Determine How Much Auto Insurance You Need
Before you can compare quotes, you must determine how much auto insurance you actually need. For starters, you need to know what the minimum requirements are in your state. Nearly every state requires drivers to maintain a minimum amount of liability insurance by law in case they cause a wreck that injures another person or damages another person’s property. Also, drivers who are still paying a car loan are subject to the minimum standards set by the bank that issued the loan. Check both requirements to determine the bare minimum needed for your car.
You’ll also need to take your vehicle’s worth into consideration when thinking about whether you need collision coverage or comprehensive coverage. If your car isn’t worth much, it may not make sense to have full coverage. It might be smarter to just purchase basic liability insurance that covers damages or injuries you cause in a wreck. You may also want to opt for Personal Injury Protection to cover your own injuries if you get in a wreck. To learn more about finding the right policy, visit our Policy Guide.
Aside from dropping coverage that doesn’t make financial sense, you can also save money by dropping optional coverages, such as roadside assistance, full-glass replacement, or rental car use. While these are certainly helpful, you can put money in savings to cover situations like this rather than adding them to your insurance bill. Once you’ve determined how much coverage you want, you can look to save money by comparing rates. If you’re still uncertain about which coverage options are best for you, check out the article “The Different Types of Car Insurance Coverage” for more information.
Tip: If you already have health and disability insurance coverage through your work, you can probably go without Personal Injury Protection (PIP) coverage on your auto insurance. If you live in a state where PIP is required by law, you can opt for the minimum. The idea is to avoid doubling up coverage where you can.
Auto insurance is a competitive industry, and each insurer sets their rates slightly differently based on different factors. A fast way to get multiple quotes from several major insurers is to use our online quote tool. After you’ve gathered a handful of quotes, you may find that certain companies will match their competitors’ rates in order to earn your business. Some will even match or beat the price that was quoted to you by another insurance company. To get an idea of which insurers offer coverage in your state, look on your state insurance department’s website. Many of these sites maintain a list of the top insurers by number of policies in that state and provide a helpful list of contact information all in one place. For example, New York State provides an extensive list of telephone numbers of auto insurers that consumers can reference.
When you compare rates, remember to compare quotes for identical levels of coverage. This way you are making “apples to apples” comparisons. In other words, you must know ahead of time what policy limits you need for each type of coverage and the deductible you can afford. Have the insurance company factor in any discounts you are eligible for so that the final quote is as accurate as possible.
Remember that price isn’t the only thing to take into consideration when choosing an auto insurer. The level of service you receive is also important. Before making your final decisioncall around to a few local body shops and ask which insurers they recommend. Since most body shops deal primarily with insurance claims, they typically experience both the good and the bad from the whole insurance industry, and will hopefully be forthcoming with advice on which insurers are the easiest to work with. If you are unfamiliar with an insurer, you can also ask your state’s department of insurance if any complaints have been filed against them. It’s not worth your while to save a little money on insurance only to receive poor service.
Tip: You may be able to save time by purchasing insurance through an independent insurance agent, since they sell policies from a variety of different companies and can do cost comparisons for you. This is a particularly good idea if your driving history isn’t quite as spotless as you’d like, because it can be much more difficult to find an affordable policy on your own.
Perhaps the biggest factor affecting the cost of insurance is your driving history. Auto insurers aren’t fond of losing money, and they know their chances of having to pay a claim are higher when they insure people with a history of at-fault accidents and tickets. Because of the risk insurers take on by covering people with a bad driving history, they may tack a surcharge onto your policy if you have one or more traffic violations or accidents. Therefore, one of your best defenses against high car insurance prices is driving safely.
When it comes to assessing rates and premium costs, each insurer uses its own formula to determine an appropriate surcharge to give someone who has a traffic infraction on their record. An otherwise good driver who is ticketed once for a minor speeding infraction may not see his premium raised at all, while a second violation of this nature will typically lead to a rate increase. In general, these types of violations will stay on your record for three years, though this varies by state. However, if you are ticketed for a major violation,such as reckless driving or a DUI, you can expect a significant rate increase when it comes time to renew your policy. Too many major violations may even lead your insurer to cancel your policy or choose not to renew when the term is up. Major violations can impact your premium for up to five years, depending on the insurer and the state.
On the other hand, many insurers offer discounts for drivers who maintain accident-free records for certain lengths of time. If you have a good driving history, ask your insurer about any discounts they offer for your clean record.
Tip: If you are generally a safe driver, look for insurers that offer accident forgiveness, a perk in which the insurer agrees not to raise your rates after a single accident.
Auto insurers like to reward policyholders who pay upfront and in full with deep discounts. While breaking down your car insurance premium into more manageable monthly payments might initially seem easier on the wallet, it usually costs you significantly more to do this over the term of your policy. Instead of paying your insurance premium on a monthly basis, pay the entirety of your premium upfront on an annual or six-month basis.
Tip: Since the average person doesn’t have stacks of cash on hand to pay their insurance premiums upfront, it’s a good idea to break down the lump sum into monthly amounts and put a little money away each month leading up to the end of your current term so that you will be ready to pay in full when you receive your renewal notice.
Raising Your Deductible
One of the quickest ways you can save on car insurance is to raise your deductible, which is the amount you must pay out of pocket before insurance starts paying a claim. Most drivers choose low deductibles such as $250 or $500, which are easy to pay out of pocket but contribute to higher premiums. As an alternative, many insurers offer deductibles of $1,000, or even as high as $3,000. If you choose a higher deductible, it forces you to be responsible for any damage less than the amount of your deductible, thus lowering your risk of a claim and reducing your rates. Ask your insurer to provide you with quotes for the same policy limits factoring in different deductible amounts and consider how much you could reasonably afford to pay out if you got in a wreck. Use caution in doing this, though. If you raise your deductible, but can’t afford to pay that much to repair your vehicle if it sustains major damage, you could find yourself in a serious financial bind.
