When was the last time you took a good look at your auto insurance policy? Most likely, the answer is 'never' - or at the very least, 'not for a long time.' You're not alone. The majority of folks renew their policy without giving it a thorough look, even when premiums rise. But those few minutes to review what kind of coverage you have and what you actually need, can save you money. (To learn more about insurance in general, check out The History Of Insurance.)

TUTORIAL: Intro to Insurance

Here are a few things to consider if you're looking to reduce your costs:

Consider Higher Deductibles
The deductible is the amount of money you have to dish out before your insurance policy takes over. By increasing your deductible to $500 from, say, $200, you could lower the cost of your collision and comprehensive coverage by 15 to 30%. Increasing it to $1,000 could decrease that cost by at least 40%.

Avoid Duplicate Medical Coverage
Most insurance policies have an option for personal injury protection and medical coverage. But if you have an existing health plan, you may be paying extra for double coverage. Purchase only the minimum which is required by your state. One word of advice, though: check with your health and medical plan to make sure that policy will cover injuries incurred in auto accidents.

Drive a Lower-Profile Vehicle.
The belief that car color bumps up your premium is false. However, owning a car that is a target for theft, expensive to repair or has a less-than-stellar safety record can easily boost your costs. Car insurers are more interested in the make and model, year, body style, engine size and, in some areas, location (street parking versus driveway/garage-kept vehicles, for instance).

If a car falls under the "sports car" category - two seats, lots of horsepower, performance engine, high-end wheels and racing tires - expect to pay more. Insurers see these vehicles as higher risk for accidents (drivers tend to use the speed potential, also increasing the potential for getting traffic fines), more damage (sports cars tend to be smaller than family sedans) and higher maintenance costs (sports cars usually are equipped with unique or high-tech parts which make them costlier to replace).

Bundle Your Coverage
Many companies offer discounts for multiple policies. Ask your insurance carrier what the price difference would be if you combined your auto, homeowners and/or life insurance policies. If there are no discounts, consider shopping around. (To learn more, see Bundle Your Insurance For Big Savings.)

Consider Safety Options for Your Vehicle
Most newer vehicles include safety options, such as anti-lock brakes, air bags and automatic seat belts. But auto insurance companies take into consideration extras when determining your costs. Alarm systems, anti-theft devices, daytime lights and passenger-seat air bags can help reduce your premiums.

Maintain a Clean Driving Record
Driver behavior is a big factor when it comes to insurance costs. Moving violations, like speeding or reckless driving that result in "points," certainly affect the cost of premiums.

Ask About Other Discounts.
You shouldn't be shy when it comes to asking questions about auto insurance. Many companies offer reduced rates for folks over 50 or 55 years of age, if you have a clean driving record or have been a longtime customer. There may also be discounts for customers who complete a defensive driving course refresher (many states offer it online), teens who have completed a driving course through an approved driver's education program, teens who are included on your policy or students who attend college and do not take their car with them.

Skip Unnecessary Coverage
Before you agree to expensive collision and/or comprehensive coverage, ask yourself a few questions first: How old is your vehicle? What is the vehicle's market worth? Sometimes this coverage isn't worth it because a claim may not exceed the amount of the insurance policy or deductible. Likewise, if you might want to drop emergency road assistance coverage through your insurance company if you have an adequate plan with another program, such as AAA or through your credit card.

The Bottom Line
While it's one of those must-have items, automobile insurance can put a major dent into your monthly bills. But don't take it on the word of all the insurance companies' ads promising to save you money. Ask questions, take a good look at your policy and shop around. (For more savings check out Top Tips For Cheaper, Better Car Insurance.)

Related Articles
  1. Insurance

    Top 5 Car Insurance Companies in Texas

    Examine the five biggest automobile insurance companies operating in the state of Texas, ranked based on market share in the state.
  2. Insurance

    Top 8 Car Insurance Companies in New Jersey

    Read about the top personal auto insurers operating in New Jersey, and learn about recent trends in market share among these companies.
  3. Insurance

    Umbrella Insurance: You May Need It, Too

    If you have assets to protect – or just run a business from home – you could be unpleasantly surprised at how much you need umbrella insurance.
  4. Economics

    Understanding Switching Costs

    Consumers incur switching costs when they receive a monetary or other type of penalty for changing a supplier, brand or product.
  5. Investing

    What’s Holding Back the U.S. Consumer

    Even as job growth has surged and gasoline prices have plunged, U.S. consumers are proving slow to respond and repair their overextended balance sheets.
  6. Economics

    Explaining Market Penetration

    Market penetration is the measure of how much a good or service is being used within a total potential market.
  7. Economics

    Calculating the Marginal Rate of Substitution

    The marginal rate of substitution determines how much of one good a consumer will give up to obtain extra units of another good.
  8. Insurance

    Top 5 Car Insurance Companies in Florida

    Learn which car insurance companies lead the Florida market in terms of market share and new premium dollars, and discover which companies are growing fastest.
  9. Home & Auto

    5 Cars That Will Save You Money in 2015

    Learn which cars will save you money in 2015, whether you are looking for a compact, mid-size or full-size car, or even a pickup truck.
  10. Stock Analysis

    Is the Apple Watch a Real Threat to Fitbit?

    Examine the potential for marketplace competition between Fitbit and the Apple Watch in the rapidly growing consumer wearables industry.
RELATED TERMS
  1. Duty Free

    Goods that international travelers can purchase without paying ...
  2. Basic Reparations Benefits

    Automobile insurance coverage benefits that provide medical, ...
  3. Directors And Officers Liability ...

    Directors and officers liability insurance covers you if you're ...
  4. Omnibus Clause

    An automobile liability insurance policy clause which extends ...
  5. Anti-Stacking Provisions

    An insurance policy provision which prevents more than one limit ...
  6. Class 2 Insurance

    Insurance that covers individuals that are not specifically named ...
RELATED FAQS
  1. What does marginal utility tell us about consumer choice?

    In microeconomics, utility represents a way to relate the amount of goods consumed to the amount of happiness or satisfaction ... Read Full Answer >>
  2. What are some common ways product differentiation is achieved?

    There are many ways to achieve product differentiation, some more common than others. Horizontal Differentiation Horizontal ... Read Full Answer >>
  3. What is the difference between an OEM (original equipment manufacturer) and a VAR ...

    An original equipment manufacturer (OEM) is a company that manufactures a basic product or a component product, such as a ... Read Full Answer >>
  4. Is the retail sector also affected by seasonal factors?

    Generally speaking, the retail sector is highly seasonal. Almost invariably, sales in the retail sector are highest in the ... Read Full Answer >>
  5. Which emerging markets are seeing the strongest growth in the insurance sector?

    The emerging market economies seeing the strongest growth for the insurance sector are primarily the main emerging market ... Read Full Answer >>
  6. What has the retail sector evolved to its current structure?

    Retail is the catch-all phrase for the sale of final goods to consumers; a retail transaction is considered an "end" and ... Read Full Answer >>

You May Also Like

Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!