Auto insurance is a necessity for many people that need a vehicle to commute back and forth to work and live their daily life. According to Statista.com, there were 272.48 million registered vehicles in 2017. Most of these required some type of auto insurance.
With the rising costs of medical insurance and daily living in general, it should come as no surprise that auto insurance is also on the climb. A study by the Insurance Institute showed car insurance has risen in price over 50% from 2009-2018. The increase in 2018 alone was 7.4%. Compare this to the growth in costs associated with hospital services at 4.4% and the jump in price for auto insurance is alarming. We all know the cost for medical care is going up at a fast pace, but auto insurance is showing the prices are soaring past even the price of medical care.
The increasing price of auto insurance has brought the average cost of insuring a medium sedan to $1232 as of a 2018 study by AAA. With auto insurance premiums on the rise, how can you save money on car insurance?
Comparison Shop
The price for insuring an automobile can vary greatly from company to company. Just like it can be easy to save by getting multiple quotes on home owner’s insurance or life insurance, insuring a car is no different. Get multiple quotes from at least three or four different companies. You will be surprised by the difference in price and possible discounts offered through various insurance carriers.
Be a Safe Driver
If you don’t want the price of your auto insurance to be astronomically expensive, I can’t stress how important it is to be a safe driver. A driver that is considered a high risk will pay for it. Things as simple as traffic violations can add up and increase the cost of auto insurance. If you get a ticket and are offered a traffic course to prevent points on a license, make sure to do it.
There are a number of other factors that can put a driver into a higher risk category, thus increasing the price of auto insurance. These might include:
- An at-fault auto accident
- Being convicted of DWI or DUI
- Conviction of a hit-and-run
- Just being a new driver
Do Not Carry Auto Insurance You Don’t Need
Make sure to look at your car insurance policy in detail each year. Although it might be somewhat confusing, coverage is often broken down into many different categories, such as liability, collision and comprehensive coverage.
One example of an extra cost that may not be needed with auto insurance is collision coverage. If you drive an older car that does not have much value left, the insurance company is also not going to give you much money in the event of an auto accident. Why pay for something you will never get a return on? It is likely the premium portion you will pay for collision will have a larger out of pocket expense than just paying for another older car in the long run.
Another example is the cost I personally experienced. I noticed my insurance had a charge each month for towing and roadside assistance. This was a coverage I already had through another source and it was just doubled on my auto insurance policy. If you have AAA or roadside assistance from a warranty, do not also pay for it on your auto insurance. You can always add it back at another time if another provider is no longer providing the service.
Look for Discounts on Your Auto Insurance
Insurance takes a look at the risks involved in evaluating the cost. If there are certain things that can lower the risk of injury, an accident or theft, the insurance company will likely offer a discount. It might only be a small one for certain things, but they can add up. Look for discounts on your auto insurance for items such as:
- Low mileage – Not driving much in a year
- Safety – airbags, stability control, daytime running lights, lane warning systems
- Anti-theft devices
- Multi-car discount – more than one car is used
- Other discounts – good student, being married, having children, additional insurance under the same carrier
- Male vs Female – it might be hard to believe, but insurance companies do discriminate. The cost of insurance of a comparable driving record for a male and female driver may be very different. This is just due to statistics and actuary science. Male drivers tend to have more accidents and driving violations. The same goes for older aged drivers compared to younger drivers. Younger drivers have less experience on the road and mathematically have more traffic violations.
The discounts listed are just some of the examples that might be available. You can also ask the agent for additional items they may have available to lower the price. Always inquire about discounts when talking with an auto insurance agent. It never hurts to ask if there are any further discounts.
Choose to Drive a Car that is Inexpensive to Insure
The car a person drives can have a big impact on the auto insurance cost. One that is a medium sedan will have a much different insurance cost compared to a sports car that is designed to drive fast. Also, an imported expensive vehicle with pricey parts and a requirement for specialized mechanics will cost more for insurance compared to a Toyota Camry.
A more expensive car just costs more to repair generally so the insurance premiums will be higher.
Raise the Deductible
A car insurance deductible is the amount of money paid by the customer for repairs before insurance coverage begins. Raising the amount of money on an auto insurance deductible can lower the price of the annual cost. You might currently have a $500 deductible and be required to pay this amount in the event of a traffic accident before the insurance picks up the cost. Raise this to $1000 and the premium should drop. Essentially you are just personally taking on more risk by being required to pay more out of pocket if something should happen.
If you raise the deductible, you will want to make certain the amount of money will be available for covering the cost with an accident.
