If it’s time to renew your auto insurance policy and you’re facing a serious case of sticker shock, you will be glad to know there are a lot of ways to reduce what you pay without sacrificing the necessary level of coverage. In this article, I’ll take a look at some of the most popular ones.
Check Out These Ways to Save Money on Car Insurance
Paying the premiums on your auto insurance policy can take a big chunk out of your monthly budget. But there are ways to reduce the cost:
- Get Multiple Quotes
- Increase Your Credit Score
- Buy Used Instead of New
- Drop Comp and Collision on Older Cars
- Bundle with Your Home Policy
- Raise Your Deductible
- Maintain Continuous Coverage
- Look for Discounts
- Drive Safely
- Take a Defensive Driver Class
- Consider Pay-per-Mile Insurance
Get Multiple Quotes
Comparison shopping is ground zero when it comes to saving money on car insurance. You’ll want to get a minimum of three quotes to compare. You can do this online or over the phone.
Be sure you have your current policy in front of you before you begin. That way you can make sure you’re shopping for the same level of coverage you already have.
If the idea of getting three or more quotes on your own seems daunting, consider working with an insurance broker.
Brokers have relationships with multiple insurers and can easily shop you around to all of them. It’s like having the best of both worlds: You get the comparison shopping, but you don’t have to put in all the legwork.
Increase Your Credit Score
In all but a handful of states, insurers are permitted to use your credit to establish your premiums. So having good credit really pays when it comes to insurance. (Notable exceptions include California, Hawaii and Massachusetts.)
Let’s say you have a credit score somewhere in the 660s. If you can bump it up by just 10 to 20 points, you’ll enter the next tier in the credit scoring model. Research from The Zebra’s State of Auto Insurance 2020 shows making that leap can save you an average of $190 on your premiums.
Raising your credit score is easier than you think. The #1 rule is to pay every bill on time every month without fail. For other tips to raise your credit quickly, see our article on 5 Sneaky Ways to Improve Your Credit Score.
Buy Used Instead of New
Money expert Clark Howard is a big fan of buying used vehicles and calls buying used “one of the smartest financial moves you can make.”
That’s doubly true when it comes to what you pay for car insurance. A new car is always more expensive to insure than a reliable used car that’s two or three years old.
In fact, The Zebra’s research found that buying a used car will save you an average of 18% on insurance premiums versus buying a new car.
If you’re looking to buy a used car, be sure to read our simple 7-step guide before you start shopping.
Drop Comprehensive and Collision Coverage on Older Cars
If you have an older vehicle, it often doesn’t make sense to carry full coverage on it. That’s because the car has so little value to begin with that you’re not going to get a big, fat check to replace it if you have an accident
Depending on the age and condition of the vehicle, you may be lucky to get a few hundred or even a thousand dollars.
So, the general rule is: When the cost of comp and collision exceeds 10% of your old vehicle’s value, that’s the time to dump it and carry only liability coverage. You can determine your vehicle’s value at Edmunds.com, KBB.com or NADA.com.
Bundle With Your Home Policy
Combining your auto and homeowners insurance can deliver some big-time savings, depending on where you live and your personal history of credit, accidents and other factors.
One study from Quadrant Information Services found that the average discount for bundling home and auto is 16%, while bundling auto and renters insurance will save about 8% on annual premiums.
Raise Your Deductible
Raising your deductible — the amount of money you have to pay out of pocket when you file a claim before coverage kicks in — is a great strategy when you’re wondering how to save money on car insurance.
You should always opt for a $1,000 deductible for the best savings on your policy. At that level, you’ll pay a lower premium and won’t be tempted to file any claims for small things like a cracked windshield.