4 Tips to Save on Car Insurance

By Sarah Winfrey on 2 October 2009 (Updated 1 April 2011) 22 comments
Photo: a adamant

Auto insurance is one of those pesky, nagging things, almost like a tiny leech. It sucks money away and we're not even always aware of it, at least until we have to write another check. The bad news is, car insurance isn't avoidable. Most states have minimal amounts that you're required to carry in order to drive legally. But the good news is that there are some easy ways to save money on your car insurance.

Compare Rates

Before your current policy is up for renewal, get some quotes from different insurance companies. Many people find that they can save up to $500 each year on insurance by going with a different company.

While there are websites that will give you quotes from several different companies, it's always a good idea to contact the companies you're interested in working with directly. Sometimes, they can offer you savings that you won't find if you go through the other brokers. The best plan is to get quotes both ways, and go with the one that works best.

Before you purchase your insurance, make sure you the company you're going with is nationally known and well-reviewed. It's not worth a price break if you're only going to struggle with the company every time you need something!

Check Your Credit Rating

Counterintuitive though it may seem, insurance companies use your credit rating to determine your rates. Statistics show that people with higher credit ratings file fewer insurance claims. If you've had the same credit accounts for a long time and have paid on them regularly and on time, you're considered a more stable person and a lower risk to the insurance company.

If there are mistakes on your credit report, clear them up before you look for new car insurance. If your credit is generally shaky, know that cleaning it up will eventually effect your car insurance.

Once you have a clean credit record, approach your insurance company and ask them to reconsider your case. If you still don't like the rates they offer, check around with other companies.

Combine Policies

Many car insurance companies will offer you a 10-20% discount when you combine your auto insurance with a renter's or homeowner's policy from the same company (some will offer the discount on BOTH policies). Occasionally, it's even possible to get both policies for a price that's lower than what you would pay for car insurance without the second policy.

ARTICLE CONTINUES BELOW

Another option that's becoming more and more available is to tie your car insurance to your health insurance. Since healthy, strong bodies are less likely to need extended treatment if you get into a minor accident, staying healthy can keep your rates down if you have one of these policies.

Whenever you consider combining policies to save money, make sure that the second policy is something you actually need. Maybe you have an amazing deal on homeowner's insurance through your job, or your health insurance is entirely paid for. Don't get yourself into a worse financial situation just to save a few dollars!

Pursue Your Discounts

Probably the most common way to save money on car insurance is through discounts offered by your insurance company. What most people don't know is that these discounts are not necessarily applied automatically. Most auto insurance companies try to apply them whenever possible, but they don't always have enough information to know that a certain discount should apply to you.

Ask your insurance agent regularly about the available discounts, and calculate yourself which ones you should qualify for. Check your policy or talk to the company again to make sure each of these are showing up on your policy. When you get another statement, check again. If the discounts aren't applied, make another phone call.

Insurance companies deal with so many people that it's easy for your discounts to get lost in the shuffle. By taking responsibility for them yourself, you'll be able to ensure your savings.

Adding it All Up

When you're thinking about car insurance, remember that every little bit adds up. A 2% discount may not seem like much, but over time it can make a big difference. When every penny counts, that difference is magnified even more.

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Andrea Karim's picture

I would add: fight your traffic tickets in court. I don't get many tickets, but I did get one that I hired a traffic lawyer for, who got me off for $300. $300 isn't cheap, but 3 years later, I got a speeding ticket and simply paid the fine - and my insurance went up by $600 per year.

Financial Samurai's picture

I know many adults 30+ years old still on their parents family plan. That's the biggest savings right there i.e. 50% less than on your own.

Bank of Mom & Dad is a powerful savings technique.

Keigu,

Financial Samurai
"Slicing Through Money's Mysteries"

Guest's picture

Fight the notion that the best auto insurance policy is the cheapest auto insurance policy! What you want to know is who is your insurance company looking out for: the policy holder (you) or the stock holder?
Many, MANY insurance companies are skimping on the quality of repair and quality of replacement parts by sending people to their "preferred" shops, who have a contractual agreement with the insurance companies to do the work for less in exchange for more business sent their way.
READ THE POLICY before you buy it! Watch out for policies that allow for aftermarket replacement parts and deny you rights that you thought you would have. How many other contractual agreements do you enter in to before you even read the contract?
For more information about your rights as a policy holder and the tactics insurance companies use to save a buck, check out www.crashtalk.com.

Sarah Winfrey's picture

Andrea--Yikes! I've had my insurance go up because of a ticket but not like that. That's nuts.

Financial Samuri--Do insurance companies allow that? If yours does, that's an awesome deal!

Financial Samurai's picture

Hi Andrea - We don't have any dependents, but if my parents lived in San Francisco, we could definitely latch on to their plan, and have one big happy family plan. It is much cheaper.

Also, USAA is very competitive.

Keigu,

Financial Samurai
"Slicing Through Money's Mysteries"

Guest's picture
Jan

Car insurance is very important and it is also advisable to check the fine prints of your insurance.

Guest's picture
Michele

My husband and I bought a reliable gas saving Honda Fit for our college son. He's making the payments on the car ( on our account) and we are paying the insurance for a 22 year old who drives more than 12,000 miles a year with one accident and one ticket- $90 a month with State Farm.The bank of Mom and Dad saves him over $550 a month and we got a much better rate for financing a car (3.5%) than a 22 year old with no credit. It will be his car after he graduates, has a degree and it's paid off...and he will be 25 years old so the insurance rate then will be much cheaper. Same with his Crackberry-oops, Blackberry-it's $40 a month for unlimited data on my plan but it would be hundreds for him on his own. College kids get screwed- ask your parents to help!

