Seven Tips to Lower Your Car Insurance Costs
Increasing your deductible, cleaning up your credit report, and reducing minor claims may save you money
The cost of insuring your automobile is based on several key factors1:
- your geographical location (zip code)
- your age
- your gender
- the type of car you drive
- your driving history
- your credit score
- your deductible
- marital status
- driving habits (pay as you drive)
It may not be worth moving to an area where roads are less congested just to lower your monthly car insurance costs, and getting married probably isn’t a good means to lower monthly premiums, but there are some simple steps you can take to cut insurance costs, sometimes by as much as 30% to 40%.2
1. Increase Your Deductible
Your deductible is what you pay before the insurance company (insurer) starts paying some of the costs associated with an insurance claim. The higher the deductible, the more risk you assume, and the lower the risk the insurance company carries. If you currently have a $200 deductible, your monthly premiums will probably be higher than if you have a $1,000 deductible, because you’re assuming a larger percentage of the risk.
If you increase your deductible and lower monthly premiums, you might be able to deposit the extra savings each month into a savings account so you’ll be prepared in case you have a claim. Figure out how long it will take to make up the difference between a high and low deductible policy. It may take a year or two before you come out ahead. However, after that time, your savings continue to grow each month, and that’s worth further examination.
2. Clean Up Your Credit Report
Insurance companies recognize that people with quality credit are typically responsible and less likely to have an auto accident.3 Insurers use actuarial tables to determine how likely you are to have an accident, and how likely it is the insurer will pay a claim while protecting your automobile. A better credit history isn’t a guarantee of lower monthly premiums, but it helps with some insurers, so shop around and keep current on payments to lower the cost of car (and other) coverages you carry.
3. Don’t File Claims for Minor Dings and Dents
The more claims you file, the higher your premiums are likely to be. If you scratch your car, or get dinged in the parking lot of the supermarket, filing a claim may cost you more in the long run than if you pay for the repair yourself.
4. Choose Your Car Carefully
It will probably cost more to insure a fully-loaded, high-performance car than it will a less extravagant vehicle. Insurers expect sports car owners to drive faster and, as a result, have more accidents, adding increased risk for the insurance company. Owners of smaller, safer cars can enjoy lower insurance costs because the risk factor is lower. Repairing a fully-loaded automobile may cost more than a smaller car with fewer features, thus lowering the risk to the insurer, which, in turn, can lower your insurance costs.
5. Bundle Insurance Coverages
Talk to your local insurance agent about bundling insurance coverages to lower total insurance costs. If you have your homeowner’s or renter’s insurance with one company, your automobile insurance with another company, and personal liability coverage with a third insurer, you’re likely to pay top dollar for each type of coverage. However, if you purchase all of your insurance coverages from a single insurer, you’re likely to enjoy better rates on all of your insurance, saving money each month.
Some insurers offer monitors that plug into your vehicle and track everything from mileage to braking habits to driving speed. You might be uncomfortable knowing that the insurer is tracking your driving habits, but if it saves you money each year on car coverage, you just might let the insurer “watch” just how well you drive.
7. Shop for Discounts
If you don’t ask for discounts, chances are you won’t receive them. Insurers offer discounts for a number of reasons. For example, the longer you have a driver’s license, the lower your monthly premiums may be. Insurers also offer discounts for senior citizens, who are more likely to obey the rules of the road and experience fewer accidents than a teen-ager who just obtained a driver’s license last month.
Members of certain associations and organizations can save money. Insurers pool these association members to lower their costs of acquiring new insureds. The association markets the insurance, saving the insurance company money, which in turn, saves you money.
If you do get a moving violation ticket for speeding, making an improper turn or for some other reason, talk to your insurer about attending driving school to keep your insurance rates down. Some insurance companies may forgive an infraction when you demonstrate your desire to be a safe driver.
In the United States, the average driver pays about $1,6252 annually for auto insurance, but rates vary widely, so it’s worth checking out various ways to save on insurance costs and still get the coverage you need.
The information provided is presented for general informational purposes only and does not constitute tax, legal or business advice. Any views expressed in this article may not necessarily be those of Nevada State Bank, a division of ZB, N.A. Member FDIC