Car insurance is a necessary expense for most drivers, but it can also be a major burden on your budget. According to the National Association of Insurance Commissioners, the average annual car insurance premium in the United States was $1,004.68 in 2019, but it can vary widely depending on your state, your insurer, and your coverage level. For example, Michigan had the highest average premium of $2,878.67, while Maine had the lowest of $539.94.
Fortunately, there are many ways to lower your car insurance costs and save money without compromising your protection. In this article, we will share some tips and strategies for finding the best rates and discounts, choosing the right deductibles and coverage options, improving your driving record and credit score, and selecting a cheaper and safer vehicle. By following these tips, you can be a smart and savvy consumer of car insurance and enjoy more savings in the long run.
Tip 1: Shop around for the best rates and discounts
One of the easiest and most effective ways to save money on car insurance is to shop around and compare quotes from different insurers. You may be surprised by how much you can save by switching to a cheaper insurer or by taking advantage of discounts that you may qualify for. Here are some steps to follow:
- Compare quotes from at least three different insurers for the same coverage and limits. You can use online tools or websites to get multiple quotes quickly and easily. Make sure you compare apples to apples, meaning that you use the same information and criteria for each quote.
- Look for discounts that you may qualify for, such as bundling, good driver, good student, low mileage, safety features, etc. Different insurers offer different discounts, so ask them what they can offer you . Some common discounts include:
- Bundling: You can save money by buying multiple policies from the same insurer, such as car, home, life, etc.
- Good driver: You can get a lower rate if you have a clean driving record with no accidents, tickets, or claims in the past few years.
- Good student: You can get a discount if you are a student with good grades or if you have completed a driver education course.
- Low mileage: You can get a lower rate if you drive less than a certain number of miles per year.
- Safety features: You can get a discount if your vehicle has features that reduce the risk of injury or theft, such as airbags, anti-lock brakes, alarm systems, etc.
- Switch to a cheaper insurer if you find a better deal, but check the cancellation fees and coverage gaps. Before you cancel your current policy, make sure you know how much it will cost you to do so and when your new policy will start. You don’t want to end up paying more or being uninsured for any period of time.
Tip 2: Review your deductibles and coverage options
Another way to save money on car insurance is to review your deductibles and coverage options and adjust them according to your needs and preferences. Your deductible is the amount of money you have to pay out of pocket before your insurance kicks in when you make a claim. Your coverage options are the types and amounts of protection you have in case of an accident or other event. Here are some things to consider:
- Consider raising your deductibles for comprehensive and collision coverage to lower your premium. Comprehensive coverage pays for damage to your vehicle caused by events other than collisions, such as fire, theft, vandalism, etc. Collision coverage pays for damage to your vehicle caused by collisions with other vehicles or objects . By raising your deductibles, you agree to pay more upfront in case of a claim, but you also pay less for your monthly or annual premium. However, make sure you can afford to pay the higher deductible if you need to make a claim.
- Make sure you have enough liability coverage to protect your assets in case of a lawsuit. Liability coverage pays for the damage or injury you cause to others in an accident. It consists of two parts: bodily injury liability and property damage liability. Bodily injury liability pays for the medical expenses and lost wages of the other party or parties involved in the accident. Property damage liability pays for the repair or replacement of their vehicle or property. Each state has its own minimum requirements for liability coverage, but they may not be enough to cover the full cost of a serious accident. If you are sued for more than your liability limits, you may have to pay the difference out of your own pocket. To avoid this risk, you should buy enough liability coverage to match your net worth or assets.
- Drop unnecessary or optional coverages if you don’t need them or have other sources of protection. Some coverages that may not be worth paying for are rental reimbursement, roadside assistance, or personal injury protection . Rental reimbursement pays for the cost of renting a car while your vehicle is being repaired after a covered claim. Roadside assistance pays for the cost of towing or other services if your vehicle breaks down or needs help on the road. Personal injury protection pays for the medical expenses and lost wages of you and your passengers regardless of who is at fault in an accident. You may not need these coverages if you have other ways to cover these costs, such as a credit card, a membership, or a health insurance plan .
