Smart ways to save on auto insurance (and when you shouldn’t)
Through Chaya Milchtein, Next avenue
Auto insurance rates rose an astonishing 16.9% in May, overall, after increasing 6.4% in April, according to the Consumer Price Index. So now is a great time to look for ways to save money on your auto insurance premiums.
And if you’ve been driving less lately, due to work remotely during the pandemic, or you are struggling to make ends meet, you may be wondering if you should cut your auto insurance costs by reducing your coverage.
As a person with almost 10 years in the automotive industry and automotive educator who founded Mechanic Shop Woman, I can help you break it down so you can make an informed choice about where it’s wise to cut your insurance costs and where it’s not.
Some auto insurers have refunded a percentage of premiums to customers due to the reduction in driving Covid-19 – the Insurance Information Institute estimates that insurers will return $ 14 billion to customers.
The easiest ways to save on auto insurance
But you might be able to pay less for your auto insurance by doing some legwork on your own.
The easiest way to save money is, of course, to drive better. Practice defensive driving; don’t accelerate or drive when you are distracted. This will help you avoid tickets and accidents, which will increase premiums.
If your driving habits have changed significantly over the past year and will remain so, report the updated mileage to your insurer so you don’t pay for the drive you don’t.
You can do this either by updating the insurer’s app, calling the company, or speaking to your agent if you have one. In most states, insurers will reduce your rates if there is a significant change from the US average of 12,000 to 15,000 miles per year.
Savings vary from person to person and from insurer to insurer. The Coverage.com website found that it could be up to 27% savings in California, which heavily regulates this, to 0% in North Carolina – and everything in between.
When I called my agent in Wisconsin to find out how much I could save by driving less lately, I was told that if my annual mileage was less than 7,000 miles, my rate would drop by $ 83 for the term. six months or about $ 14 per month.
If your premium doesn’t drop much, or not at all, even if you don’t drive a lot these days, you might want to consider auto insurance from a company that charges by the mile. Allstate, for example, offers this option in some states with its Milewise program.
Understand what’s in your policy
A good way to lower your insurance premium is to review your policy and speak with your insurance agent, if you have one, to understand the coverage you have and your deductibles, then see where you can reduce. the cover.
You may decide to remove comprehensive and collision coverage, for example. (Comprehensive coverage covers vandalism, theft, and acts of God like a collision with a deer or damage from a flood or hailstorm.) The removal of these coverages will not affect the liability coverage which protects you against financial liability for damage to another person’s vehicle, injury to another person in such an accident or property damage.
Increasing your deductible – the amount you have to pay if you’re involved in an accident – will definitely save you money. However, this is not a good option if you increase the deductible to an amount that you cannot afford to pay if you fall in a wreck because you will not be able to have your car repaired until you arrive. with the funds.
You’ll also want to check with your insurer to see if you qualify for discounts that you don’t get.
For example, State Farm’s Drive Safe and Save program and Progressive’s Snapshot offer “safe driving” discounts. You can save up to 30% with discounts like this if you’re willing to use a device that allows them to track your driving habits.
Insurers also offer discounts for taking defensive driving lessons or having safety equipment such as car alarms and anti-lock brakes.
The amount of these discounts may depend on where you live. With GEICO, for example, discounts on defensive driving lessons can go up to 15% in Arkansas, while drivers in Wisconsin save only up to 5%. In most states, GEICO also requires drivers to be 50 years of age or older and take courses voluntarily.
If you decide to reduce coverage or find that you qualify for discounts or both, find out about the new premium from your insurer. Then shop around to see if other insurers could offer the same coverage for less.
Often times you will find that you can save with another company. Independent agencies that represent a large number of carriers make it easy to research, put together quotes for you, and explain if other companies can meet your needs at a lower price.
What about group insurance?
Another way to save: bundle your home or home insurance and auto insurance policies.
You have probably heard advertisements on TV and radio promoting this technique and you may have thought it was just a trick to get your business. But bundling can actually save you money, sometimes more than you might think.
For example, I helped a woman get a car insurance quote from State Farm a few months ago and it turned out that she didn’t have tenant coverage. This insurance costs about $ 115 per year, and by bundling renters and auto insurance, it saved $ 213 over a year of auto insurance.
This meant that not only was her tenant’s policy effectively free, but she saved an additional $ 98. It’s almost like the insurer is paying her for extra coverage.
Working to improve your credit can also lower your auto insurance premium in many states. According to the National Association of Insurance Commissioners, an on-time payment history and the amount of your unpaid debt matter the most.
While it is difficult to compare different insurance policies from different drivers side by side due to the number of factors that go into an insurance premium including vehicle type, driving history and location , a 2021 Bankrate.com survey found that the annual premium for someone with bad credit was $ 3,026, but it was $ 1,487 for someone with great credit.
Where not to cut corners on auto insurance
There are also ways to lower your auto insurance costs, but you shouldn’t.
For example, if you didn’t have access to another vehicle while yours was being repaired, keep your rental car coverage (or add it if you don’t). It’s one of the cheapest parts of your insurance policy, so it’s not worth going without.
Glass coverage is another thing some people cut back on when cutting car insurance costs. For older vehicles, this may make sense. But if your vehicle has advanced driver assistance systems and, in particular, distance sensors that require an original windshield and special calibration for the safety equipment to work, replacing the windshield is not economical at a distance. The cost can start at $ 1,000 and increase from there. So this blanket may be worth keeping.
Make sure you meet your state’s minimum coverage requirements. These generally require all drivers to have liability coverage. If your vehicle is financed, your bank will also have minimum requirements and may penalize you – up to and including purchasing a policy on your behalf and charge you if you fail to meet them.