How To Lower Car Insurance Premiums
A couple of months ago, it was time to renew my auto insurance policy, but I was unhappy with the amount I was having to pay out every month. In fact, I had been unhappy with it for a while. I had started to notice that every couple of months, my bill was a few dollars higher. This made absolutely no sense to me because, at that time, we had not been in any wrecks and had not had any tickets in over a decade. Why was I getting charged more and more for coverage? By the time my policy ended, I was paying three times as much per month as I had when I signed up with this company, which I found to be absolutely insane.
Instead of sticking with that company, I shopped around for a better rate and lower car insurance premiums. Crazily, almost everywhere I called was charging much more than I felt I should be paying, so I got on the ball and started looking for ways to lower car insurance premiums and deal with my personal bills in a better way. Here, I am going to share what I learned with you.
How car insurance works
In order to maximize your savings potential, it is important to have a basic understanding of car insurance. Without getting too technical, insurance is basically a way to protect you financially in the event of a covered issue, such as an accident or theft. If you carry liability insurance and cause an accident, ideally, your insurance will pay for the damage to the other person’s vehicle and any medical care they have to seek.
How much and what exactly is covered depends on your policy. There is also insurance that will theoretically cover you and the other party, the damage to both vehicles and so on. All of this depends on the coverage you choose and the details of the policy.
If an insurance company fears that they will definitely be paying out money on you because you have a history of accidents or reckless behavior, you will get charged more because you are a greater risk than someone who has never had an accident. Basically, the riskier the insurance agency feels you are, the more they will charge. However, there are ways to counter higher premiums.
How To Lower Car Insurance Premiums
When you are trying to figure out how to lower your monthly bills, there are two great places to start: your grocery budget and your auto insurance. Here are some of the best ways to lower car insurance premiums:
Shop Around
With almost every single bill you pay, you might be able to find a cheaper rate if you just shop around. Choosing car insurance should be no different than shopping for a new television, computer, or other electronic devices. Unless you are an impulse shopper all of the time, you have probably taken the time to compare one device from multiple sellers.
Let’s say, for instance, you are about to purchase a phone. Most people first compare different phones to decide which one has the features they need and want. After choosing a phone, they will compare the prices of that phone from a few different places. Only then when they find the best combination of the phone and price they are looking for do they actually make the purchase.
Buying car insurance should be no different. You should know what type of coverage you need and any extra coverage you would like to add. Then, you should shop for insurance coverage from multiple providers. I am fully aware of how long and tedious the process of talking to insurance companies can be. I just had to do it myself a few weeks ago, so I know the idea of talking to more than one is not a fun one.
So, I’m not going to tell you that you should talk to 15 different companies, but it is a good idea to compare at least three or four insurance providers. By then, you should have some idea of the average amount you can expect to pay. Also, to make the process a little easier to deal with, start by shopping online. That way, you will not be starting from the beginning when you actually have to speak to them.
Never, ever get complacent with car insurance.
Every time your policy is about to end, shop around instead of automatically signing on for another run with your current provider. It is possible that they have the best rate for you, but you’ll never know until you check.
Downgrade Your Current Policy
Let me start by saying that I am in no way, shape, or form an insurance agent, so I am not going to tell you exactly what you should do. This is something you need to think through on your own. However, there are a few basics for you to consider when it comes to downgrading your policy:
If you are currently paying for your vehicle or you have a lien against it, you are obligated to carry the minimum amount of insurance that your contracts state. Most often, until a vehicle is paid off or way down, you will be required to carry full coverage.
If you are not required to carry full coverage, you can choose to downgrade completely to liability. This is the absolute minimum that the law requires you to have. Some states require some additional coverage, so be sure to check with your state laws before deciding to downgrade.
Some companies will automatically tack on uninsured motorist coverage onto liability even if it is not required. Take a look at your policy to see if that is on there. If so and your state does not require it, you can consider canceling it.
Check For Any Unnecessary Fees
While you have your policy out, go ahead and look at it line by line to understand what you are actually paying for.
Did you know that some insurance companies charge a fee if you set up through autopay?
Some others charge a fee if you go into the building and pay in person.
Does your policy or payment receipt show any fees that you pay for each month that you can avoid?
Cancel Redundant Coverage
Do you currently pay for extras, such as roadside assistance? Those extras can be a handy thing, but sometimes you do not have to pay for them. Do you already have AAA? If so, roadside assistance is just a redundant cost. Many people can lower car insurance premiums simply by eliminating items they have through other means.
If you are connected to any other organization, you may already have this perk. Sometimes - though it may be rare - companies will provide this to employees. Other times, these extras will be included with other types of insurance that you already pay for.
Be a Safe Driver
One of the best ways to lower car insurance premiums is to be a safe driver. Drive the speed limit, follow the laws of the road, avoid accidents to the best of your ability, and do not give the cops any reason to pull you over and give you a ticket.
