Save Money on Auto Insurance

Auto insurance: just about everybody needs it, but almost nobody really wants it. After all, car insurance bills are a lot to pay for something you may never end up needing. While many of the factors that affect insurance premiums are out of your control, there are a number of things you can do to increase your chance of getting the lowest price for your coverage. Here’s how to get the insurance protection you need while also protecting your wallet.

Steps

 * 1) Shop around. In most states, insurance companies’ rates vary wildly.    Different companies may have better rates for different vehicles or different zip codes. One company may have great rates one year and then raise them the next, so it pays to shop around periodically.  Get as many quotes as you can, and get them in writing if possible.  Be honest with each agent so that he or she can give you an accurate rate, and have each company quote you for exactly the same coverages—if you’re not getting “apples-to-apples"? quotes, you can’t tell which company is really cheaper. Also look into doing the following:
 * 2) *Insure all your cars with one company. You can save big with “multi-car"? discounts, so you should generally insure all your cars in one place if at all possible.
 * 3) *Insure your home where you insure your cars. Many companies offer discounts if you have both your home (or tenants) insurance and auto insurance with them.  The discount may apply to one policy or to both.  Even if you can find a better price with another company for one of your policies, your total insurance cost may be lower if you have both policies with the same company.  Sometimes you can also get discounts for insuring boats.
 * 4) *Get insurance quotes for vehicles before you buy them. If you’re in the market for a new car, but you can’t decide between a few different models, call your agent and find out how much it will cost to insure each one.  Insurance companies calculate vehicle-specific rates based on how much the vehicle costs and how often a particular model is involved in accidents or is stolen, among other things, so the premium difference for similar cars may be substantial.
 * 5) Stay insured. Never let your insurance policy lapse.  You may find it difficult to obtain insurance if your policy expires, and your insurance may be more expensive than it was before.  Customers who let their insurance expire—even for a couple days—are statistically higher-risk, and insurance companies often charge extra for this.
 * 6) Increase your deductibles. Some coverages, notably comprehensive and collision, have deductibles, an amount you pay out of pocket before the insurance company begins to pay. The higher your deductible, the lower the price for that coverage, so have your agent quote you higher deductibles to see how much you could save.  Make sure that you can afford to pay your deductible before raising it—a $1,000 deductible, for example, may be substantially cheaper than a $250 deductible, but you’ll have to pay $750 more in the event of an accident.
 * 7) Buy only the coverage you need. Review your coverage with your agent at least once a year. Depending on your assets and personal preferences, you may not need as much liability coverage as you currently have, or you may wish to reject certain coverages such as uninsured motorist or personal injury protection.  Make sure you fully understand the implications of dropping or reducing coverage—in many cases, the extra risk you take on by doing so exceeds the money you save. For example, if your car isn’t worth much, you may be better off dropping the coverages that protect against damage or theft.  You may also be able to drop just collision coverage, which is usually the more expensive of the two.  Check your policy to see how much comprehensive and collision cost you, and make sure that if you drop the coverage you could afford to repair or replace the vehicle on your own.
 * 8) Don’t insure vehicles you don’t drive. If one of your cars broke down and has been sitting in the backyard for a year, make sure it’s not still on your insurance policy.  Keep in mind, though, that many states require that you have any registered vehicle insured, so if you drop insurance you may want to register the vehicle as “inoperable"? to avoid any complications or penalties.  Only drop a vehicle from your policy if you’re sure you’re not going to be driving it for a long time.
 * 9) Buy a longer policy. There may be a price penalty attached to 3- or 6-month policies, so the longer your policy term, the cheaper your rates will likely be.  Regardless of the length of your policy, you may be able to save money by paying it up front in full instead of in monthly installments. If installments are the only affordable option, you may be able to avoid fees by having your premiums automatically deducted from your bank account each month.
 * 10) Take a driver training course. Some companies offer discounts—especially for kids or people over 55—for taking an approved driver training course.  Check with your agent before investing a lot of money in such a course, however, as the discount usually isn’t very big.  Nonetheless, no matter what your age, a training course may help you become a better driver, which will lower your insurance premiums in the long run.
 * 11) Drive safely. Accidents, especially accidents where you are at fault, may increase your insurance premium, usually for 3-5 years. If you haven’t had an accident in a while, be sure to ask your agent if you qualify for an accident-free discount.  If you get into a minor accident, especially one in which yours is the only vehicle involved, you may want to pay out of pocket instead of reporting a claim—the amount you pay in accident surcharges can be more than the vehicle repairs if the claim is just for a few hundred dollars.
 * 12) Avoid tickets. Speeding tickets and other moving violations can push your rates up substantially and these, like accidents, usually affect your insurance for 3-5 years.
 * 13) Build good credit. There is a statistical correlation between certain aspects of a person’s credit rating and the number of insurance claims the person might be expected to file, so depending on what state you live in, many insurance companies charge more for bad credit or give you a discount for good credit.
 * 14) Make the kids wait to get their licenses. Young, newly licensed drivers are the most likely to get into accidents, and insurance companies price for them accordingly.  If your child gets his or her drivers license, you must pay the extra premium, and the price increase will probably shock you.  It can be hard to make your kid wait to drive, but if insurance bills are already stretching you thin, it may be the best choice.  If your child already has a license, you may be able to exclude him or her from coverage by signing an exclusion form.  Rates usually go down a little after the driver turns 18, and the price plummets later, usually at age 21 and/or 25.
 * 15) Drive less (if you can!). Some insurance companies offer a discount of up to 10% if your annual mileage is less than 5000, and up to 5% if you drive less than 7,500 miles per year.
 * 16) Install an anti-theft unit if you don't have one already! Some insurances will provide discounts of up to 36% depending on the category of the anti-theft device.

