Nearly every car owner is required to have auto insurance coverage, but that doesn’t mean they need to pay an arm and a leg for it. Insurance premiums tend to be particularly high for young drivers, those who have been involved in a recent accident and new car owners.
Here are some ways to lower car insurance costs:
1. Shop around if you haven’t in a while
The best way to find the cheapest car insurance coverage is to get quotes from several providers.
This is because how much you pay for car insurance depends on a number of factors, like where you live, the kind of vehicle you drive and your driving record. Even your age, gender and job can impact the cost of auto coverage. Every insurance company considers these factors and determines their rates differently. The quote Allstate sends you is likely to differ from the quote GEICO, Progressive or State Farm sends you.
To make sure you’re getting the best rate for the coverage you need, compare quotes from multiple insurers at least once a year — if not every six months.
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2. Drop any unnecessary coverages
Additional coverages provide an added layer of protection for your car during an accident, but may be unnecessary depending on your circumstances. For instance, if you drive infrequently or keep your vehicle in storage, having high coverage limits or multiple add-on protections may be unnecessary and expensive.
If you drive an older car, you could save on auto insurance by dropping collision and comprehensive coverage from your policy and carrying only liability coverage. Although most lenders require you to have collision and comprehensive coverage when you finance a vehicle through them, you can drop both after you pay off your loan.
Here’s a good rule of thumb: if your car is worth less than your annual auto insurance premium plus your deductible, you might want to get rid of your comprehensive and collision coverage.
Just make sure you have enough cash or savings to pay for any needed repairs that may pop up if you go down this road.
3. Adjust your payment schedule
Pay your entire six-month or yearly premium all at once, if you can afford it.
Monthly bill-pay can sound appealing when you buy car insurance, but it often makes the overall cost of a policy more expensive. This is because most insurers charge interest for convenience. These fees add up, too — to $50 or more a year, in some cases.
Drivers looking to save money on car insurance can do so if they switch from being billed monthly to being billed every six or 12 months. And you can save even more by switching to an automatic payment option, which most companies offer.
Finally, don't worry about the commitment of paying in full. If you cancel your policy early, you'll get a prorated refund.
4. Raise your deductible
Raising your deductible is another good way to save money on car insurance.
A lot of people choose a low deductible for their car insurance policies, and it makes sense. In fact, the lower your deductible, the less you have to pay out of pocket for repairs after something damages your vehicle.
A low deductible also means a high premium, though. And that’s what many people worry about when buying car insurance — their monthly or yearly costs.
As a result, if you want to save on auto insurance costs, raise your policy’s deductible. Be sure you can afford to spend that amount if your car is in an accident, though.
As a result, if you want to save on auto insurance costs, raise your policy’s deductible. Just make sure you can afford to spend that amount if your car is in an accident.
5. Bundle multiple insurance policies together
Buying and bundling several types of policies from the same company is a particularly easy way to save on insurance costs. Many insurance providers give you a discount if you buy more than one policy from them. It's also easier to track different claims and premium payments through one company versus several.
These and other companies also offer similar multi-line discounts to people who bundle auto and renters insurance policies or auto and condo insurance policies with them.
6. Look for discounts
Bundling discounts aren’t the only discounts that can help you save on car insurance. Insurers offer tons of other discounts, too, including ones for:
- Alternative fuel vehicles.
- Anti-theft devices.
- Automatic payments.
- Good students.
- Members of certain organizations and groups.
- Members of the military.
- Multiple vehicles.
- New vehicles.
- Safe drivers.
- Safety features and equipment.
- Seniors and retirees.
- Teen drivers.
- Usage-based insurance programs.
Speak to your insurance agent about any savings opportunities you may qualify for. This is one of the best ways to ensure you receive the best rates.
7. Take advantage of low-mileage driving programs
The more you drive, the more likely you are to get into an accident. Most insurance companies recognize this and offer reduced rates to infrequent drivers.
Some insurers reward infrequent drivers through low-mileage discounts. Others do it via usage-based or pay-per-mile programs.
Regardless, if you drive less than the average 13,500 miles a year, let your insurance provider know about it. It could shave hundreds of dollars off your annual premium.
8. Improve your credit score
Many insurance companies consider credit when calculating premiums. This doesn’t mean they look at your credit score, though. Instead, they look at something called a credit-based insurance score.
According to the National Association of Insurance Commissioners, credit-based insurance scores differ from credit scores by ignoring rate factors like age, gender and income, and focusing instead on things like:
- Length of credit history.
- Payment history.
- Outstanding debt.
- Pursuit of new credit.
- Credit mix.
Insurers use these scores to figure out how likely someone is to file a claim. As such, if you have a good credit-based insurance score, your premium should be lower. And if you have a bad credit-based insurance score, your premium should be higher.
How can you raise your credit-based insurance score and reduce your car insurance costs? The following could help:
- Pay your bills on time.
- Keep your credit card balances as low as possible.
- Don’t apply for new lines of credit unless you need them.
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