The cost of auto insurance depends on several factors: age and marital status, where you live, and what you drive. You can”t do anything about your age, and few people will move just to lower their insurance premium. You can, however, choose a vehicle that costs less to insure. And you can certainly choose what coverage you’ll need.
First, coverage. What are you actually being insured from? Although you might be buying a single policy, the components therein actually add up to the total cost.
- Bodily injury liability – injury and death claims against you, and legal costs, if your car injures or kills someone.
- Property damage liability – claims for property that your car damages in an accident. It also protects the other party, and is required in all but three states.
- Medical payments: for injuries to yourself and to occupants of your car. Optional in some states.
- Uninsured motorist protection – for injuries caused to you or the occupants of your car by uninsured or hit-and-run drivers. “Under-insured” coverage also is available. In some states, as many as 30 percent of drivers are uninsured.
- Collision coverage – for damage to your car up to its book value. Collision coverage carries a deductible, which is the amount per claim you have to pay before the insurance takes effect. The lower the deductible, the higher the premium. Legally optional, a lending institution or leasing company usually requires collision coverage.
- Comprehensive (physical damage) – for damage to your car from theft, vandalism, fire, wind, flood, and other non-accident causes. Comprehensive also carries a deductible
Raise your deductibles
Forbes recommends raising your deductibles. A deductible is the amount you will be responsible for out-of-pocket if you file a claim in which the deductible applies. The amount of your deductible has an impact on the premium you pay for car insurance. Generally speaking, a higher deductible may carry a lower premium because you are taking on a larger portion of the responsibility in a claim situation. This means that the insurance company can expect to pay out a lower amount on the claim.
Remove Towing and Car Rental Coverage
Get Rich Slowly recommends removing towing and car rental from your policy. Instead of towing, it recommends proper maintenance and good planning. “Don’t run out of gas. Don’t lock your keys in your car. Make sure you have a spare and know how to change it. Sometimes your car will break down, but if your car is well-maintained, it won’t happen often. You pay $10 – $30 a year over the life of your policy and one tow costs $100. Note that in the event of an accident, towing is almost always covered under collision.”
Forego coverage you don’t need
Today Money recommends dropping collision and/or comprehensive coverage on older cars with a low market value. Such coverage often is not worth it because any claim you make probably won’t exceed the cost of the insurance and the deductible amount. It also advises against duplicating medical coverage if you already have good health, life and disability insurance. Instead, just buy the minimum protection against personal bodily injury required by your state.
Reduce your mileage
Insurance companies also look at how much driving you do and your insurance premiums might be adjusted to reflect this, the rationale being that the more you drive the higher the chances that you will experience an event (e.g. accidents) that will require you to claim insurance. Consider carpooling or using public transportation to get to work. The less you use your car, the less your insurance will cost you.
Look for unlikely discounts
Did you know that taking and passing a driving test can reduce the insurance premium? There are other discounts available out there. If you have an existing policy and you’ve recently started working from home, you can call your insurance company up to ask for a discount.
Choose your car wisely
If you’re drawing up a policy for a new car, your choice will affect the premiums you pay. How Stuff Works explains that insurance premiums are based partly on the price of the vehicle, which affects the replacement cost if it is stolen or “totaled” in an accident. How expensive the vehicle is to repair — including parts and labor — can also affect the cost. In addition, surcharges may apply to vehicles that are frequently stolen or involved in accidents.
Have you taken steps to reduce your auto insurance premiums? Share your story with us.
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