How to Lower Your Car Insurance Cost and Still Have Enough Coverage

$907.38.

That’s what the average U.S. consumer currently pays for auto insurance, which, according to the Insurance Information Institute, is up from $841.23 in 2016.

Despite these ever-rising costs, along with the fact that premiums account for anywhere between 2.5% and 8% of our annual income (depending on age), most of us only shop for car insurance once every few years.

But I get it. Shopping for insurance probably ranks somewhere near getting a root canal on your ‘things I’d like to do today’ list.

But the reality is that saving money on your auto insurance doesn’t have to be time-intensive, or a pain in the you-know-what.

Instead, we’ve broken the process down into three practical steps that will show you how to lower car insurance cost in no time.

Step 1. Make Sure You Have Enough Auto Insurance Coverage

With the exception of New Hampshire, every U.S. state requires owners to carry minimal liability insurance, called state minimums, on any vehicles they own. However, this often isn’t enough to adequately cover consumers in the event of a loss.

What’s the point here?

You’re excited about lowering your auto rates, but it’s important that you don’t become ‘coverage blind’ in the process. Why?

If you own a home, a car or two, a business, and/or any other kind of substantial asset (i.e. you have a net worth), state minimum coverage—while almost always the least expensive option available—probably won’t cut the mustard if you’re involved in, or responsible for, a severe auto accident.  

This is especially pertinent if you’re ever at-fault for a crash involving bodily injury.

That’s why it is important to calculate your net worth to ensure that you’re fully covered in the event of a loss. After all, that’s what you’re paying for with an auto insurance policy, so you might as well get your money’s worth. 

Once you understand how much coverage you need, what’s the next step?

Step 2. Shop Around for Auto Insurance Quotes

Among all of the insurance professionals interviewed for this article, one of their first recommendations for saving money was to shop around. But why?

Consumer savings expert Andrea Woroch explains that “Most of us put our insurance policies on autopilot, but doing so sabotages our budgets. According to a study by JD Power, only one-third of auto insurance policyholders shopped around for lower insurance rates, but those who did, saved an average of $360 per year.”

Jim Krieg, owner of Bonnie Brae Insurance Agency in Denver, CO, expanded upon this by explaining that the longer you’re with a company, the higher your rates are likely to be. As a result, if you haven’t checked rates from other carriers in a few years, you’re probably leaving a lot of money on the table.

Even if your auto policy is only a year old, keep in mind that carriers file new rates with state Insurance Commissions on an annual basis. As a result, a company that might not have been competitive just 12 months ago could now represent a viable option for you and your family.

Is There Really a Big Price Gap Between Auto Companies?

During my years as a personal lines underwriter, I learned that when carriers file new auto rates for approval, they’re often rooted in the company’s loss ratio and market saturation.

As an overly simplistic example, if they find that most of their high-payout losses were caused by a specific demographic (say, males age 25-30 who drove more than 15,000 miles per year for commuting purposes in Ohio), they might file new rates that charge these drivers higher premiums than others.

Consequently, Insurance Company A might have significantly higher rates than Company B, based on factors that might or might not apply to you.

In short, some auto insurance companies will be more expensive than others.

To outline just how much of a difference there can be between insurance companies, agency owner Jim Krieg used my information to run three different quotes (two household drivers, no youthful; married, one vehicle, no commuting, 250/500/100, $1K deductible):

Company Price
Progressive $576.50
Auto Owners $1,026.68
Safeco $1,337.20
Travelers $904

As you can see, it’s important to shop around. But what’s the easiest method?

Are Auto Insurance Comparison Websites Your Best Resource for Finding the Lowest Rates?

Thinking about using an auto insurance comparison site to quickly shop around?

It can be tempting, but based on our research, including feedback from hundreds of customers, we’ve learned that it can be a toss-up as to whether or not these sites will save you time or money. Not to mention the fact that you could be gambling with your personal information.

Pro tip: If you’re still considering using one of these sites, make sure to read through their privacy policy before handing over any personal details. If they pass your information along to more than two or three parties, you might want to keep looking.

Local Agents Can Best Your Best Resource for Quickly Obtaining Auto Insurance Quotes

Instead, perhaps the most surefire method of shopping insurance rates is to reach out to a few local agents (I’d recommend a minimum of three).

Paul Moyer, author of SavingFreak.com, agrees: “One of the best ways to lower your auto insurance rates is to work with an independent agent.”

This way, you can talk with someone who’s part of your community, who can counsel you on the appropriate coverage, and who can score you a competitive rate based on your specific coverage needs.

Most agents are also experts at ensuring you’re getting all the applicable discounts on your policy, which is what we’ll discuss next.

Step 3. Don’t Miss Out on Discounts That Can Reduce Your Car Insurance Rates

In advance of speaking with local agents, here are some discounts and factors to remember, which could help you save a significant chunk of change on your auto policy.

How Do Vehicle Features & Driving Habits Affect Your Auto Insurance Premiums?

Consumer savings expert Andrea Woroch told me that the type of vehicle you drive, “including the make, model, cost, horsepower, and even theft rates,” can have a big impact on the cost of your insurance.

It makes sense, though. Luxury vehicles are typically more expensive to repair. The more horsepower a car features, the easier it is to speed or lose control and cause an accident. If a vehicle has a greater chance of being stolen, it’s more likely that the company will have to pay a total loss.

Pro tip: Did you know that even one mistyped letter or number in your VIN can have an impact on your premium? To avoid, make sure it’s listed correctly on your existing policy, along with any new quotes obtained from agents.

Also, make sure you’re receiving credit for any vehicles with anti-theft and safety features, such as alarms, GPS tracking, remote entry, passive restraints (seatbelts), and airbags.

