in their service.
- Bundle Your Insurance Policies
Most companies will give you a discount when you bundle policies. Typical bundles are
Auto and home insurance
Auto and renters insurance
Auto and life insurance
Bundling will save you between 5 and 25 percent, depending on the company. It’s also more convenient to deal with one company for all your policies.
- Increase Your Deductible
Your deductible is the amount you pay yourself before your insurance company starts paying out. Increasing it from $500 to $1,000, for instance, can reduce your premium. Just make sure you’ll be able to afford the higher deductible if you must make a claim. - Use Discounts
A lot of drivers lose money on discounts simply because they don’t ask. Typical discounts available for auto insurance are
Good driver discount If you have been accident-free for several years.
Good student discount For young drivers with a B or better average.
Low mileage discount If you drive fewer than the average number of miles annually.
Defensive driving course discount Some companies reward drivers who take a certified safety course.
Vehicle safety discount Vehicles with anti-lock brakes, airbags, anti-theft devices, and other safety features may be eligible.
Multi-car discount Insuring two or more cars with the same insurer can save you money.
Always request your insurer to apply available discounts — they may not do so automatically.
- Improve Your Credit Score
In most places, insurers base your premium on your credit score. A better score tends to mean lower premiums.
How to improve your credit score
Pay bills on time
Lower credit card balances
Review your credit report for errors and challenge any inaccuracies
A good credit score doesn’t merely save you money on insurance — it benefits loans and other products as well.
- Drive Carefully and Have a Clean Record
The longer you’re accident- and ticket-free, the lower your rates. Most insurers grant “safe driver” discounts, and some have usage-based programs that monitor your driving habits.
Good driving habits that can qualify for discounts are
Not hard braking or accelerating hard
Driving fewer miles per year
Not driving late at night
- Look at Usage-Based or Pay-Per-Mile Insurance
If you drive fewer miles, you could save with a usage-based or pay-per-mile policy. These policies monitor your driving with a smartphone app or a plug-in device. The less you drive and the safer you drive, the more you save. - Review Your Coverage Needs
If you have an older vehicle, you can probably drop the collision and comprehensive coverages. A good guideline — if your vehicle is worth less than 10 times the premium you pay annually, you can drop these coverages.
Keep the liability coverage, though — it’s necessary and mandatory by law.
- Check Your Policy Each Year
Life changes, and so should your insurance policy. Take a look at it annually to ensure you’re not paying for coverage you no longer require. Think about changes if
You relocate to a new neighborhood
Your vehicle depreciates in value
You drive less
- Ask About Loyalty Rewards — But Don’t Be Afraid to Switch
A few insurers give discounts to loyal customers. But don’t count on loyalty to bring you the lowest price. In some cases, new customers are offered better introductory rates.
If you discover a lower quote with a solid company, don’t be afraid to switch. Just ensure there’s no break in your coverage in the middle.
Saving on car insurance doesn’t have to involve sacrifice. Shopping around, applying discounts, modifying your coverage, and enhancing your credit score will have you getting a policy that won’t break the bank but still keep you secure. Reevaluating your policy every now and then guarantees you receive the best bargain available.