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.)