How to Save Money on Auto Insurance: Tips and Tricks
Knowing how to save money on car insurance is important. You have to have insurance coverage to drive your car but also don’t want to go broke paying for insurance.
Insurance companies base your premiums on many factors, including your driving record, age, and gender. But there are many ways to save money on car insurance, making carrying the coverage affordable.
What are Car Insurance Premiums?
Car insurance premiums are the cost you pay to the insurance company to get insurance. Since car insurance is required by law in all 50 states, everyone must have proper coverage to drive a vehicle.
You pay car insurance premiums whether you use the insurance or not. If you don’t make your payments, you could lose coverage, so paying your premiums on time is essential. Always contact your insurance agent if you can’t pay on time to avoid losing coverage. They may have options to help you catch up on your payments.
Every driver’s premiums differ depending on the type and amount of coverage, their driving record, credit score, age, and gender. Each insurance company also charges different premiums, so it’s always a good idea to shop around to find the best deal.
How Often Do You Pay Car Insurance Premiums?
You can pay car insurance premiums in full every six months or break them into monthly payments. Some car insurance companies charge a small premium to pay your car insurance monthly, so be sure you know the full cost before choosing that option.
Your car insurance premiums may also change every six months when the policy renews. Always read your insurance documents to determine if your insurance premiums increased, and if so, by how much. You are always free to shop around for cheaper premiums with another company, too.
What is a Good Way to Save on Insurance Premiums?
Since insurance is required, you should find as many ways as possible to keep your premiums low. Whether you’re a young male driver or an older female, there are ways to get lower premiums and make your car insurance affordable.
The key is knowing your eligible discounts and what insurance companies look for when assigning premiums.
1. Bundle Insurance Policies
If you have multiple insurance policies with an insurance company, they may give you a discount. The most commonly bundled insurance types are home and auto insurance, but you may get a bundled discount for almost any type of bundle.
On average, people who bundle home and auto insurance save 14% on their insurance policies. It may not sound like much, but the average driver pays $2,014 per year for full auto coverage, a savings of $281.96 per year, or $2,819.60 every ten years!
If your insurance company offers auto and home insurance, be sure to ask for the bundled discount.
2. Compare Prices Before Buying a Car
Every car has different premiums, no matter who drives it. If you buy a car that’s commonly stolen or is known to cause certain types of personal injuries in accidents, it could cost more to insure because there’s a history of problems with it.
Before buying a car, contact your insurance company to learn how much the insurance may cost. You may find the premiums too much, causing you to find a different car. You can also start your car search by using the IIHS Top Safety Picks to ensure you won’t fall in love with a car that isn’t safe.
3. Shop Around for Cheaper Insurance
Don’t take the first insurance offered to you. It’s always best to shop around, even after having car insurance.
Every insurance company weighs factors differently to come up with your insurance premium. For example, if you got a speeding ticket or your credit score fell, one insurance company may raise your premiums significantly, and another may not raise them much at all.
It’s a good idea to have quotes from three insurance companies to compare before choosing. Once you have car insurance, it’s also a good idea to shop around annually to ensure you still have the best deal.
4. Ask for Loyalty Discounts
Don’t be afraid to ask for a loyalty discount. This usually occurs after you’ve renewed with the same insurance company a couple of times. If they won’t provide a loyalty discount, it’s okay to let them know you’re going to shop around. You’d be surprised at how many companies then ‘miraculously’ find a loyalty discount they can offer.
5. Re-evaluate your Current Auto Insurance Policies
Your insurance needs today may differ from when you purchased the policy. For example, if you bought the car new, you probably took out maximum coverage. After you have had the car for several years, its value declines, which means you may have too much coverage.
If you bought an older car, you may get to the point where it doesn’t make sense to carry comprehensive and collision insurance any longer. If the car isn’t worth enough, you’re paying to insure something that won’t pay out. If your annual premiums cost more than 10% of your car’s Kelley Blue Book value, it’s not worth carrying collision and comprehensive insurance.
6. Increase your Deductible
Your deductible is the amount of money you must pay before insurance pays anything. For example, if you have a $500 deductible and have to file a claim for an accident, you must pay $500, and then the insurance company will pay any remaining covered amount.
The higher the deductible you take, the more insurance companies can lower your premiums. However, don’t take a deductible you cannot afford. So, if you don’t have the money saved already or can’t save it fairly quickly, don’t change your deductible.
If you can increase your deductible, though, you’ll likely see your premiums fall significantly because you reduce the insurance company’s risk of paying out on claims.
