Turn on a television, and you will be inundated with advertisements from giant insurance companies promising rate reductions in no time. But these simple advertisements mask a confusing array of companies and policies, and many customers simply go with a policy that is “good enough” instead of looking for the right policy which could save them money and keep their vehicle protected.
But by making a few moves, you can save yourself up to hundreds per year by reducing auto insurance costs. Here are a few ideas.
- Go Shopping More Often
Auto insurance companies count on the fact that once a customer picks an auto insurer, they will likely stay with said company year in and year out without taking the effort to shop around. The auto insurer can thus start jacking rates up, all while mollifying the customer with some yearly membership program which is nowhere worth the increased cost.
Credit Karma thus suggests that you should shop for new car insurance each year, though I would contend that doing it every two years is fine. An additional benefit from shopping more often is that you will have a better understanding of what your new policy actually covers, and by extension will learn more about the auto insurance industry.
- Look at Small and Local Insurance Companies
Value Penguin notes that four auto insurance companies (State Farm, GEICO, Progressive, and
Allstate) control 50% of the auto insurance market. These companies relentlessly market themselves and in doing so pressure customers away from smaller insurance companies who may not appear as established or legitimate.
But smaller companies such as Elephant Auto Insurance or Grange can offer a better rate with the same coverage, especially as they are not spending millions per year getting James Harden or a cartoon lizard to advertise on their behalf. Smaller companies often offer better customer insurance as well. There are certain downsides, such as the fact that said companies normally operate regionally, such as offering Mississauga insurance, for example, instead of nationwide and they may offer less benefits. But if you are regularly switching insurance companies as noted above, these downsides are not that bad.
- Get Your Credit Up
Your credit score plays a key role in determining your auto insurance rate. This practice is banned in Massachusetts, California, and Hawaii, as some people argue that such practices are discriminatory against minorities and poor people who cannot easily access credit. Insurance companies like Esurance argue “that those with higher credit scores tend to get into fewer accidents and cost insurance companies less than their lower-scoring counterparts,” which thus means lower rates. Maybe people with higher credit are better at risk assessment and drive less aggressively as a result.
So make sure that your credit is up to date. Pay your bills on time, focus on reducing and eliminating any debt, and check your credit score. Even if it does not improve your premiums, a good credit can help your finances in other ways.
- Buy the Right Kind of Car
If you are car shopping, you likely know that there are other financial considerations beyond the sticker price such as gas mileage and ease of repair. Insurance is another consideration, as more expensive and flashy cars means a higher insurance payment. It should also be noted that if you are buying or have an older car, it may be better to skip comprehensive or collision coverage on your vehicle entirely. Any potential payout will be low given such a car’s value.
But that does not mean you should just get the cheapest car available. Also look for a car which carries plenty of safety features such as anti-lock brakes and a security system. If you can show insurance companies that you are making a real commitment towards protecting your vehicle through such purchases, they may lower your premiums quickly.
- Look for Other Discounts
Insurance companies, particularly the larger ones, can offer a wide range of discounts beyond having good credit or a safe vehicle. If you do not drive that much or have a short commute, you can sign up for a usage-based insurance program such as Progressive’s Snapshot. You can raise your deductible (the amount you must pay before insurance kicks in) and use the savings to create an emergency fund to help pay for any potential repairs. You can take a defensive driving course.
The key is to take your time and do your research in order to find potential discounts. Start by looking at your coverage and reading the fine print of what you signed, and then move onto the insurer’s website. Only you can know which discount will work best for your unique situation.
- Drive Better
All of the above tips will help, but there is one very simple truth to lowering your insurance rates: insurance companies will lower your rates if you have a history of not getting into accidents. Ergo, drive better.
And there are lots of things we can all do to drive better and reduce the risk of accident. Actually follow the speed limit. Getting to your destination five minutes faster will not change anything, while getting into an accident will. Don’t drive when you are sleepy. Ignore distractions like food and your cell phone. And practice. It may take some time until your premiums decline, but driving safely and avoiding accidents carry other obvious benefits and pays off financially.