Tip 3: Improve your driving record and credit score
Your driving record and credit score are two factors that can affect your car insurance rates significantly. Your driving record shows your history of accidents, tickets, and claims, while your credit score shows your history of paying your bills and debts. Insurers use these factors to determine how risky you are as a driver and as a customer. The riskier you are, the higher your rates will be. Therefore, improving your driving record and credit score can help you save money on car insurance. Here are some tips to do so:
- Drive safely and avoid accidents, tickets, and claims that can raise your rates . Follow the traffic rules, drive defensively, and be alert and attentive on the road. Avoid distractions, such as texting, eating, or talking on the phone while driving. If you are involved in a minor accident or damage your vehicle, you may want to pay for the repairs yourself instead of filing a claim with your insurer. This can prevent your rates from going up or losing your discounts.
- Check your driving record for errors and dispute any inaccuracies. You can request a copy of your driving record from your state’s department of motor vehicles or online. Review it carefully and look for any mistakes or outdated information that may affect your rates. If you find any errors, contact the agency that issued the record and provide evidence to support your claim. You may also contact your insurer and inform them of the correction.
- Monitor your credit score and take steps to improve it, such as paying your bills on time, reducing your debt, and fixing any errors on your credit report . You can get a free copy of your credit report from each of the three major credit bureaus (Equifax, Experian, and TransUnion) once a year through www.annualcreditreport.com. Check it for any errors or fraudulent activity that may lower your score. If you find any mistakes, contact the credit bureau and the creditor involved and dispute them. To improve your credit score, pay your bills on time and in full, keep your credit card balances low, avoid opening or closing too many accounts, and use different types of credit wisely .
- Some states prohibit or limit the use of credit scores in setting car insurance rates, so check your state’s laws before applying for insurance. Some states that ban or restrict this practice are California, Hawaii, Massachusetts, Michigan, New York, and Utah.
Tip 4: Choose a cheaper and safer vehicle
The type of vehicle you drive can also affect your car insurance rates. Some vehicles are more expensive to insure than others because they are more likely to be involved in accidents, stolen, vandalized, or damaged. Some vehicles are cheaper to insure because they have lower repair costs, higher safety ratings, or lower theft rates. Therefore, choosing a cheaper and safer vehicle can help you save money on car insurance. Here are some things to look for:
- Avoid buying or leasing a new, expensive, or high-performance vehicle that can cost more to insure . Newer vehicles tend to have higher depreciation rates, meaning they lose value faster than older vehicles. Expensive vehicles tend to have higher repair or replacement costs in case of an accident or theft. High-performance vehicles tend to have higher horsepower, speed, and acceleration, which can increase the risk of accidents and injuries.
- Opt for a vehicle that has a good safety record, low theft rate, and low repair costs . A vehicle that has a good safety record means it has features that protect the driver and passengers from harm in case of a crash, such as airbags, seat belts, anti-lock brakes, stability control, etc. A vehicle that has a low theft rate means it is less likely to be stolen by criminals or targeted by vandals. A vehicle that has low repair costs means it is easier and cheaper to fix in case of damage or breakdown.
Install anti-theft devices or tracking systems on your vehicle to deter thieves and lower your premium. Anti-theft devices are devices that prevent or discourage thieves from stealing your vehicle, such as alarms, locks, immobilize, etc. Tracking systems are devices that help you locate your vehicle in case it is stolen, such as GPS, LoJack, etc. These devices can make your vehicle less attractive to thieves and more recoverable if stolen. Some insurers offer discounts for installing these devices on your vehicle.
Car insurance is a necessary but costly expense for most drivers. However, by following the tips and strategies we have shared in this article, you can save money on your car insurance premiums and enjoy more savings in the long run. You can shop around for the best rates and discounts, review your deductibles and coverage options, improve your driving record and credit score, and choose a cheaper and safer vehicle. By doing so, you can be a smart and savvy consumer of car insurance and protect yourself and your vehicle from any unforeseen events.