Car insurance is a requirement – and not just to protect yourself and others in the event of an accident – but a legal requirement. If you drive a car, you need insurance. Fortunately (and unfortunately), there are thousands of companies that provide automobile insurance and just as many policies from which to choose.
With so many options available, it’s easy to throw your hands up and choose whichever is the cheapest option or to just stay with the company you have been using for years. Both of those options are easy, but they can also cost you a lot of money in the long run.
So which auto policy is the best? The one that provides quality coverage at an affordable rate. Sounds easy, right? It’s actually not as bad as it sounds. The following tips will help you find affordable auto insurance rates without sacrificing coverage.
How To Find Affordable Auto Insurance Rates
Many factors go into your auto insurance premiums. Your auto insurance rates will be based on the type of coverage you purchase, where you live, your age, gender, driving record, credit score, number of recent claims (if any), and other factors. The following tips are general factors that can often save drivers money on their car insurance premiums.
Bundle Your Insurance Policies
If you have more than one car or have other insurance policies such as homeowners or life insurance, you may qualify for lower insurance premiums by bundling two or more of your policies through one provider.
Multiple insurance policy discounts not only make insurance less expensive, but you can take care of all your insurance needs at one location making it an affordable and convenient choice. All things being equal, I much prefer paying one bill each month, compared to multiple bills.
Ask for Organizational Discounts
Many insurance providers offer a discount if you are a member of a certain organization. Ask for a list of group affiliations that qualify for discounts. These may include credit unions, certain credit card accounts, colleges, professional organizations, employers, military discounts, and more. For example, here are some tips on saving money on a military car insurance policy.
Decrease Your Coverage
There are certain minimum coverage requirements that must be met in order for your vehicle to be legally insured. Financed vehicles also have insurance requirements to ensure the vehicle is properly covered while you are making payments to the bank or dealer. Lenders want to be reimbursed if your vehicle is damaged or totaled before you pay it off.
Beyond this, it is up to you how much or how little insurance you carry. The higher the coverage, the higher the premium. If you lower your coverage and increase your deductible you will see a reduction in your insurance premium. You may even reach a point where it makes sense financially to drop full coverage in lieu of liability-only auto insurance.
Shop Around for Lower Premiums
While car insurance policies are very similar regardless of the provider, they are not exactly alike. For this reason, you must shop around and compare all policies and providers to find the best rates available, and to determine what exactly your car insurance covers. It’s generally a good idea to get several insurance quotes every few months to ensure you are getting the best rates.
Improve Your Credit
Did you know that your insurance provider may check your credit history before quoting a price for insurance premiums? If you have a low credit score as a result of financial hardship in the past, make every effort to improve your credit before shopping for insurance. The better your credit score the less money you will spend on insurance premiums.
Be a Responsible Driver
Your driving history just like your credit history will play a factor in your premium prices. A clean driving record is viewed favorably by the insurance provider because you pose a lower risk than a person with a history of accidents, claims, or traffic violations. Traffic violations are expensive because they cost you money upfront, and often increase your car insurance premiums for months or years after the violation. These tips can help you avoid getting a speeding ticket.
Security and Safety Devices
If your vehicle comes equipped with security and safety devices, make sure the insurance provider is aware of them. This is true for any devices you may have purchased and installed that reduce the chances of theft or injury. These devices will reduce the cost of your automobile insurance.
These are just a few ways to lower your automobile insurance rates. Car insurance is a necessary part of owning and operating a car. Knowing how to reduce this expense without sacrificing coverage is a great way to save money that can be used elsewhere in your budget.
» MORE: Compare Car Insurance Rates
How to Lower Your Auto Insurance Premiums
Mitigate Your Risk Profile
Your insurance rates are often based on the perceived risk you pose. Factors such as your age, marital status, how many miles you drive, where you live, your credit score, driving record, claims history, auto insurance coverage history, occupation, and other factors can affect your auto insurance rates.
For example, most insurance companies are going to give you a discount on your rates if you don’t do a lot of driving every mile. Every company is going to have a different limit for their low mileage discount. Most companies have their threshold around 8,000 – 10,000 miles. If you take the bus, or you get to carpool to work every day, then it could save you hundreds of dollars every year on your car insurance policy.
Pay Your Premium Up Front
Many companies offer a discount on your auto insurance premiums if you are willing to pay your entire premium in advance instead of paying each month. Be sure to ask your company if they offer this type of auto insurance discount – you could save up to 10% or more.
Not only will you save money, but you also don’t have to worry about making payments every month. If you want to save money, make one lump payment. Most insurance companies will give you a decent discount. Not only that, but most companies are going to charge a fee every time that you make a payment, and you’ll only have to pay that fee once.
Increase Your Deductible and Drop Unnecessary Coverage
Raising your deductible can save you up to 30% on your auto insurance premiums. Increase your deductible to $500 or $1,000 if you can afford that much for repairs. With an older car, drop collision and comprehensive coverage when the car is worth less than 10 times what you pay for the insurance (check Kelly Blue Book for used vehicle values). You can also consider dropping comprehensive coverage if you have fully paid any outstanding loans or if you can afford repairs if you are at fault.
In most cases, policyholders have too much coverage on their cars. While the extra protection is nice, it’s going to be very expensive. If you’re looking to save money, cut out some of that coverage.
Get Good Grades
Many auto insurance companies offer discounts of 10-15% for students who maintain good grades. These discounts are often available for high school and college students. Check with your insurance agency for more details.
Join An Association Or Club
Many large associations and clubs are able to negotiate group discounts for auto insurance. Examples include AARP, Costco, AAA, military organizations, trade groups, unions, and more.
