Rob Berger
Contributor
Car insurance is a expensive nuisance . . . until you need it. As a father, you hate thinking about those 1:30 am phone calls. I received one last month. At least nobody was hurt. I can’t say the same thing for our 2014 Hyundai Sonata. Totaled. It’s times like these that you really appreciate having good insurance.
Good insurance, however, doesn’t have to cost an arm and a leg. Here are some tips on how to reduce your auto insurance premiums.
1. Get Multiple Quotes
Getting quotes from multiple insurance companies seems like an obvious starting point. Yet I must confess to having purchased car insurance in the past without comparison shopping. Call it inertia. I stuck with the same carrier I’ve used for years. My wife might call it laziness.
You might be surprised, however, by how much premiums can vary. As part of a study of car insurance in California, my team compared auto rates for various hypothetical drivers. In one case, the quotes for an identical policy ranged from $504 a month up to $1,488.
With tools like this one, you can get multiple quotes online in minutes.
2. Consider the Car You Drive
The type of car you drive has a significant effect on car insurance premiums. In one study on the least and most expensive cars to insure, annual rates ranged from $1,112 (Honda Odyssey LX) to $3,835 (Mercedes S65 AMG Convertible).
You can estimate the cost of care insurance before buying using this tool from careinsurance.com. You can also call your existing insurance carrier or agent.
3. Adjust Your Deductible
Insurance is a necessary evil. Whether life, health or auto, insurance protects us against losses we could not otherwise handle financially. We should, therefore, have the insurance we need to handle unacceptable losses, but no more.
A $100 deductible is far too low for many. If you can handle a $1,000 loss, why set a deductible at $100 or $250? You’re just buying insurance you don’t need.
So how much can you save by raising your deductible? The answer will vary, so it’s best to consult with your insurance carrier. But one study found you can save 9% by raising your deductible from $500 to $1,000.
4. Combine Policies
If you have multiple insurance policies, there are two good reasons to combine them with one carrier. First, it’s an easy way to simplify your finances. Working with one carrier is much easier than working with two or more.
Second, you can get a discount. We qualify for a discount because we combine our auto and homeowner’s insurance with one company.
5. Guard Your Credit
In most states, insurance carriers factor in your credit history in setting premiums. Studies have shown that there is a meaningful correlation between how we handle our finances and claims history.
And the difference in premiums can be significant. According to Consumer Reports:
Our single drivers who had merely good scores paid $68 to $526 more per year, on average, than similar drivers with the best scores, depending on the state they called home.
In Virginia, for example, Consumer Reports found that a poor credit score can cost a driver $1,513 more in annual premiums.
6. Claim Your Discounts
Auto insurance companies offer a plethora of discounts. Some you might expect, such as a discount for safe driving. Others may surprise you, like a discount because you belong to the United States Chess Federation, as I do.
Here’s a list of discounts we have with our carrier:
Accident Free
Affinity–United States Chess Federation member
Good Student
Combing Home/Car
Multi Car
New Vehicle (a discount for insuring a car less than 5 years old)
Paperless
SmartRide (used by Nationwide to evaluate how safely you drive)
Contact your insurance carrier or agent to find out if there are additional discounts you can obtain.
7. Pay By the Mile
One potential money-saver is to pay for insurance by the mile. While not available in every state, paying by the mile can reduce both the miles you drive (as you factor in the cost of insurance) and the premiums you pay. A quote from a leading pay-by-the-mile insurance carrier recently produce a cost of 3.2 cents per mile.
8. Reduce Your Coverage
Similar to raising your deductible, you can also save money by reducing your coverage. As cars age, the need to insure against damage to the car diminishes.
As Esurance describes:
In some cases, the premium you might pay on comprehensive and collision coverages plus the deductible you select may outstrip the value of the car itself. Since the value of the car itself is the most you can be reimbursed through these coverages (in the event of a total loss), consider whether you need to add them to your policy.
9. Compare Prices Annually
Getting a great rate on car insurance is just the start. It makes sense (and cents) to compare your existing rate each year. It’s easy to do online and takes just a few minutes. And comparing rates won’t hurt your credit score.
10. Pay Semi-annually
Every six months my insurance bill comes with two payment options. One option is to pay the 6-month premium in full. The other is to make monthly installments.
By paying in full, I save just over 2% on my premiums.
11. Drive Safely
An obvious tip, but one with a bit of a surprise. Of course you can keep premiums low by avoiding accidents and traffic tickets. But you can also reduce your premiums by allowing some carriers to monitor your driving habits.
Progressive offers Snapshot and Nationwide offers SmartRide. You simply plug a device into your car for a few months. The device monitors certain driving habits, such as hard stops, idle time, and daytime versus nighttime driving. Based on the results, you could see a significant decrease in the cost of auto insurance.
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