How Can I Lower My Car Insurance Premium?

Car Insurance costs are continuing to rise. These costs represent a larger and larger part of the family budget. What can you do to lower your premium while also ensuring that you're covered for major costs in the event of an accident, theft or total loss of the car? The most important reason to have car insurance coverage is to ensure that you aren't left with huge costs due to an accident that is caused by you or an uninsured driver and to cover you in case your car is stolen or damaged beyond repair so you can replace your vehicle.

We believe that car insurance is meant to cover the BIG costs such as serious damage or injury to other drivers and passengers and/or total loss of the car. It shouldn't be used to replace a car radio or fix a windshield. With that in mind, here are some things you can do to lower your car insurance costs:

Increase Your Deductible

One major influence on car insurance costs is your deductible. This is the amount of money you have to pay out of pocket before insurance coverage kicks in. It's our belief that you should set this as high as possible taking into account your ability to pay. Where you set this depends upon many factors such as affordability and whether or not you have a lien on your car. Many banks have maximum deductibles that they are willing to accept on cars that are secured by a loan. Some banks want this deductible as low as possible while others are more flexible. You should check with your lending institution about their requirements before contacting your insurance agent regarding increasing your deductible.

I set my deductible at $1000 as I believe that insurance coverage is for major events and not small, lower cost events. You are better off raising you deductible and then taking the savings and setting it aside for possible claims. This way , you control the money. For example, if you raise your deductible to $1000 and save $40 per month on your premium, then put this $40 a month away in savings to cover any out of pocket costs.

Check to see if you can save money with another company

This is one of the biggest things you can do to reduce your rate. There is no loyality when it comes to car insurance companies. Don't stay with your current company just because "we've been with them for years" or you're friends with your insurance agent. In many cases, the longer you stay with a company, then the more they may be taking advantage of your loyalty with higher insurance rates compared to their competitors! It doesn't hurt to see how much you're currently overpaying for car insurance. Go to a good comparison site such as Insureme to see if you can save any money. It's free, costs you a few minutes of your time and you can compare rates among dozens of competitors. You could easily save hundreds of dollars a year by switching. Be sure to compare the exact same coverage levels you currently have in order to give you a fair comparison.

Once you find the lowest rate online ask your current company if they can match it with a long-time customer discount. If they can't, then move on!

Best Auto Insurance

Get a cheaper to insure car?

Many sites suggest that you trade in your current car for one of these cheapest to insure cars, however, please note that many of these cars are minivans. Minivans are great if you have a family, but the reality is that they also depreciate a lot. The depreciation rate for many of the cars on this list is so high that any insurance savings you get would be overshadowed by the depreciation and poor gas mileage. Unless you're driving a very costly to insure car, then this may be something your not willing to or should do. The type of car you drive does affect your insurance rate but be sure to consider other factors. It doesn't make sense to get a car with a car payment if you own your current vehicle outright for example. Only consider this if you aleady are planning to get another car. Be sure to call your insurance agent to compare rates for each car your considering buying. Don't buy a car without checking the insurance cost first!

Remove your collison coverage

If you own your car and have the title (banks with liens on your car will never let you do this), then you may want to consider removing collision coverage. This only makes sense if you have an older car with a value not much more than 4-5 times your deductible. If you have a 1999 Honda Civic, then you may want to remove collision coverage if you haven't already done so. If you have a 2005 Lexus, then it would make sense to keep it. Be sure to consider your ability to replace the car if it is totaled in an accident or repair it. Whatever you save each month by removing collision coverage, just put that amount in savings each month to cover any unexpected repairs.

Ask about other discounts

This is a simple change that can save you 10% or more on you combined premiums. Ask your car insurance company about multi-policy discounts and consider combining policies with the company. Not only does it simplify your billing, but you could also save money on the combined cost of all your coverages. Combine auto, home (renters), life, long term care , etc. with one company if the savings is significant enough to make combining worth it.

Many car insurance companies offer the following types of discounts. Be sure to ask your agent if any of these applies to you and can save you money:

Lower your coverage amounts

One of the things many people do is get too much coverage. Some insurance agents will try to talk you in to coverage levels that really aren't needed. Depending upon your financial position, you may want to consider reducing your coverage levels. Do you really need $300K coverage per person per acident? Check out your state's minimum liability coverage requirements and then work up from there. You can find your state's minimum liability coverage requirements by going to your state's insurance department website. You can find your state's site through the NAIC website.

The big secret is that the vast majority of auto injury lawsuits are settled no higher than the limit of coverage. If you don't really have a lot of assets or income, then it really doesn't make sense to get much higher coverage than the state minimum or maybe 1 or 2 levels above state minimum. Most attorney's know that a defendent with little assets or income is not worth pursuing. Consult with a financial advisor prior to making any changes to coverage levels, especially if you are a higher net worth individual. There are also many umbrella policies which can cover you in the event that your auto insurance falls short.

Group insurance through your employer

Many companies now are offering group auto insurance as a benefit of employment. Check with your company to see if they offer this when signing up for annual benefit enrollment. The savings here can be very significant.

Maintain good credit

Your credit score affects your premium. You may believe that it's unfair to consider this but it's legal for insuance companies to consider it. The reality is that the lower the policy holder's credit score, then the greater the chance that they will have a claim. You may be a great driver with a low credit score, but you will be sucked into this category anyway. Improve your credit score and then go back to your car insurance agent and see if they can reduce your rate.

This should not be considered financial advice which can only be given by a qualifed financial professional. We suggest you consult with a qualified financial planner and/or insurance professional who is most qualified to consult with you regarding policy decisions. Many factors are involved in your policy premium some of which may not be mentioned in this article. We are an affiliate of the Bankrate Insurance Network.

Return to Best Insurance Deals

Home/ Contact Us / Links/ Site Map/ Privacy/