Every time I have to go somewhere, I look around and wonder exactly how the people around me have not had a bad accident yet. Some will be talking away on their cell phones or texting. Some weave in and out of traffic or speed past everyone else. Some stop paying attention and swerve into the other lane. All of these are ways not to lower car insurance premiums, and they are definitely not safe.
I am willing to bet that I have made a lot of drivers in my city angry. I always drive as close to the speed limit as possible because I do not want a ticket and I definitely do not want a wreck. People will get in behind me and ride my tail as if that is going to make me speed up. It actually makes me slow down and drive even more cautiously because if they are reckless enough to drive that way, I have to protect myself.
And this is something you have to do as well. Other drivers are not looking out for you - you have to look out for yourself. Be as safe a driver as you can be and you should see your premiums lower, and, you know, stay alive.
Choose a Higher Deductible
The deductible is the amount of money that you have to pay for any covered event before insurance starts paying. Let’s say you have insurance with a $1,000 deductible and damage worth $5,000. This means that you have to pay that $1,000 first, and then your insurance should cover the remainder (as long as the damage is covered, of course). When you choose a higher deductible, you have lower car insurance premiums.
Bundle Insurance
Many insurance companies will give you a discount if you bundle other insurance with it, such as auto and home insurance. So, it may be wise for you to get all of your insurance from one provider instead of several. You might also get a discount for multiple drivers if you and other family members purchase your insurance from the same agent.
Improve Your Credit
It is sad to say but many states can use your credit to determine your insurance costs. I have never thought that this is fair, but in some strange way, I kind of understand it. Here’s the thing: the insurance company is signing on to pay for covered damage to your vehicle.
So, before they decide to be responsible for you, they want to know how responsible you are and how risky covering you will be. In this way, it is not really any different from getting a loan. Your credit can tell a lender - or an insurance company - a lot about your character. Based on that character, they make decisions that impact how much you pay out.
If you want lower car insurance premiums, you need to work on your credit. This task may take the longest of all the ways to save, but it can also have a huge financial impact on your entire life, so it’s worth it.
Consider the Cars You Buy
Everything about your vehicle can have an impact on your premiums. If you want to lower car insurance premiums, you need to be wise when purchasing vehicles. Here are a few facts to know:
SUVs cost more to insure than smaller cars. Minivans are a better option than SUVs, too. Unless you are just adamant about getting an SUV, consider something smaller.
The color of your car can increase your insurance. As crazy as it may sound to some people, this is true. Red vehicles are usually more expensive to insure because the color is often associated with speed. You are better off sticking with neutral color vehicles, such as white and beige.
Some insurance companies provide discounts for eco-friendly cars.
Any extras you have can either cost you more money or lower car insurance premiums. For instance, after factory sound systems can increase premiums as they increase the vehicle’s value. However, any anti-theft devices can lower car insurance premiums since they reduce the risk of theft.
Get a Low Mileage Discount
Unless you are on the road often, you can probably get a low mileage discount. People who travel a lot in their vehicles and use them for work tend to have higher premiums. This is because the more the vehicle is on the road, the greater the chance of an accident. Those that only drive to the grocery store and a few other local places can usually get lower car insurance premiums, so if this is you, let your agent know.
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Consider Usage-Based Insurance
Speaking of how much you drive, you might consider a program referred to as usage-based insurance, or pay as you go insurance. Basically, you allow the insurance company to track your driving, such as how much and how well you drive, and you receive discounts according to the information they collect. It’s not new. You have seen advertisements for it in the form of State Farm’s Drive Safe & Save program and Progressive’s Snapshot.
Check For Group Insurance
Many companies have deals with certain companies that provide employees with lower cost items, including lower car insurance premiums. Find out if your company has anything like this. Other organizations may have a deal, too, so be sure to ask around.
Pay On Time
You should pay your insurance on time every time.
First off, this will prevent any potential late fees, which can get pretty high.
Second, building a good history with your auto insurance company may lower your rate over time or at least keep them from rising - theoretically, that is. Either way, it’s best to pay on time.
Ask Your Agent What Discounts Are Available
Some insurance agencies offer discounts, which result in lower car insurance premiums if you take a defensive driving course. Others offer veterans discounts. Some companies provide a discount to anyone who pays their premiums upfront instead of monthly. Even choosing to receive your bill by email instead of a physical bill may get you lower car insurance premiums.
And, if you are adding a teen driver, ask about good student discounts and anything else that your kid might qualify for. The thing is, your insurance company may have a long list of available discounts that they do not advertise. Ask what discounts they have that you may get to take advantage of.
You can call your agent or visit them and simply ask, “How do I save on my car insurance?” If you mention that your premiums are too high and that you are shopping around, they will likely be highly motivated to find you some discounts. And if you have been with that company for some time without making any insurance claims, they may offer to lower your rates simply for being a good customer and safe driver. You never know until you ask.
Conclusion
Insurance often seems like an unnecessary expense - until you need it. The problem is you never know when you will need it, so it is best to keep an active policy at all times. Otherwise, you could be on the hook for a lot of money if something happens. You should not avoid insurance but you can do a lot to save money on it.