Don’t Always Report a Claim
The more claims reported to your auto insurance company the increased likelihood of them raising your rates. An accident involving injury or another person’s property should be reported to the authorities and your insurance company. However, if an accident occurs that does not involve injury or damage to property, it might be better to get an estimate of repairs before reporting the mishap to the insurance company. An example could be backing out of your own garage and the side mirror or door gets a small ding. If your insurance deductible is $1000 and it will cost $800 for you to get it fixed, then just have it fixed.
Always Contact Your Auto Insurance Company About Changes
There are a number of life changes that can affect the cost of auto insurance. The company you work with may or may not lower the annual price depending on some of these, but a number of variables do have a chance to decrease premiums. Getting married and having kids is one of these. The actuaries, who work for insurers, show statistically people that are married and have children are more likely to drive safely.
If you move, you will definitely want to let your auto insurance provider know. You might need to shop a different company to keep the same rate or even get a lower one. A study by the Insurance Information Institute showed that in 2016 the most expensive average auto insurance was in New Jersey with an annual premium of $1309.29. Idaho had the least expensive average cost of insurance coming in at $599 per year.
Your geographic location can make a big difference in the cost of auto insurance and it might even surprise you. I once moved from Florida to Illinois and the cost of auto insurance dropped by several hundreds of dollars per year. I would have thought that driving in the snow and ice would raise the price, but it did the opposite.
Usage Insurance
Being fairly new, usage insurance is on the rise. This is not surprising with the rapid rate of advances in technology. I believe there is one insurance company that currently consistently shows a commercial for this. With the use of technology, the insurance company connects a device to your car in order to monitor your driving habits and mileage. They will provide a discount on insurance if you use such a device.
Pay Auto Insurance Premiums Semi-Annually or Annually
Check with your auto insurer and see if you can get a break on your premiums by paying them upfront every six months or yearly compared to monthly. They may offer a slight discount. Insurance companies almost always like to get their money upfront and they may offer a break for you doing it.
Do Not Let Your Auto Insurance Lapse
Not paying or renewing your car insurance can result in higher premiums. It may also put you in a position where you do not have insurance coverage. Not only are there legal complications when driving with no insurance, but it will also be a financial issue if you get into an accident and your car is totaled or there are injuries to you or a passenger. Just make sure to always not let your auto insurance lapse.
Your Credit Score Might Be an Issue
Some states are not allowed to use credit for car insurance costs, but you might live in one that does. If you do live in a state that takes your credit score in to account for your auto insurance cost, try improving your credit if it is poor. This issue really stinks for people that have to pay more for auto insurance due to bad credit. Not all people that have poor credit get there by being irresponsible or a bad person. It is not just car insurance costs that can be higher due to bad credit.
Negotiate
Just as a lot of bills can be negotiated, such as cable or a cell phone bill, you might be able to negotiate a little with car insurance. It never hurts to try. If you have another quote that is better for insurance you might want to mention this. However, I would not recommend using the tactic that you will go someplace else if they do not match the price another insurance provider offers. It is likely the insurance provider will not care. Almost all big-name insurance companies are not hurting for money or customers. Even the small ones will likely not care. Insurance is a large profit for companies in almost all categories. The actuaries that do insurance risk calculations rarely if never loose.
Comparison Shop Each Year
Insurance companies change rates and their policies from time to time. Also, rates can increase just purely due to profits and claims. Doing some comparison shopping each year can save hundreds of dollars. Surprisingly, a study by Statista.com showed that only 27% of Americans comparison shop for auto insurance every few years.
It can take a little time and research to shop for auto insurance. But the internet has made it much easier. Take the time to at least look for savings every few years.
What is the Conclusion?
Getting the best price for auto insurance is a combination of comparison shopping and being a responsible driver. Life changes and the vehicle you choose to drive can increase or decrease the cost of car insurance.
Look for ways to decrease the price of auto insurance. There are a number of them available. Never be afraid to negotiate with your insurance company and ask them for any discounts that might be available.
Cheap Isn’t Always Better for Auto Insurance
Although this article is about saving money on car insurance, purchasing a cheap policy or lowering coverage to the absolute minimum is not always the best decision. Buying an inexpensive policy might save some money in the short-term, but you want an affordable auto policy that fulfills your needs for the long-term. A few hundred dollars more a year for a provider that has great customer service and does not fight every claim can be better compared to inexpensive insurance.
Do not go cheap on the insurance you need. Why? Let’s say for example your auto liability insurance only meets state minimums and the minimum is quite low. If you are at fault in an auto accident and your coverage is the least amount required, your personal assets could be at risk to pay any of the remaining bills. In general, the more money you may have to lose, the more auto insurance you might need. Don’t just look at the financial savings, get the auto insurance coverage you need for your situation.