Guest's picture
econobiker

It may be possible to save money with college students, co-op interships, medical residencies, temporary military assignments, etc by making sure that your insurance reflects your actual location.

As an example: someone from Los Angeles or the metro NY/NJ region may save money if that person is living in a lower cost area for a year or more by insuring to that location. One item of note is to make sure that you insure with the exact same company as in that high insurance area if you intend to return to the higher risk area. Certain companies will drop your coverage if you decide to return to the higher risk area as those companies do not do business in high risk/cost areas. (That note is based on a personal experience of 5 years insured no tickets/no accidents in Alabama and was dropped upon returning to New Jersey due to the insurer "not servicing that area".)

The same applies to people with multiple residences in that the person is supposed to have their vehicle insured and registered to the residence where they spend the most time. Often this may be the lower insurance and registration costs location- also make sure your driver's license reflects your residency requirements.

As above you may be able to get additional savings on yearly registration and inspection costs- though you have to be aware of some state's yearly ad valorem taxes on the value of your vehicle. Some areas do not even require yearly safety and emissions inspections while others require in-depth and potentially costly inspections. You may be able to qualify for a registration in your home state which exempts the annual vehicle inspection requirement if you are in college or the military and the vehicle is too far away to return for its annual safety/emissions inspection. This could save money if your home state registration/insurance is less expensive than that of your temporary residence state. Most state DMV websites list the legal requirements and often costs of annual registrations and / or inspections.

Overall compare costs and legal requirements to determine the ~legal~ and least costly options for your specific situation.

Guest's picture
Beth

The Bank of Mom and Dad doesn't always work. When I turned 22, my parents received a nice letter from the insurance company saying that they did not allow anyone over 21 to remain on their parents' policy. So, I had to get my own policy. It worked out okay for me, since I'm actually paying less for my own policy, but I just wanted to point out that it's not always possible to remain on your parents' plan indefinitely.

Guest's picture
Jake Auto

Too many people are having a tough time making ends meet, here are a couple of strategies to lower your insurance rates:

If you are the optimistic type who expects to never get into an accident, raise your comp and collision deductible, you may save about 10% by raising your deductible from $250 to $500 out of pocket in the event of an accident.

If your car is older and paid off consider reducing from full coverage to the minimum liability coverage requir4d by your state. Some cars are worth little more than the deductible anyway. ask your agent about customizing your stripped down policy, perhaps leaving in passenger medical coverage.

Drive a safer car, you can save hundreds if you drive the right minivan or SUV instead of a sports car or tin box sub compact.

Don't let your teen drive for another year or two, explain the need for best tightening and put off allowing your teen to get a license until they are 18 years old, at which point you won't have the legal say soo to deny them.

Guest's picture
Robin smith

People often wonder about criteria on which car insurance companies fix up car insurance rates. Well many factors are there which determine what premium rate you can predict while asking for quotes. A general misconception is that car insurance rates are set by law and can't be changed under any circumstances. Although the state laws govern much of the methods followed by every auto insurance company for setting rates, the rates themselves are not set by the state itself. It allows every company to set their own rates. That’s why car insurance rates used to vary from one company to another & comparing rates from different companies will help you save money.

http://www.onlyinsurance.com/

Guest's picture
Renee

This is a great article on how to save on auto insurance! I know with my family it's hard because we have 3 cars and we don't always use all of them but need them from time to time. My dad usually turns to canceling the insurance on two cars during most of the year when my brother and I are away at school and then just share a car to work.

I found this great article with 7 ways to save on insurance on this new Equifax Personal Finance Blog. Check it out for more tips: http://bit.ly/brlOTO

Guest's picture

It is very important to pursue all discounts. Everything helps and you can get great rates and coverage if you do your research. Read the whole contract before signing it, and make sure you obtain a copy for yourself.

Guest's picture
Insurance

The enation of selecting applicants for insurance and classifying them according to their degrees of insurability so that the allot payment rates may be effervescent. The cognition includes rejection of unsatisfactory risks.
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@Jackson
Insurance

Guest's picture
Insurance

The enation of selecting applicants for insurance and classifying them according to their degrees of insurability so that the allot payment rates may be effervescent. The cognition includes rejection of unsatisfactory risks.
__________________________________
@Jackson
Insurance

Guest's picture
Insurance

this is very nice.
Insurance
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mariah

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stev

his is a wonderful opinion. The things mentioned are unanimous and needs to be appreciated by everyone.
Home Insurance
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Steve

Guest's picture

Great tips to save on car insurance, however these are kinda obvious. Maybe a blog on "Unusual Tips to Save on Car Insurance" might get more readers....just a kind suggestion :)

Guest's picture

its very interesting article and I am very pleased with the thought and don’t feel like adding anything in it. It a perfect answer.
Auto Trade Insurance
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jess walls

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Alice

I combined my car and home insurance policies and got a really good discount. Since I wasn’t going through an insurance agent, I learnt this trick really late!

Guest's picture
Gino

This is a great bit of information compiled here! I just thought I would place a starting place for shopping around. This site offers free quotes.
Car Insurance Quotes Online

Guest's picture
James K Shaffer

The police tend to stop RED cars, especially. Somehow, they have the idea young drivers of red cars are a little wilder than drivers of white or blue cars. They may be right. Red late-model Camaros are a police magnet, as are Corvettes. I always choose white because it is more visible on the road than blue, black, or grey cars, which tend to blend in with asphalt. Let see-and-be-seen be the motto. Drive safely, and watch out for the other guy.