Auto insurance is an unavoidable expense for drivers. It's illegal to drive without a car insurance policy, and it puts you and other drivers at risk. Still, this necessary and critical coverage doesn't come cheap. The average cost of full-coverage insurance is $179 per month, amounting to over a thousand dollars annually.
The "average" cost isn't a guarantee, though. You're not necessarily doomed to high prices. Follow along with this article to learn what you can do to get the lowest car insurance rates possible. It's one of the most important purchases you make each year. Since you can't (and shouldn't) avoid it, you should at least secure the best car insurance premiums around!
Figure Out What You Need
The language around car insurance (and insurance in general) can seem complicated. There are terms you may not encounter elsewhere, so you need to understand what you're paying for. It will keep your car insurance costs accurate and sometimes lower than what you paid. After all, if you don't need and won't use a certain type of coverage, you shouldn't pay for it!
When you're evaluating policies, the first thing you should do is determine how much coverage you need. Start by learning the basic terms.
- Collision Insurance - Collision coverage protects you if you have a crash or collision with another vehicle or object.
- Comprehensive Insurance - Comprehensive coverage protects your vehicle from non-collision threats, such as theft, animals, falling trees, and so on.
- Liability Insurance - Liability coverage is typically the minimum level of insurance required. It covers you if you're responsible for causing damage to another person or their property.
- Full Coverage Car Insurance - Full coverage car insurance includes liability, comprehensive, collision, and personal injury coverage.
So, how do you determine how much car insurance you actually need? It depends on several factors. If your car is newer and you're still making payments, you want to ensure you'll be taken care of. Full coverage is typically your best option.
On the other hand, if your car is fifteen years old and not in the best condition, you probably don't need to pay the higher car insurance bill for full coverage. If you total an old car, you might find out that your reimbursement amount is less than what you've paid into the collision insurance. The actual cash value of an older car sometimes means comprehensive and collision coverage just isn't worth the cost. You'd be better off putting that money into a repair fund, or savings account for a downpayment on a new vehicle (in the event that something happens to the current one).
Some people feel more at ease knowing they have full coverage on the car, however and do better paying a car insurance premium than setting aside savings. Ultimately, the amount of coverage you keep is a personal choice. If the goal is saving money, opt for the lowest level of adequate car insurance you're comfortable with.
One of the best ways to save on your car insurance is by getting quotes from multiple different car insurance companies. This isn't a "one-and-done" thing, either. For the best results, do it annually. Any number of things could change over the course of the year. Perhaps your driving situation is different than when you signed up. Other companies might offer discounts they didn't have when you checked previously.
Whatever the reason, you need to compare car insurance rates regularly to ensure you're getting the very best deal. Most insurance companies use the same information to determine rates (age, driving record, credit, etc.), but they weigh each factor differently. You won't know whether your insurance company is really the best deal until you've compared it to others. Most insurance companies give car insurance quotes for free, so there's nothing to lose and potentially hundreds of dollars in savings to gain.
Be a Safe Driver
One of the best ways to keep auto insurance costs low is by maintaining a safe driving record. Accidents happen, and sometimes there's nothing you can do about it, but you'll save money by driving carefully, adhering to traffic laws, and minimizing your number of at-fault accidents.
Many insurance companies even offer "safe driver" discounts. The specifics vary, but generally, you (or your household) must be accident-free for a designated amount of time. If you meet that requirement, you'll earn a discount. Beyond that, a clean driving record yields lower premiums in general.
Car insurance companies offer dozens of different discounts. Sometimes, they automatically apply to your account with no action on your part. Other times, you might need to prompt your insurance company about what they offer and which discounts apply to you. Some common examples of insurance discounts include the small sampling below.
- Safe Driver Discount - As mentioned above, safe driving discounts usually apply after a certain period of time passes without any recorded accidents or collisions. Some companies take it a step further and allow drivers to sign up for safe driving programs, where their driving habits are tracked with an app or other device. Those who participate and do well could receive steep discounts.
- Good Student Discount - Young people typically have the most expensive insurance coverage. Good student discounts offer some relief for students who maintain high grades.
- Loyalty Discount - Many companies reward customers who keep their coverage for several years. These types of discounts often increase with additional time. However, they're not available in certain locations or with every company.
Increase Your Deductible
One of the quickest ways to lower your auto coverage cost is to increase your deductible. Most companies offer deductible amounts that range from $250 all the way up to $5000. Both sides of the spectrum have a significant impact on what you'll pay. Be realistic about what you can afford to fix your car, however. If you have a high deductible, set aside some money each month for a car repair fund.
Increasing your deductible can save you hundreds of dollars each year, though, so you should have plenty to set aside in savings. If you do get into an accident or decide to buy a new vehicle, that money will be readily available to you and not tied up in insurance.
Bundle Your Plans
If you're a homeowner or need renter's insurance coverage, bundling them with your car insurance can save you a pretty penny. Practically every company offers discounts for policy bundling, so you'll save on two (or more) policies at the same time. Sometimes even pet insurance counts as part of a bundle! You can save up to 25% with some companies when you purchase multiple policies.
Car insurance is an inevitable purchase. If you own (or plan to own) a vehicle, you will have to maintain coverage. It protects your vehicle, covers medical expenses, and so many other important things. Follow the tips in this article to get the best deal possible and keep the coverage you need.
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