If you own a car, auto insurance is an annoying bill that cannot be avoided in 48 of the 50 states. Whether you pay your premium in full, bi-annually or every month, you may feel you are overpaying, and there’s a good chance you are. Auto insurance has many moving parts and factors making it easy to overpay. So what should you do if you want to reduce your auto insurance costs?
Table of Contents
- Compare Quotes From At Least Three Companies
- Reconsider Your Comprehensive and Collision Amounts
- Adjust Bodily Injury and Property Damage Liability
- Apply for Discounts
- Other Factors
If you think you are overpaying, the first thing to do is to shop around for quotes. This may be the simplest solution if you are not contracted to your current company. Auto insurance is highly competitive and in any given area there may be over 20 companies offering insurance. For example, in Virginia, across twenty companies prices ranged from 54 a month up to 218 a month for a 30 year old male driver just in one town. Auto insurance companies price based on your zip code, so just because State Farm prices your friend who lives thirty minutes away a certain amount, that doesn't mean you would get the same. Sometimes even the largest companies can have stark differences in certain areas.
Depending on the worth of your car, collision insurance can be an extraordinary expense. If you are unaware, collision insurance is used in the event where you are at-fault in an accident, and need to make repairs to your car. If you are not at-fault, the person who crashed into you would make the repairs with their property damage insurance.
The first thing to recognize is how valuable your car is. If your car is not worth a lot, perhaps only a couple thousand dollars, you could very well spend more on the insurance than what the car is actually worth. According to GEICO, nearly 65% of owners of cars 10 years or older do not even carry collision insurance. If you bought your car ten years ago, and have just renewed your policy every year without considering any changes, you can very well be overpaying by hundreds every year.
On the other hand, if your car is actually worth a few thousand dollars, and would be costly in the event of an accident, you can still lower the price by adjusting the deductible. The higher deductible you opt for, the lower monthly premium you will pay. For example, when we looked at a quote from New York, we found by changing the collision deductible from $500 to $1,500, the monthly premium lowered by $11 a month or $132 over the year. There is of course a risk with choosing a high deductible. We discuss more about choosing deductibles here.
Though not as expensive as collision, comprehensive is another great, and low risk way to control your car insurance payments. Essentially, comprehensive insurance is insurance against whatever unlucky thing the universe may throw at you--a tree landing on your car, a hailstorm, or even someone vandalizing your car. If you live in a relatively calm weather area, or an area of very low crime, it may be worth increasing your deductible to pay less every month. Simply, the odds of filing a comprehensive claim go down in areas like that, so its less risky to have a high deductible. The pay off is not nearly as good as collision however, we found that a $500 to $1,500 deductible for comprehensive insurance only decreased the monthly premium by $2, or $12 a year.
The safest way of saving on auto insurance. Companies, especially large ones, offer so many discounts that there’s a great chance you don’t even know you qualify for some. Simple discounts include bundling, good student, early signing, paying electronically, paying in full and more.
If you have several assets to insure, like a house, a condo, or even a motorcycle, “bundling” them under one company such as Progressive or GEICO can be a great way to save up to 20% on your premium. The bundling would also save you on the other policy you are combining with. A good student discount does as it says; if your child is averaging a B or 3.0 in college or high school, and they are on your policy, you can submit their transcript and save up to 10% on your premium. Signing early, as in, getting a policy a few weeks before you need it to be effective can also save you around 3% on your premium. As well, large companies like Allstate offer a 10% discount if you keep everything paperless. There are also discounts for senior drivers, over the age of 55. In states like California, if you are over the age of 55, you can take defensive driver courses. They range from $15 to $35 but can save you up to 10% on your premium.
Just being a safe driver will save you money. If you got into an accident seven years ago, and still see it affecting your rates, you should re-do your policy right away. Car accidents generally shouldn't affect rates past five years, and if you have been accident and incident free for that time, many companies will give you a discount. Overall, tou should talk to your insurance agent at your company and see whatever other discounts they offer you may qualify for.
Bodily injury and property damage liablity is admittedly trickier, and much riskier to control than collision and comprehensive insurance, and should be a last resort. At least with collision, you are only covering whatever damage your car takes. With body liability, you are paying for the damage you cause to someone else and their car. Another person’s medical bills can cost hundreds of thousands of dollars if the accident was very bad. If you are only insured for $50,000 and the other person doesn’t have personal injury protection, or low underinsured motorist limits, you are going to have to somehow foot the rest of that bill. Not choosing the right limits can lead to possible financial ruin.
We wouldn’t recommend adjusting this coverage to save money. We would actually recommend getting the most coverage you can possibly afford. An extra $50 a month pales in comparison to owing hundreds of thousands of dollars. If however, your financial assets or situation have decreased, then lowering your coverage limits appropriately can save you a decent amount every month.
One factor you can work on is your credit score. Insurance companies use your credit report to form an insurance score that greatly affects your premium. We found in a policy from Utah that someone with poor credit can be paying as much as 62% more every year than someone with great credit. If you filed your policy while your credit was low, but have improved it since then, you should definitely tell your insurance agent.
The amount you use your car can also save you money. If you no longer need to drive to work everyday, or simply drive less for whatever reason, you can adjust your policy to reflect that. The less you drive, the less you should pay.