There are many necessary expenses we have to pay for every month: mortgage or rent payments, credit cards, utility bills. But saving money matters too. There are plenty of ways to cut down your bills, and the one most often overlooked is the cost of running a car. You may not be able to shorten the distance you travel every day or buy a fuel-efficient car overnight. But you can cut your auto insurance costs by hundreds of dollars each year.
Here are six strategies to help you lower your auto insurance and reduce the burden on your wallet.
1. Reduce risk
The less risky you are, the lower your premium.
- The best thing you can do is avoid accidents and drive carefully. Safe drivers are rewarded with a better premium. It will save you 5% or more. Most insurers reduce your premium further if you have had no traffic violation for three years. If you have had violations in the past you can still lower your payments by staying clean; in many states, violations drop off your record after three years.
- Driving a car that is less likely to be stolen and has security features can be cheaper to insure. Keeping your car in a garage overnight, or having an approved immobilizer, airbags, anti-lock brakes and an anti-theft engine cut-off, can qualify you for discounts.
- If you are buying a new car, do not choose a fast one, because it is an easy way to pay more premium. Select a more average model in a lower insurance category to help keep costs down.
2. Do not pay monthly
Paying for your auto insurance monthly may be more convenient, but you will end up paying more once add-on fees and interest are counted. Opt for paying every six months or annually instead, and consider auto-billing to save more. If the large bill makes you anxious, divide the premium by 12 and move that amount into savings every month.
Keep an eye out for extras you may not need or already have elsewhere, such as roadside assistance and car rental coverage. Some banks, for example, offer breakdown recovery. It can also be cheaper to buy add-ons separately.
3. Maintain a good credit rating
Most insurers now take your credit history into account when pricing your premium. According to research by the Insurance Information Institute, people who effectively manage their credit are less likely to file claims.
To get the best deal possible, keep your credit rating high: pay bills on time, reduce the overall amount you owe, and contest any credit reporting errors you find.
4. Opt for a higher deductible
You can reduce your premium substantially by choosing a higher deductible. A deductible is the amount you pay out of pocket before your policy pays anything.
Different companies calculate premiums and deductibles differently. As a rough guide, raising your deductible from $200 to $500 can lower comprehensive and collision coverage by 15 to 30%. Before you talk to your provider, decide how much you can genuinely afford to set aside in savings, and adjust your deductible accordingly.
5. Get multi-vehicle and multi-policy discounts
Many companies offer incentives when you insure two or more vehicles under the same policy. If you have more than one car in your household, bundling them together can earn a multi-vehicle discount.
If you hold multiple policies, bundling them with the same carrier can qualify you for a multi-policy discount: homeowners insurance with auto, for example. It also simplifies your finances: one carrier is easier to work with than two or three.
6. Take a defensive driving course
Defensive driving has benefits beyond the road. Many companies offer discounts to drivers who complete a defensive driving course at an accredited institution. These courses are usually taken by seniors or teenagers, but any driver can benefit. Call your insurance company or check online, because the discount varies from state to state.
The final word
There are many strategies that can help you reduce your auto insurance and save hundreds of dollars a year. Before making any potentially costly decision, take your own circumstances into account and choose what works best for you.