Tips

 * Review your policy at each renewal. Make sure that all your discounts still apply, and check to see if you may be eligible for additional discounts.  Sometimes discounts need to be certified each year(“good student"? discounts, for example), and sometimes a computer glitch will accidentally drop a discount from your policy.
 * Keep your insurance policy up-to-date. A lot of variables affect your insurance rates, so if your situation changes you’ll want to make sure your policy reflects that.  If you get married, if you’ve moved, if your commute to work has changed, or if you’ve installed a car alarm, for example, your rates may be reduced.  Keep in mind, however, that if your commute is longer, or if you’ve moved to a neighborhood with higher loss rates, your price could go up.
 * In the long run, it often doesn’t pay to switch insurance companies, especially if you do it a lot. Insurance rates may go up and down—usually up—each year, and if you switch companies for a lower rate you may find that your rates increase even higher at the next policy renewal.  In addition, if you stick with a company for several years, you may become eligible for a “long-term"? discount.  Additionally, you may earn “accident forgiveness"? as a long-term customer, so that if you get into an accident, your premiums won’t rise.
 * Find out if you qualify for any group plans. For example, if you are an alumnus of a college or university, or a member of a professional organization, you may qualify for an affinity discount or a special group plan with one or more insurance companies.
 * Don’t be afraid to get a second opinion. Not sure if you need the coverage your agent advises you to have?  Check with another agent or your attorney for advice.
 * Make your child earn driving privileges by getting good grades. If you do allow your son or daughter to get a drivers license, insist he or she get good grades in school.  The “good student"? discount can save you up to 20% or more off the rate you pay for a child.  A “B"? average (3.0 GPA) is usually required to qualify.

Warnings

 * When it comes to buying insurance, deal with a reputable auto insurance firm. You can always check their Insurance Bureau rating before purchasing insurance from them, and you can find out about complaints (and file one, if necessary) by contacting your state’s insurance commissioner.
 * Make sure you are adequately covered. While lowering your liability coverage limits or declining injury protection may save you money, the decision might be unwise.  Many people don’t carry enough liability coverage as it is. Remember, if you’re liable for injuring someone, the medical costs could reach hundreds of thousands of dollars, and if you can’t pay those costs, you could be sued and have your wages garnished or your assets (including your home) taken.  Discuss your coverage with your insurance agent or attorney, especially if you’re thinking of making any changes.
 * Do not exclude a driver from your policy unless you can be absolutely certain that he or she will never drive your vehicle.  If the excluded driver gets into an accident, you will have no coverage and will be responsible for paying for your own repairs and any liability to others.
 * Don’t lie to your insurance agent. Insurance companies check your accidents, tickets and some other information on a national database, so if your rates go up because of an accident, you can’t just switch to another company for a lower rate.  If you lie to your insurance company or omit to tell them about something that affects the rate (a young driver in your household, for example), this could be considered a “material misrepresentation", and any   claim you make may be denied.
 * Never drive without insurance. Driving without insurance is illegal in almost all jurisdictions, and the fines and increased insurance costs can be staggering.  If you get into an accident while uninsured you will have to pay out of pocket for any injuries or property damage you are responsible for.

Related Tips and Steps

 * How to Buy a New Car
 * How to Save Money on Gas
 * How to Avoid a Traffic Ticket
 * How to Repair Your Credit
 * How to Avoid Annoying Other Drivers
 * How to Live Without a Car
 * How to Know Which Insurance to Take on a Rental Car

Sources and Citations

 * Insurance Information Institute A fairly comprehensive resource for questions on all kinds of insurance, including auto
 * Pueblo.gsa.gov Insurance Information Institute article on reducing your auto insurance
 * ConsumerAction.gov List of state insurance regulatory departments
 * Insurance Institute for Highway Safety Loss ratings for most vehicles