5 Ways to Save on Auto Insurance Costs
A recent review of your monthly expenses and your savings account balance made one thing clear: that dream trip to Spain next summer isn’t going to pay for itself. You’ve done the math and come to a sobering conclusion: other than winning the lottery or receiving an inheritance, reducing expenses is the quickest way to fund the trip (or any other financial goal) without increasing your income.
Cutting unnecessary entertainment expenses, such as magazine subscriptions, is easy. It’s the necessary ones that are giving you trouble. Essential expenses are tough to reduce without a drastic change in lifestyle. For example, to reduce the cost of housing, you may need to move to another apartment, sell your home, or rent a spare bedroom. Fortunately, there are less drastic ways to trim necessary expenses that translate to significant savings which can then be applied to your financial goals.
Reducing your grocery bill and auto insurance premiums can bring needed relief to your budget and leave extra money in your bank account. Clipping grocery coupons and eating less meat can trim your monthly food bill. Clearly, this requires a change in lifestyle. But, slashing auto insurance costs can translate into hundreds of dollars saved each year without changing the way you live. The best part is that there is more than one way to save on this necessary expense.
Here are five ways to save big on auto insurance costs that don’t require a lifestyle change.
1. Rethink your loyalty and bundling discounts.
When you signed up for car insurance five years ago, your coverage needs were probably different than they are today. While some insurance companies offer discounts the longer you remain a customer, that doesn’t mean the discount is worth your loyalty. The same is true for insurance companies that reduce your premiums when you have more than one type of insurance policy with them, e.g., homeowners, life, boat, etc.
Shop around. Start with your current auto insurance company. Update your insurance needs with them and then compare their proposed rate with other companies offering the same coverage. Don't let your current discounts prevent you from exploring available options.
2. Determine if you have too much insurance.
Yes, it's possible to have too much auto insurance for your current needs. For example, the benefit of having comprehensive insurance coverage on a ten-year-old vehicle must be weighed against the financial costs of paying premiums plus the deductible. Compare the vehicle’s value and those costs. Then, consider eliminating collision or any other unneeded coverage and only retaining auto insurance as required by your state of residence.
3. Increase your insurance deductible to save money.
If retaining collision or comprehensive coverages, consider increasing your deductible. This seems risky and counterintuitive, but think about the potential cost savings and your driving history. Paying a higher deductible, e.g., raising it from $1,000 to $1,500, means more out-of-pocket should you file a claim, but it reduces your monthly or annual premium costs. If an increased deductible seems jarring, set aside money in a separate savings account and make small monthly deposits, so it's there if you need it.
4. Improve your credit score.
Paying your bills on time and keeping credit account balances low not only translates into credit approvals with lower interest rates and favorable terms, but lower insurance rates too. Your credit history doesn’t tell the insurance company if you’re a good driver, but it's a factor many insurance companies use when determining your car insurance rates.
5. Ask about insurance discounts.
As you shop around for less expensive auto insurance coverage, ask about discounts that might be available. You may qualify for several or none, but if you don't ask, you may wind up paying more than necessary. Here are several popular discounts to consider along with common minimum qualifications:
- Multi-vehicle: Insuring more than one vehicle with the same company
- Good driver: No claims, moving violations, or accidents within the past five years
- Bundling: Holding several types of policies with the same insurance carrier, e.g., auto, life, homeowners, renters
- Group: Belonging to a particular occupation or professional association can garner discounts, e.g., college alumni, military, etc.
- Behavior tracking apps: A GPS device is installed on your vehicle or phone to monitor your driving habits
- Vehicle safety equipment: Vehicles with factory-installed airbags, security alarms, dash cams, etc.
- Low mileage: Drivers with low annual mileage or those that carpool to work or school
- Alternative billing options: Paying in full, paperless billing, or electronic autopay
- Good student: Teen or young adult drivers in the household and attending high school or college? Lower rates may be available if your student attends full-time and maintains a minimum grade point average.
Insurance discounts vary by carrier and may reduce your total premium by 5 to 30 percent.
Reaching any goal takes time and commitment, but financial goals include another variable: money. Give your financial goals a needed boost by cutting your auto insurance costs. While minimum state auto insurance coverage requirements will determine the exact savings, shopping smart should bring you closer to your financial goals.