Categories

Personal Finance

How to Reduce Your Auto Insurance Costs Now

In the current financial uncertainty surrounding the COVID-19 pandemic, you may be looking at different ways to cut your expenses. One way you can save money is by lowering your auto insurance premiums. With fewer Americans on the road, some auto insurance companies are offering a wide variety of discounts, some of which will let you start saving money immediately. Try these steps to reduce your rates.

Contact Your Insurance Agent

Start by contacting your current auto insurance company to ask how you can trim your premiums. Have a copy of your insurance policy at the ready so you can see exactly what your current coverage includes. The insurance agent should be able to suggest several options.

For example, you might be able to save money by bundling your auto and homeowners or renters insurance with the same insurance company. You can also shrink your premiums by increasing your deductible. Assess how much you could reasonably pay out of pocket in the event of a claim. Could you handle a $1,000 or even $1,500 deductible instead of $500? If so, you're likely to see significant savings.

Compare Auto Insurance Quotes

Once you have an estimate of your potential savings from your current insurer, it's time to get quotes from several other insurance companies. The easiest way to do this is to search online. Compare apples to apples by making sure each request for a quote includes the same types of coverage, limits, deductible amount and other factors.

Drop Unnecessary Coverage

Auto insurance includes collision coverage, which covers damage from an accident that is not your fault, and comprehensive coverage, which covers theft and non-accident-related damage (such as a tree falling on your car).

The payout for both types of insurance is limited to the value of your car. If you have an older car that's already paid off, collision and comprehensive coverage may not be worth the cost—and you can probably lower your insurance expenses by eliminating them. Kelley Blue Book and Edmunds are two good sources to check your car's value.

Auto insurance policies often include features you may not need or even be aware of. For example, your policy might provide coverage for rental cars, pay for a rental car if your own car is in the shop, or provide roadside assistance in case of an emergency. Find out what extras your policy includes and eliminate the ones you can live without.

Choose the Right Vehicle

If you're in the market for a new car, know that the cost of insurance can vary widely depending on your vehicle. Some cars are more complex to repair, more prone to theft or more easily damaged than others. Before you choose a car, check with insurance companies to get an estimate of the insurance premiums for that vehicle.

Features to protect your car and passengers can help lower your insurance premiums. For example, Geico offers premium discounts of up to 25% for cars with anti-theft devices such as an immobilizer or location-tracking device. You may also be able to get a discount on insurance if your car has safety features such as airbags, daytime running lights or anti-lock brakes.

Be a Good Driver

Because those with clean driving records are statistically less likely to have car accidents and make claims, many insurance companies give them discounts. You may get a discount for going a certain number of years without an accident, for example. Do your best to avoid getting any traffic citations, as these can cause your rates to rise.

Going back to school can also help keep your premiums down. For instance, teenage drivers may get discounts for taking driver's education courses. Liberty Mutual is one of several companies that offers a good student discount for students who maintain a B average or better. Older drivers may be able to reduce their car insurance rates by taking defensive driving courses, such as those offered by the American Automobile Association office or AARP.

Ask About Affiliation Discounts

Many car insurance companies offer reduced rates for specific groups of people, such as federal employees or active, retired or reserve servicemembers. Check to see if your employer or any organizations you belong to provide discounts on auto insurance. (You'll generally have to use a specific insurance company to get such discounts.)

Improve Your Credit Score

What does your credit score have to do with car insurance? Unless you live in California, Hawaii or Massachusetts, where the practice is prohibited, most auto insurance companies use a credit-based insurance score when calculating your premiums. Having a poor credit score could mean paying more for auto insurance.

It's a good idea to check your credit score when shopping for car insurance and, if necessary, take steps to improve it. Paying your bills on time is the biggest factor in your credit score, but there are several other steps you can take to raise your credit score—and potentially reduce your auto insurance premiums.

Pay Based on Usage

As a result of the coronavirus crisis, most people are driving much less than they normally do. In fact, Allstate has launched a Shelter-in-Place Payback program that will automatically refund its auto insurance customers an average of 15% of their April and May premiums.

But you don't need a stay-at-home order to save on car insurance. Many companies offer usage-based insurance, which reduces your premiums if you drive less than a certain number of miles per year (generally 10,000 or 12,000).

Another type of usage-based insurance goes a step further by using a mobile app on your smartphone or a third-party device in your car to monitor driving behavior, such as braking and acceleration, speed, miles driven and the time of day you drive. Progressive's Snapshot is a usage-based program that gives you an automatic discount just for participating and additional discounts if you demonstrate good driving habits.

Get the Right Auto Insurance for You

In your effort to lower your car insurance premiums, be careful not to strip down your coverage too far. Make sure your car insurance meets the minimum coverage requirements for your state, as well as any specific needs you may have, such as lender requirements if your car is financed. If you're leasing a car, it could be a good idea to get gap coverage, which pays the difference between the value of the car and the amount you owe on your lease in the event the car is stolen or totaled in an accident.

No matter how much you're currently paying for car insurance, reviewing your insurance every year could help you identify ways to save. By carefully assessing your needs and budget, and taking some time to comparison shop, you can cut your car insurance costs and put more money in your pocket.

Resources