Tip: If you want to raise your deductible to save money, but are fearful that you’ll get stuck paying a huge bill if you get in a wreck, consider saving up the full amount of your deductible before you make this change. This way, you’ll have your own financial cushion in place and you won’t be paying more than you need to for car insurance.
Don’t Let Your Policy Lapse
When money is tight, it can be tempting to let your auto insurance lapse. However, this is a surefire way to increase your premiums dramatically the next time you purchase auto insurance (if you intend to keep driving, you will need to purchase it again). And that’s not the only thing you’ll have to worry about. If you let your insurance lapse, you are no longer meeting your state’s minimum liability requirements and are driving illegally. If you get caught driving without insurance, you could be ticketed and issued a steep fine. Do it a second time, and you could be issued an even higher fine, have your vehicle impounded, or even have your driver’s license suspended. This is a slippery slope. The further you go along these lines (e.g., driving on a suspended license, continuing to drive without insurance), the worse your driving record will get, which typically makes it impossible to get insurance in the standard market. You could be forced into a high-risk insurance market, which not only costs more, but offers fewer types of coverage.
Tip: If you are struggling financially, consider downgrading to the state minimum liability insurance. While it’s risky to drive without other types of coverage, you’ll at least be driving legally and avoiding tickets, fines, and higher future premiums associated with letting your insurance lapse. You might also consider downgrading your vehicle to one that is cheaper to insure.
Negotiate a Better Rate
If you feel your rates are too high or keep increasing, call a local agent or customer service representative and ask if you are getting the best rate possible. Ask about any negative factors that could be contributing to your rates, such as your credit or driving history. Where your credit history is concerned, there’s always the possibility that an error on your credit report or a stolen identity is contributing to higher rates. A brief chat with your agent can shine a light on problem areas you may be able to remedy or available discounts you aren’t taking advantage of.
Additionally, your rates may be up for review if you’ve moved into a new neighborhood, got a new job, graduated from school, got married, or bought a house, among other factors. Insurers look at multiple demographic factors to assess your risk of an accident, so if you’ve changed your lifestyle in any way, check with your insurer to see if it has affected your rates for the better.
If your driving history and credit are both pristine, and you’re utilizing all available discounts, you still have room to negotiate. Explain to your agent that you are unhappy with your current rate and that you may take your business to a different insurer that can offer a better value. If you are a longtime customer, you may have even more leverage.
It’s also useful to come to these conversations armed with quotes from other insurance companies. If you can prove that other insurance companies will offer you the same or better rates, your current insurance company may fight to keep your business by matching or even beating the quotes. You may need to send your insurer a copy of the competing quote, however.
Tip: An agent or representative may not initially give in to your request for lower rates, but persistence can pay off. Call back in a month or two and talk to a different representative, or ask to speak to their supervisor. Just remember to be civil and treat them respectfully on the phone. Agents and representatives will be less inclined to help you if you lose your temper or come across as overbearing.
If you’re paying too much for car insurance, it’s good to know you have options that can help you pay less. Remember that insurance is a competitive industry and you’re not obligated to stick with a particular insurer who you feel is overcharging you. At the same time, loyalty could also work to your advantage if you’re up for a little negotiation.
Take Advantage of Discounts
Insurance companies offer a wide variety of discounts that you should take full advantage of. Some of these discounts include:
- Discounts for Vehicle Safety Equipment. If you drive a car equipped with air bags, anti-lock brakes, daytime running lights, or a theft prevention device, you could save big on insurance. Airbags and theft prevention devices typically lead to the deepest discounts, as they reduce the cost of medical payments and PIP coverage, and comprehensive coverage, respectively. Some insurers offer discounts if you equip your car with a dashboard-mounted camera, and certain insurers will even provide the camera and set it up to record when driving, thus making their claims process easier and saving you the hassle of recounting events if an accident should occur.
- Good Driver Discounts and Claims-Free Discounts. Almost all major insurers offer significant discounts to good drivers who haven’t had an at-fault accident on their record or filed a claim for a period of three to five years. This is a huge incentive to drive defensively and avoid risky behavior on the road.
- Driver Education or Safe Driving Course Discounts. Most insurers will offer a discount to policyholders who take an approved safe driving course. While you might associate defensive driving courses with getting traffic tickets dismissed, doing this independently can actually lead to a discount. A driver education course is particularly beneficial for teen drivers, who cost the most out of any age group to insure. By having their teen take a driver education course, parents can soften the blow of teen auto insurance costs.
- Good Student Discounts. Young drivers, particularly teens, are notoriously expensive to insure. However, full-time students who earn good grades (a “B” average or higher), either in high school or in college, will receive a discount if they send in proof of those grades to their insurer. Auto insurers have determined that good students are more responsible and pose less of a risk of making claims.
- Military or “Preferred Occupation” Discounts. Many insurers provide a discount to veterans or members of the armed forces to honor them for their service. Insurers may also provide discounts to people who work in certain occupations, such as police officers, firefighters, or teachers.
- Affinity Discounts. If you belong to a group that is partnered, or affiliated, with your auto insurer, you may receive a discount. These insurance partners could include certain credit unions, alumni associations, professional development associations, fraternities/sororities, and more.
- Multi-car or Multi-Policy Discounts. Insurers like to reward you for trusting them to insure you in as many ways as possible. If you insure multiple cars, or hold multiple policies with the same insurer (such as home insurance and auto insurance), you can save money by “bundling” them together.
- Mature Driver Discounts Senior citizens may be eligible for a discount if they take a state-approved course for mature drivers.