The airwaves are full of ads for lower auto insurance costs. But the commercials don’t tell you even half the story. Unfortunately, few people do their auto insurance correctly. There are many ways to cut your auto premiums without putting yourself at risk. This is especially good news for older Americans. Those premium reductions you get for being older than 50 generally stop when you get around 65. That’s when age causes your premiums to rise again.
Shop around. Most auto policies are written by three companies. But competition is growing, and many insurers count on your not comparing prices. Always check with at least three insurers before making a decision, and you might be able to save around $300 annually. There are auto insurance comparison services on the Internet, but watch out. They don’t have the flexibility to compare premiums for different deductibles and other changes. The best sites are insweb.com and insurance.com, but they are only a starting point.
When shopping around, be sure to consider service as well as prices. Look for a 24-hour helpline. Check with your state insurance commission and the Better Business Bureau for complaints. You don’t want to get a low cost policy and find that the insurer looks for every way possible to deny claims or handles them poorly.
Check liabilities. The most important provision in your policy probably is the one covering bodily injury and liability for injuries you cause to other drivers and passengers. Most states require you to carry a minimum liability, but insurance experts recommend higher amounts. The minimum recommendation usually is $100,000 per individual and $300,000 per accident or incident. If you have significant assets you want to protect, your liability coverage should be much higher than this. But a less expensive alternative is to buy a personal liability umbrella policy covering you for $1 million or more. These policies usually are riders to homeowners’ policies, and the cost per $1 million of coverage is quite small. Plus, it covers you for many kinds of liability, not just auto accidents.
Cut some coverage. Most people pay for more coverage than they need. Cutting this coverage can reduce premiums significantly.
Collision and comprehensive coverage, for example, covers damage you do to the car. But the insurer doesn’t have to fix your car or pay you the cost of buying a replacement. All the insurer has to pay is the value of the car before the accident. Most insurers decide to “total” the car and give you its value when the cost of repairs exceeds 50% of the value. Your deductible is subtracted from that amount before the check is written.
The collision and comprehensive portion of the premium can be quite high, usually around 50% of the total premium. Most premium statements itemize the different coverages so you can see what each costs.
On an older car, you might want to drop collision and comprehensive coverage. If your car is worth $3,000, your deductible is $500, and the coverage costs you $500, you might want to consider dropping the comprehensive and collision coverage. You are paying $500 annually for coverage that at most will net you $2,500 if you total the car. It is your choice. But it might be a better move to save the premium and count on replacing the car on your own if you cause an accident.
Raise the deductible. Raising the deductible from $100 to $500 often cuts the premium by one third.. Raising it from $500 to $1,000 can cut the premium by 50%.
Join an auto club. This lets you drop the towing service on your auto policy. Auto club annual dues often are less than the towing service premiums and come with other benefits.
Check before you buy a car. The make and model you own determine your premiums. Before choosing a car to buy, you should call the insurer and ask what the premiums would be on the cars you are considering. A sports car or one that is frequently stolen results in relatively high premiums. A car that the insurer considers safe, less likely to be stolen, or inexpensive to repair gets lower premiums.
Combine coverages. There usually are discounts if you insure two or more cars through the same company. Additional discounts are available for having your homeowner’s insurance and auto insurance through the same company. If your business has insurance, it often is inexpensive to have the company own and insure the cars.
With a few phone calls you can cut your auto insurance costs by checking prices and changing the terms of your policy. Take a few minutes now to put this extra money in your pocket.