Check that the annual mileage listed for your vehicles is correct, as well as the use (typically either commute or pleasure).

In the end, Andrea recommends: “If there’s a certain vehicle you’re interested in purchasing, call your auto insurance provider to find out what it will cost to insure that vehicle. Then, factor this additional cost into your final decision, because it will impact your budget.”

How Long Do Accidents & Violations Affect Your Car Insurance Rates?

In addition to the vehicles you drive, another—perhaps obvious—factor that can impact your auto rates is any claim or citation activity on your record (formally called your motor vehicle report, or MVR).

Depending on the state in which your policy is active, along with how the insurance carrier is filed, most minor violations (speeding less than 20 mph over the limit, failing to use a turn signal, etc.) and minor accidents (those under a certain limit, which will vary based on carrier) can impact your rates for between three and five years.

On the other hand, major violations (speeding 20+ mph over the limit, DUI/DWI, causing an accident involving death) can significantly raise your rates for a period of 7-10 years.

Because of this premium impact, Answer Financial recommends making sure that any recently cleared activity is no longer reflected in your policy.

To avoid increasing your premium in the first place, it’s best to drive defensively, slow down, and avoid using your cell phone or becoming involved in other distractions. Driving a properly maintained car can also help you avoid being involved in an accident.

Recently receive a ticket? If so, be sure to take defensive driving. This will remove one minor citation from your record once every 12 months. And make sure you fight the ticket if you believe you were wrongly cited, which could avoid defensive driving to begin with.

Insurance Coverage Adjustments That Might Help You Save Money

Again, this is where the assistance of a professional agent can especially come in handy, since they can help adjust your coverage so that you’re maximizing your policy savings, while adequately covering your assets.

As noted at the beginning, though, Tom Simeone of Simeone & Miller, LLP, a D.C.-based attorney who frequently deals with auto insurance companies, warns:

“One thing not to do is to reduce the amount of coverage you buy. If you waive collision coverage, for example, you will have no coverage if you are at fault for an accident or the other driver denies being at fault. And, if you seriously injure someone, you will be legally responsible for a large judgment if you have minimal insurance.”

Instead, Andrea Woroch recommends increasing your comprehensive or collision deductibles to help pocket some cash. But beforehand, “Evaluate how much your budget can take if you do get into an accident, and then increase your deductible accordingly.”

On the other hand, “If you avoid accidents altogether or for several years, you will save money without losing any coverage,” Tom adds.

Pro tip: When you’re obtaining quotes, some companies might dishonestly compete for your business by cutting your coverage, sometimes to state minimums, and subsequently reducing their quote. Make sure you’re comparing apples to apples.

If you have health insurance, you might consider waiving personal injury protection, or PIP, which is also known as medical payments coverage. Why?

Tom explains that in many states, this coverage is optional. “If you have health insurance, you can use it for any medical treatment.”

Potential benefits of maintaining this coverage, though, include quick reimbursement of lost wages or out of pocket medical expenses while waiting on the at-fault party’s insurance to pay. “Again, however, for those looking to save money—especially those with health insurance, waiving or reducing PIP is an option,” Tom concludes.

If you have an older car, you might consider removing collision, which tends to be the costliest single coverage on any auto policy.

This won’t be an option (nor should it be) if you currently have a lien holder (loan) on your vehicle. And as discussed a moment ago, you should still consult with your financial professional and agent before removing this coverage, since it could spell big financial problems if you’re involved in an at-fault accident.

Policy Discounts & Misc. Rating Factors

You might not have thought about it, but the reality is that just about any changeable factor on your auto policy has the potential to affect your premium. This includes:

  • Your level of education (high school, college, etc.)
  • Your career, especially if you’re a first responder (police, fire, emergency), a medical or legal professional, or an engineer
  • Your marital status
  • Whether you rent or own your home
  • If your mailing address and vehicle garaging address is different
  • Whether or not your children maintain good grades (usually a 3.0 or better GPA)

And while they’re not the same, your insurance score is greatly impacted by your credit score, which can change frequently. Often, insurance carriers will automatically re-run your insurance score every few years, so you'll want to ensure yours is correct at least annually.

But did you know that there are also some non-rating factors that can potentially save you money on your auto insurance policy?

Paul Moyer of SavingFreak.com mentioned that things, like paying your premium on an annual or six-month lump sum basis, agreeing to receive your documents digitally, and signing up for electronic funds transfer (EFT) payments, could all lower your premium.

Another good option is to combine home and auto with the same company, which can save you 25 percent or more in some instances. This could also make you eligible for an umbrella policy (adds extra liability coverage), which might increase your overall insurance protection while saving money on your current rates.

When it comes down to it, though, saving money on your premium begins by reviewing your auto policy in detail, which might be a bit overwhelming if you’re new to the process.

Sure, we've provided a lot of actionable tips, but here again, this is where your agent or financial professional can be of great assistance.

Once you start saving on your auto insurance, what can you do next? Implement it into your budget, so you can start applying the money to whatever you see fit!


Derek Lakin

Senior Editor at HighYa. With more than a decade of experience as a copywriter, Derek takes a detail-oriented, step-by-step approach to helping you shop smarter. Whether it’s nutritional supplements or new scams, he believes an informed consumer is a happy customer. Connect with him on Twitter: @DALwrites


Comments

comments powered by Disqus

Want to Learn How to Build Amazing Credit Scores?

Our FREE eBook will teach you how to build amazing credit scores, save thousands and score the best deals on loans, insurance, and credit cards. Enter your email below to get a free copy of the eBook and to receive our weekly newsletter!