For those of us that require a vehicle as our main form of transportation, car insurance is a must. However, the premiums we pay and the coverage we receive can vary drastically from one provider to the next. Many different factors can influence this cost. Aside from the level of desired coverage you seek, the make and model of your vehicle, your driving record, age, the estimated number of miles driven per year, and even your state can impact the premiums. Sorting through all of this can be a huge pain and finding the best coverage for the most affordable price a difficult process. Luckily, we’ve taken much the guesswork out of the equation for you with these 5 tips to save money on car insurance.
Raise Your Deductible
If you already own a car and are paying insurance premiums, the quickest and easiest way to save money is to simply raise the deductible on your policy. Your deductible is the amount of money you have to pay before your insurance will kick in to cover any remaining costs. Common deductibles are $0, $500, and $1000 at the highest any personal auto policy will allow. If you’re currently at the standard $500 deductible, you can bump it up to $1000 to lower the premium. Just make sure you have a decent emergency fund in place.
Reduce Optional Coverage on Older Cars
If you drive an older car, having optional coverages such as collision and/or comprehensive may not make sense. For example, if you were to get in an accident, the cost of repairs plus your deductible will likely be more expensive than the value of your car. A general rule of thumb is if your car is worth less than 10 times the annual premium you pay, it’s more cost-effective NOT to have collision and/or comprehensive coverage. To figure out what your car is currently worth, you can use a site like Kelley Blue Book to help you decide whether any optional coverages make sense.
Bundle with Other Insurance Policies
Insurance companies love having all of your business as compared to only a piece of it. This is good for them, but it can also be good for you through discounts offered for bundling policies together. If you are a vehicle-only Millennial currently renting an apartment, for example, you might require renters insurance on top of your car insurance. In order to get this business, your car insurer may offer a discount on both policies. Typically, the more you bundle, the more you save, but there are no guarantees here. That’s why you should always compare your bundled policy quotes from different insurers with the costs associated with holding each policy individually.
Shop Around & Compare Before You Buy
When buying a new car, you are in an excellent position to control the cost of your car insurance. Many insurers offer discounts on vehicles that reduce their overall risk of insuring you. This could be vehicles that have high anti-theft or safety ratings. Insurers also consider the value and average cost of repairs of the vehicle you drive. Higher valued vehicles and vehicles with expensive imported parts cost more to replace and repair, which ultimately translates to higher insurance premiums for you. In August of 2017, Nerd Wallet ranked the cheapest cars to ensure among popular models. That would be a good place to start your research.
Maintain Good Credit History
Many people don’t realize that insurance companies can and will use your credit history to price their policies. Insurance companies are in the business of managing risk and research has shown that poor credit history often translates to higher claim rates. Poor credit typically means you’re struggling to manage your money, whether that be late on paying bills or spending beyond your means. For an insurance company, low credit means you’re a high risk of filing a claim as you may not have the resources for repairs or replacement. I can’t stress how important maintaining good credit is for your own financial well-being. Good credit means lower interest rates, better lending terms, and lower insurance premiums. All contributing items for overall financial well-being. If your credit score is not very good right now, check out our post on Tips for Improving Your Credit Score.
Buying a new car insurance policy can seem like a daunting task and every insurance company out there is going to claim they have the cheapest, best car insurance on the market. However, what you’ll actually pay depends entirely on how risky each carrier deems you to be. With these 5 tips to save money on car insurance, you now should have more ammo for finding the best rate.
Chad Rixse grew up in Anchorage, Alaska and lived in Seattle, WA for 11 years where he graduated from the University of Washington before moving back to Alaska. He is fluent in Spanish, loves to travel and connect with other cultures. He’s been helping clients plan for their financial futures since 2014 and has an immense passion for helping others and making a positive impact in their lives. Outside of work, he’s a self-professed golf addict, foodie, and master taco maker.