Buying your first car is a pleasurable rite of passage for most people, but the accompanying purchase of auto insurance is less fun. In fact, many new car owners find the cost of insurance frustratingly high and so do individuals who have had car insurance for decades. (Learn how to read one of the most important documents you own. Check out Understand Your Insurance Contract.)
While competing car insurance companies offer opportunities for discounts, individuals can also take steps before they buy a car to make sure they will pay the lowest possible premiums.
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Compare Rates for Various Cars
Once you have identified two or three cars that you think you can afford and will fulfill your needs, call your current insurance (or a new insurance company) to compare premiums for the cars. Car insurance costs vary because of the safety record, repair costs and likelihood of theft as well as the price of the car.
Avoid Gaps in Coverage
If you are switching policies, make sure you are completely covered at all times. If you let your insurance coverage lapse by forgetting to make the premium payments, your rates are likely to be increased.
Maintain Good Credit
Insurance companies typically check your credit score when determining your insurance rates because they have found a correlation between bad credit and the likelihood of making a claim.
Many companies offer a low-mileage discount for drivers who have a short commute or drive few miles each year.
Request a High Deductible
One of the easiest ways to reduce your car insurance premiums is to increase your deductible. Just make sure you have the funds to pay the deductible if you get in an accident.
Claim all Your Discounts
If your car has extra anti-theft or safety features such as anti-lock brakes, most insurance companies will give you a discount on your premiums. You may also be eligible for a discount if you have taken a defensive driving class or, if you are a student, you have good grades.
Of course you should drive carefully to avoid accidents and tickets anyway, but bad driving can also raise your insurance rates or even lead to a nonrenewal of your policy. While too many speeding tickets can cause a problem, causing an accident will typically raise your insurance costs by as much as 40%.
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While this may be a bit drastic, auto insurance rates vary widely from one location to another because of the likelihood of an accident or a theft. In general, car insurance rates are lower in rural areas, so you may want to look into the potential for higher or lower insurance rates if you are thinking of moving.
Work with One Insurance Company
After you shop around for insurance rates, choose one company for all your insurance needs. Most offer a discount for combining car and homeowners or renters insurance with one provider. (Before paying for coverage, find out what you need to do to ensure you get paid. See What To Do If Your Insurance Won't Pay.)
Lower Your Coverage
The Insurance Information Institute (III) suggests dropping collision and/or comprehensive insurance on older cars to save money. As a rule of thumb, III says that if your car is worth less than 10 times the premium, it may make sense to drop that coverage.
The Bottom Line
The important thing to recognize is that car insurance should be customized to meet your needs. Consulting with an insurance agent can be the best way to make sure you are taking advantage of every possible discount and that you and your car are still adequately covered. (Continue your insurance education; check out Top 10 Life Insurance Myths.)