Buying a car without considering all of the costs is one of the worst car buying mistakes there is. You may think that you won’t have any monthly payments for your vehicles if you buy cars for cash. But you need to remember that there are other expenses with owning a car and car insurance is just one of the expenses of car ownership. Since these costs can stay with us for the life of our vehicles (and longer, especially if we cosign a loan), here are 8 ways to save money on car insurance.
Oftentimes, we can become comfortable with using the same insurance company year after year. This is even more true if we have never had a bad experience (fighting for a claim to be paid, raising rates, etc) with them.
Unfortunately, this type of complacency can cost hundreds – or even thousands (depending on your coverage) of dollars each year! Once of the most effective ways to save money on car insurance is to shop around for the best rates.
Many things can happen over the course of a year – new companies can enter your state, competitors can lower rates, your company can halt various promotions and discounts, etc – that’s why it pays to do a little bit of comparison shopping before automatically renewing your policy.
Increase Your Deductible
This move will probably help you save money on insurance more than the others. That is because the higher your deductible, the less money your insurance company needs to pay out for your first accident each year!
Since many people don’t even report claims that are less than their deductible – since they run the risk of raising the coverage cost – raising these thresholds will represent potential savings to your insurance company.
The key to this method is to have an adequate emergency fund in place so that you can cover the additional “out of pocket” costs for which you are now responsible. If you don’t have one in place, you can use the savings from your premiums to build one (you can also cut your budget to speed up the process).
Every insurer that offers multiple policies will offer you a discount for combining all of your policies under their roof. The fact that you have all of your policies with them means that they are making a lot of money off of you. They will gladly offer you a discount in order to keep your business!
They also know that by combining all of your coverage with one company, it will be very difficult for you to switch to another company. You not only have to consider all of the variables surrounding your auto coverage, but life, homeowners, boat, and any other policy that you have. It makes you much more likely to be a long-term customer, and they will easily make up the discount which they are offering you!
Another reason why they like to encourage multiple policies is that they can send out one communication, bill, and other correspondence, rather than one for each policy. The same concept exists when it comes to hiring agents and customer service representatives.
Be A Safe Driver
Having points on your driver’s license will cause your rates to increase to astronomical rates (trust me, I have firsthand experience in this area)! Keep in mind that insurance companies have their own point system, and so even if you are able to negotiate with the prosecutor for fewer or no points on your license, you may still end up earning points in the insurance system. Your rates will still increase in this case.
Also, the more times you file an auto insurance claim, you run the risk of facing an increase in your premium. This is why many people avoid filing a claim if the damage is less than or a little over their premium. It’s not worth it to get the insurance company involved, because they may decide to increase your rates!
Some companies will actually offer you a discount for being a safe driver – no accidents or tickets within a certain period of time. So, not only can you avoid a sudden increase in your rates, but you can actually be given a nice discount!
Professional Discounts Help You Save Money On Car Insurance
By being a member of certain professional organizations you can pay less for your auto insurance. This is true of other memberships such as AAA or AARP, or even being a student a alumni of a particular school.
Many companies have negotiated special rates for their employees as well. For instance, in New Jersey there exists an insurance company that has a wonderful reputation, and great rates; and coverage is only available for employees of certain NJ companies!
Get Better Grades
If you are currently a student – or have recently graduated – you can save money on car insurance by earning great grades. Even if you are not a student, but you are paying for one or more of your children to be on your policy, then call up your provider to see if you qualify for the discount. If they don’t offer this discount, then maybe it’s time to consider the first tip!
Take A Defensive Driving Course
By taking a defensive driving course, you can save money on car insurance. I have seen multiple providers offer a 5% reduction if you pass one of these safety courses.
I was pretty much forced to take one of these courses a long time ago, and that is how I found out about this discount. Now, I make sure to take one every time the previous certificate runs out.
The cost of the course (usually around $75) is usually much less than the discount offered by the insurance company!
Drop Unnecessary Coverage
If you have health insurance, there is a good chance that you are paying too much for your auto coverage. That is because many auto policies contain various levels of medical coverage as well. There is usually significant overlap between the two, meaning that you are paying twice for the same coverage! Examine both policies, and if this is the case, make the necessary changes and use the savings to pay off debt.
Also, if you are no longer financing your vehicle, you aren’t “required” to maintain full coverage on your car. Depending on the age and value of car, it may be worth it to drop the collision coverage on your car. This is another reason to increase the amount in your emergency fund!
What steps have you taken to save money on car insurance?
Do you maintain collision coverage on an older car? If so, why?
Have you taken a defensive driving course? If not, will you consider doing so in order to save money?