7. Ask About Eligible Discounts
Ask your insurance agent or potential agents what discounts you may be eligible to receive. Every insurance company offers different discounts, but here are some of the common ones:
- Good student
- Anti-theft safety installed on the vehicle
- Away from home (college students)
- Professional organizations or unions
- Anti-lock brakes
- New car
- Daytime running lights
- Military members
8. Pay your Policy in Full
If you have the money available to pay your premiums every six months, you may get a discount for not paying them monthly. If you can’t afford to pay the full premium, ask about any potential discounts for paying the premium quarterly.
9. Maintain a Good Credit Score
Some insurance companies base your premiums on your credit scores. They believe that credit scores and driving habits are directly related and people with lower credit scores are at higher risk on the road.
Check your credit frequently, even if you already have car insurance, because many insurance companies pull your credit reports before they send you a renewal offer. If you see your premiums increase significantly, it could be because your credit score dropped.
10. Keep a Good Driving Record
The better your driving record, the lower your premiums will be. If you get a ticket, see what options you have to keep it off your record, like driving school. Any opportunities you have to keep your driving record clean, take it.
11. Get an Automatic Payment Discount
Some insurance companies will slightly lower your premium if you set up automatic payments. Each company differs, but you might save as much as 5% just by putting your payment on automatic pilot. Not only does this save you money, but it ensures you always make your payments on time, so you don’t risk any lapse in coverage.
You can set up automatic payments with automatic withdrawals from your checking account or set them up on your credit card. Either way, you’ll get the discount and save money.
12. Get a Paperless Discount
Insurance companies offer a discount if you go paperless because it saves them money on supplies. It also reduces the amount of administrative work required with no bills to mail. You must opt-in to get the paperless discount.
Before choosing this option, make sure you have an email address you check often so you don’t miss important bills, renewal letters, or other correspondence from the insurance company.
13. Keep your Driving Habits Up to Date
Review your insurance documents at least once a year to make sure all information is accurate. For example, if you used to commute to a job that was 30+ miles away but have since changed jobs and work from home, you might save money on your premiums. The less you drive, the less risk you pose, so you get smaller premiums.
If you had an accident or other driving incident on your insurance and it’s since fallen off your record, be sure you’re getting the right premiums. If your current insurance company doesn’t account for the time that has elapsed since the incident, shop around to get quotes from other companies.
14. Defensive Driving Discounts
Some insurance companies offer courses to lower insurance premiums and improve driving habits. The more techniques and tactics you have to keep yourself safe on the road, the less risk you pose to the insurance company, allowing them to lower rates since premiums are based on risk.
15. Try to Get Group Insurance
If you belong to any professional groups or organizations, you may be able to get lower car insurance rates by using their insurance companies. You may also find you get discounts by getting car insurance through your employer or union.
16. Consider Usage-Based Insurance
You may save money by paying per mile if you don’t drive a lot. You must let the insurance company install a tracking device in your vehicle to do this, though. It tracks the miles you drive and shares the information with the insurance company, much like your water meter tells the water company how much water you use. Some companies even have devices that measure your habits, such as braking or speeding, allowing them to set your premiums based on your driving habits.
What are three things you can do to save money on car insurance?
There are many ways to save money on car insurance, but the three best ways are to increase your deductible, bundle your insurance, and shop around for the best deals. Every insurance company has different ways to determine your premiums and looks at different factors. Comparing your options among carriers is the key to saving the most.
How can I spend less on car insurance?
The best way to keep your premiums down is to have good credit and a good driving record. The less risk you pose to the insurance company, the lower the premiums they’ll charge. You should also watch how much insurance you purchase. While you shouldn’t settle for state-minimum insurance coverage, you also shouldn’t over-insure yourself because it won’t pay off in the end.
What are the five tips for buying car insurance?
Buying car insurance is important since it’s mandatory in every state. When buying car insurance, be sure to do the following:
- Know how much coverage you need
- Take the highest deductible you can afford
- Ask for all discounts
- Know your car’s safety rating
- Shop around for the best deal
Does paying car insurance in full save you money?
You can save a significant amount of money if you pay your premium in full at each renewal date. Each insurance company differs, but you can save 4% or more when paying your premiums in full.
Knowing how to save money on car insurance could save you hundreds of dollars annually. The key is finding the right insurance company that offers the premiums you can afford while still providing good coverage.
Don’t look at the premiums alone. Instead, look at everything, including the type of coverage and the insurance company’s rating. Remember that car insurance is there to protect you in times of crisis. The last thing you want is insurance from a company that doesn’t follow through, no matter how much money you can save.