How to Slash Your Car Insurance Bill in Half
These nine tips could help you make significant
savings in your car insurance.
By John Loos
We all want to cut our expenses in half. The good news is that
while the monthly costs for your smartphone or cable TV may be relatively
fixed, your auto insurance rate may have some room to shrink.
The average driver may spend up to $84,000 in a lifetime on car
insurance, according to a February 2011 posting on the Motor Trend magazine's
website - a figure that could be reduced if you know how to save on your
policy.
"The average yearly auto insurance premium is
about $850, but there is wide variation around this average," says Loretta
Worters, a vice president of the Insurance Information Institute (III), an
organization dedicated to improving the public's understanding of insurance.
"Many factors can affect your premium."
Check out these nine saving methods to see how you can reduce
your car insurance rate.
#1 - Get a Variety of Quotes
Be curious. When purchasing auto insurance, explore your options
instead of simply buying the first policy presented to you.
"A good rule of thumb is to get three identical quotes from
different insurance companies," says Melissa Fox, deputy press secretary
for the Pennsylvania Department of Insurance.
A quote is the estimated price you will pay if you purchase the
policy in question.
Quotes can vary significantly from company to company. For
example, a sampling of prices given through the Texas Department of Insurance's
Price Guide revealed that annual rates can run as high as $1,795 and as low as
$316. That's a $1,479 difference!
#2 - Dig for Discounts
Just as you might scour a store for sales and deals, make sure
to research your insurer to know what discounts you could qualify for.
According to the III, available discounts provided by your
insurer may include:
- Low annual
mileage - Drivers who use their vehicles
sparingly throughout the year.
- Anti-theft
devices - Devices that could prevent car
theft, such as car alarms and wheel-locking devices.
- Long-time
customer - Sticking
with the same insurance company could yield customer loyalty discounts.
- Defensive
driving courses - Completion of accredited
driving courses, particularly for drivers over 50.
- A college
student away from home - If your child is driving your vehicle less often, you
may be able to take him or her off your policy.
#3 - Regularly Review Your Policy
What fit your driving needs a year ago may not be the best fit
today. To allow your policy to reflect your lifestyle, you should get into the
habit of regularly reviewing your car insurance policy. Otherwise, you could be
paying for unnecessary coverage on your policy.
In order to make sure that you're taking advantage of possible
discounts, you should review your policy if you've changed vehicles, added or
removed a vehicle, added or removed a driver, or had a significant change to
your number of annual miles, according to the National Association of Insurance
Commissioners' (NAIC) website, a group comprised of insurance commissioners
from all 50 states.
#4 - Improve Your Credit Score
How you spend money says a lot about how responsible you are.
Depending on the state, insurance companies could look to your credit score
when determining if you are likely to be a safe or more reckless driver.
"For many insurers, credit-based insurance scoring is one
of the most important and statistically valid tools to predict the likelihood
of a person filing a claim and the likely cost of that claim," says
Worters.
What makes up your credit score? Factors such as your payment
history, any unpaid debt, your credit history length, or bankruptcies help
formulate these credit-based insurance scores, according to Worters.
#5 - Maintain a Good Driving Record
Drive smart, drive safe.
Insurers often reward good driving habits with reductions in
rates or lower initial rates, according to the "What Determines the Price
of My Auto Insurance Policy," an article on III's website.
For example, look at these annual sample rates - randomly
produced by the Texas Department of Insurance's Price Guide - from three
insurance companies:
- Male, 25-65,
no violations: $495,
$365, $599
- Male, 25-65, 1
at-fault accident in the past three years: $767, $459, $699
Between the three companies, the motorist with no violations
could have saved $272, $94, and $100 per month, respectively.
#6 - Drop Unnecessary Coverage
Trim the fat! Find out what types of coverage are required in
your insurance policy.
Most states require some type of minimum liability coverage,
which covers damage to other people and their property, according to the Rocky
Mountain Insurance Information Association website, a nonprofit insurance
information organization.
But some types of coverage could be considered optional. Check
with your state's Department of Insurance or your insurance company to learn
which insurance elements are required for your policy.
According to Fox, these types of coverage may be optional in
your state:
- Collision
- Covers
damage to your vehicle.
- Comprehensive
- Covers
theft or damage to your vehicle from various hazards, such as a fire or extreme
weather.
- Uninsured
Motorist - Covers
you in the event of a hit-and-run, or if you're hit by a motorist with no
insurance.
- Underinsured
Motorist - Covers
you if you are hit by a motorist without sufficient insurance to cover
your claim.
#7 - Change What Car You Drive
"If I could recommend one or two ways to make significant
savings on your rate, it would probably be the car [you] drive," says
Worters.
Worters recommends looking at a vehicle's overall cost, repair
costs, safety record, and probability of theft - each of which can affect your
rate.
The III article supports Worters' point.
"Some cars cost more to insure than others," notes the
article. "Engine sizes, even among the same makes and models, can also
impact insurance premiums."
Know the cost of insuring your vehicle. Changing your ride may
significantly lower your costs.
#8 - Move to a Suburban or Rural Area
“More cars equals more chance for an accident,” says Fox.
So what does this mean for you? Where you drive and live may be
affecting how much you pay for your auto insurance.
"Generally, due to higher rates of vandalism, theft, and
accidents, urban drivers pay a higher auto insurance price than those in small
towns or rural areas," says Worters.
Some locations also see a greater number of lawsuits as well as
higher medical and car repair costs, adds Worters.
#9 - Raise your Deductible
One of the simplest ways to see immediate savings could be
changing your deductible, or the amount you agree to pay in the event of an
accident before your insurer will contribute any money.
"Increasing your deductible from $200 to $500 could reduce
your collision and comprehensive coverage cost by 15 to 30 percent," says
Worters. "Going to a $1,000 deductible can save you 40 percent or
more."
The reason that higher deductibles may result in lower monthly
rates is because a higher deductible means an insurance company will end up
paying a smaller amount in the event that you file an accident claim, according
to the Texas Department of Insurance website.
But be careful. You should have enough money set aside to pay
your deductible in the event of an accident. If you are unable to cover your
deductible, your insurance company will only pay part of your claim or could
refuse to pay anything.
While each of these tips may not cut your bill in half on its
own, when combined they could noticeably slim down your car insurance rate.
Know what is necessary for your policy and understand the available discounts
at your insurance company.