5 Ways to Save on Car Insurance Costs

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car insurance claimAuto insurance costs can be affected more by outside factors than most other things we buy. Sure, we can shop companies, study various policies and provisions, but the real cost of the plan we select will have more to do with us—how we buy insurance, how we behave while driving, and even what type of vehicle we drive.

What can be done to cut the cost of auto insurance?

1. Bundle with other insurance policies
Many insurance companies will offer a discount on auto insurance if you bundle it with other coverage, especially homeowners insurance. The discounts vary from company to company and not all offer it, but it’s always worth looking into.

A complication of bundling is that you’re now put into a position of evaluating not one, but two policies—the auto policy and the homeowners. Be careful that the homeowner’s policy you take with your auto insurer doesn’t drop certain provisions in order to make the package more attractive—or worse, to give the impression of a discount where none exists.

2. Change policies periodically
None of us like shopping for insurance. It takes time to contact different carriers and to review and evaluate the different proposals, comparing them to one another to see which has the best price for the coverage offered. For that reason, most of us will avoid doing this for as long as we can.

The problem with this avoidance—however justified the reason—is that over time, small premium increases add up until we’re paying well above what the competition is offering. And we’ll never even know it! But with auto insurance, ignorance is not bliss!

From time to time, maybe every two to three years, we need to step into the auto insurance market to compare policies. That’s the only way to determine if what we’re paying is reasonable. If you find a comparable policy with a lower premium, there’s even a chance that you’re current carrier will cut your premium to keep you as a customer. But that will never happen if you don’t shop around from time to time.

3. Keep your driving record clean
This is a big one, and an easy one to underestimate. If you’ve come to view a traffic ticket “here and there” as part of the cost of being on the road, you’ll pay additional cost through your auto insurance. This is because a major component of how auto insurers set premium rates is by the risk you represent, which is at least partially determined by your driving record.

Wear your seatbelts, make a conscious effort to drive within speed limits (especially near schools), to slow down and come to a complete stop at intersections and to use your turn signals generously. And don’t even think about driving after you’ve had even one alcoholic drink. Permissible blood alcohol levels in many jurisdictions are coming very close to prohibiting as much as a single drink.

A clean driving record is typically considered to be three years with no moving violations. If you’ve had any within that time, work to avoid drawing any more from now on. It’ll pay off with lower insurance premiums.

4. Raise your deductible
According to the Insurance Information Institute, increasing your deductible from $200 to $1,000 could save you as much as 40 percent on your auto insurance premium. Just keep in mind that the higher the deductible, the greater the amount of money you’ll have to come up with in the event of a claim.

If you normally keep an amount at least equal to the deductible in a savings account, you’ll have that risk covered—in addition to the money you’ll save on the premium.

5. Make the next car you buy one that costs less to insure
Monthly payment tends to be the most important financial factor when people buy a new car, but auto insurance can be affected by the type and cost of the vehicle as well.

Generally, the more expensive a vehicle, the more it will cost to insure. High end luxury cars will cost more still because repair and replacement parts will be more expensive in the event of an accident.

If you want to make the insurance company really not like you, buy a sports car. The insurance industry charges more to cover sports cars precisely because they’re designed and built to go fast.

Certain safety features can lower insurance premiums. Airbags, anti-lock brakes and car alarms, for example, provide greater passenger protection and deter theft which lowers the likelihood of the insurance company paying a claim.

As you can see, auto insurance is about much more than different companies and their various policies. Figuring significantly into the cost are bigger picture factors that include the type of car you own and the way you drive it. Keep this in mind when buying a car, and each time you hop in to drive—how you handle those activities may have more impact on your auto insurance rates than anything else.

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{ 11 comments… read them below or add one }

Emily 2011/08/01 at 5:44 am

We do all of the above – I think the best one for saving money is having cars that don’t require as much insurance money-wise.

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Hank 2011/09/05 at 9:14 am

I tried to raise my deductible once to save money on my car insurance. Raising my deductible from $500 to $1,000 ended up only saving me about $70 per year. That was a lot of risk to assume ($500) for a small savings. I would have had to go over seven years without an accident to get the change to payoff. That’s a pretty tall order. Of course, other people may receive better savings than me since everyone’s insurance premiums are calculated differently based on your circumstances.

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kosmo @ The Soap Boxers 2011/12/18 at 9:25 am

Accident frequency also varies a lot. Some factors are outside of your control, such as traffic congestion – people in NYC are more likely to get into an accident than someone in a town of 500.

I’m 36, and I’ve been in one accident – and that was a comprehensive claim (hit a deer). I’ve driven in excess of 250,000 miles in that time (most in relatively small metro areas of 50,000 – 125,000 people).

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Megan 2011/09/19 at 10:16 am

I just recently learned about bundling with other types of insurance. Our insurance company offers this and we started taking advantage of it. You are right though, you do have to check to see if it is really a better deal than what you previously had. For us, it is.

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Jerry 2011/10/02 at 4:05 pm

We just bundled our insurance policies with USAA and it did lead to some savings, we were happy to find out. We like them so far but have not submitted a claim yet, so we’ll see!

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Spedie 2011/10/31 at 10:14 pm

I come here every week to read some new stuff. I miss fiscalgeek, what happened? He/she dropped off the face of the planet.

What gives?

Do I have to get a new link, what? What happened I hope no one died or got sick.

Spedie

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Kurt Fischer 2011/12/02 at 11:28 am

Though it usually makes the most sense if you don’t drive a lot of miles and live in an urban area, carsharing can be an excellent alternative, or supplement, to owning a car. If you choose to carshare instead of owning a car, your insurance bill would be $0! And you wouldn’t pay for gas or maintenance either. Here’s a site with info on worldwide carsharing: http://carsharing.net.

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Chris Pia 2012/01/06 at 1:08 pm

Someone shared this with me, it is an interesting article. What made you choose this topic?

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Photon0312 2012/03/02 at 5:59 pm

I’ve been surprised at just how wildly – and unexpectedly – insurance rates vary from vehicle to vehicle. My family’s mid-sized sedan is more to insure than our mid-sized SUV – who would have thought that?

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John 2012/04/25 at 4:16 pm

Raising your deductible is a great way to save money on insurance. Now that I’m working from home, I might even raise it higher because I’m driving less.

Thanks for the great reminders and tips!

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Andrea 2012/07/25 at 8:08 am

Brilliant content to say the least. There are few points that you should take care of in order to save money on car insurance costs. Negotiate, Drop the extensive coverage, Pay on time, Get tickets fixed, Scoot around town…. these are few notable factors that you should maintain and the finance will be under your control :)
Andrea Jones

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