The Type of Vehicle Affects Insurance Rates
Vehicles with higher safety ratings, lower maintenance costs, or lower purchase prices may be cheaper to insure than expensive vehicles or those with low safety ratings. Ask about discounts for daytime running lights, multiple airbags, anti-lock breaks, and other safety features. It’s a good idea to get an auto insurance quote when shopping for new cars so you have an idea of how much it will cost to insure your new vehicle.
Combine Insurance Policies Under One Roof
Some insurance companies will give you a multi-line discount when you have multiple insurance policies through their company. This can include a multiple car discount, but also for combining other insurance policies such as your homeowner’s insurance policy, renter’s insurance, etc.
Other Discounts To Ask About
Defensive driving discounts, low annual mileage discounts, no accidents or moving violations, policy renewal discounts, etc.
Understand the Types of Auto Insurance Before You Buy
Before you purchase car insurance, it’s important you understand the different types of auto insurance. Not only do you need to find the cheapest policy, but you also need to ensure you have the perfect plan.
Not having proper coverage could leave you with massive repair bills or fees that you have to pay.
There are 5 types of coverage you should take note of when you’re looking for the best possible plan.
Liability Coverage
The first type of coverage is liability coverage. This type of insurance protection will pay for any cost of repairing property damage or medical bills if you’re at fault. This is the most basic form of auto insurance and is usually required in all states.
One way to lower your auto insurance premiums is to drop full coverage auto insurance and only buy liability insurance. There are pros and cons to dropping full coverage, so it’s a good idea to read up on those details before trying to save a buck. You may be required to maintain full coverage if you still have a car loan. And it may be a good idea to keep full coverage if you don’t have enough money to self-insure (repair or replace your car if something happens to it).
Collision Coverage
The next type is collision coverage, which pays for repair costs if you’re in an accident. If your car is totaled, which means the cost of repairs is more than the value of the car, the plan will pay for the value of your car. As we mentioned, depending on the age of your car, collision coverage might be a waste of money. If you have a newer car that is expensive, then you should consider purchasing this type of coverage.
In some cases, you might be required to have collision coverage, regardless.
Personal Injury Protection
Third, personal injury protection (pip) is good for paying for any hospital bills. If you’re in an accident, then those medical bills and health care could cost you thousands and thousands of dollars. That’s where your PIP coverage comes in. With this type of coverage, any medical bills for you and your passengers will be paid for, regardless of who is at fault for the accident.
Underinsured / Uninsured Motorist Protection
Next, underinsured/uninsured motorist protection can be one of the most valuable types of coverage. While every state requires that you have auto insurance, there are still millions of Americans that don’t have auto insurance. If you were to be in an accident and the other driver didn’t have auto insurance, then you would be responsible for paying for all of those bills. That’s where your underinsurance/uninsured insurance coverage comes in. One of the best parts of this type of protection is that it’s pretty cheap to add to your coverage.
Comprehensive Auto Coverage
The last type of auto insurance (and the most well-known) is Comprehensive. Comprehensive coverage will pay for your repairs for damage done to your car that isn’t related to a covered accident. If something happens to your car, like hitting a dear, or a tree falling on your car, then your standard auto insurance plan won’t pay for those damages. Comprehensive coverage is great if you can afford it.
It’s excellent to have the maximum amount of coverage, but it’s going to be much more expensive than a standard plan.
Car Insurance is Required; Don’t Pay Too Much
You now have the information you need to search for lower auto insurance rates. Take the time to run some quotes and you may save yourself a couple of hundred dollars per year – money that can certainly be put to better use.
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Owen says
“With an older car, drop collision and comprehensive coverage when the car is worth less than 10 times what you pay for the insurance”
Is that what you pay annually?
Jason Reece says
The vast majority of us want to save as much as possible on auto insurance. But price alone should NOT dictate your choice of insurer. Consumer Reports and JD Power rank auto insurers annually and choosing a company with decent (or better) Claims Satisfaction also needs to weigh into the choice.
It is also very important to carry limits of liability that will protect your assets and financial future! The difference between 100/300 ($100k per person, $300k per accident maximum) Bodily Injury Liability and 250/500 is often as little as $30 per year. That’s $30 per year to increase the coverage if you injure someone from $100k per person to $250k per person! Carrying Uninsured/Underinsured Motorist coverage at the same level is equally important.
Finally, raising deductibles is often a very good way to cut your insurance bill. On older vehicles, if you are considering dropping Comprehensive and Collision, also take a look at keeping just the Comprehensive (also known as Other Than Collision) coverage. Comprehensive pays for things out of your control (theft, weather damage, glass breakage, fire, deer/animal impact) and Collision pays for things when you are at-fault. Comprehensive often costs just one-third the cost of Collision with the same deductible.
Assaf says
With my car value, I only go for liability only insurance and yet when it is time to renew the policy I take a quote from a competing company and call my current company to see if they can beat that offer. They usually do.
Another thing that I make sure to have is a list of the items I want the policy to cover. This assures that I’m comparing apples with apples.
Jeff Crews says
Another great way to find the best car insurance rates would be taking the time to compare car insurance companies. Car insurance companies want your business and will do some interesting things (i.e. lower your rates) to keep your business. However, don’t expect your rates to be lowered with multiple accidents, etc…..sorry.
Kris says
Shopping around is some important, as insurance companies all have their own formulas. We do this every few years and usually end up saving at least 300-500 each time. You would think being a good customer over time would lower your rate, insurance is truly a strange business.