The average auto insurance policy costs about $1,200 per year. What you pay depends upon several factors, some of which are difficult to change, including your state of residence, the make and model of your vehicle, and your age. No matter what your own particulars, you still have many good choices available to spend less on this line item. Here are the best strategies.
30.1 Research the Product
Auto policies are complex, so before you shop, read a buyer’s guide. The National Association of Insurance Commissioners (NAIC) publishes “A Consumer’s Guide to Auto Insurance.” Visit NAIC.org.
30.2 Measure Your Needs
If you buy too much coverage, you overpay—so find the right fit.
□ 30.2.1 Consider Cancelling Collision/Comprehensive Coverage
Consumer Reports suggests that you drop this coverage if the annual premiums exceed 10 percent of your car’s value. To assess value based upon recent market data, visit Kelley Blue Book at KBB.com.
□ 30.2.2 Consider “Pay-As-You-Drive” or “Usage-Based” Plans
Look at policies that base premiums upon actual driving habits, including total miles travelled, speeds, and acceleration rates. To qualify, you must agree to outfit your car with a “telematic” device that tracks its every move. Progressive and Allstate offer PAYD policies, as do other companies. This is the insurance of the future and it’s available now.
□ 30.2.3 Ditch Excess Vehicles
If you own vehicles you don’t drive often, sell them.
□ 30.2.4 Disfavor Extras
You need insurance, not bells and whistles. Decline coverage for roadside assistance, towing, rental car reimbursement, and other small-time risks.
□ 30.2.5 Choose the Highest Deductible You Can Afford
Use auto insurance to insure for major catastrophes that would have a severe—and not merely inconvenient—effect upon your finances. Ask your agent about the availability of higher deductibles.
30.3 Shop Around
Market conditions change. Shop for policies at least every other year.
□ 30.3.2 Visit Insurance Company Websites
Many insurers don’t list at price comparison sites, but still offer competitive products, including Geico, USAA, Progressive, Allstate, Amica, and State Farm.
□ 30.3.3 Call an Independent Agent
Ratchet up the competition. Locate a good deal online and then ask an agent to find you something better. If the agent beats the price you found, you save.
□ 30.3.4 Seek Discounts
Look for these deals whenever you pay a bill or shop around for new auto insurance policies.
- Bundles. If you pay multiple insurers for home, life, and auto, consider buying from a single company. Run the numbers.
- Group Discounts. Look for price breaks if you belong to certain groups—retirees, seniors, veterans, current military, employees of large corporations, AAA, or AARP.
- Annual Premium Payments. Some insurers grant breaks if you pay a year in advance.
- High Credit Scores. If yours is lofty, make an inquiry.
- Safety Features. If your vehicle has side air bags, anti-lock brakes, or daytime running lights, ask whether any discounts apply.
- Anti-Theft Devices. Some insurers lower premiums for autos with anti-theft features.
- Alternative Fuel Vehicles. Hybrids or electrics receive price breaks from some insurers.
- Driving Records. Fewer accidents and speeding tickets often trigger lower premiums.
- Defensive Driving Courses. Ask whether you would receive a discount if you completed a driver’s safety course.
- Good Students. Many insurers offer discounts for teenage drivers with high grades.
- Low Mileage. The fewer miles your vehicle travels each year, the lower your accident risk.
- Multiple Vehicles. Check for discounts if you insure more than one vehicle.
- Non-Drinkers and Non-Smokers. If you’re healthy, look for vigorous discounts.
- Zero Claims. Some insurers issue discounts to customers who never file claims. If your claims record is spotless, ask for a break on premiums.
- Loyalty. At many companies, longtime customers pay less.
- Credit Card Payments. Pay with plastic and pocket the rewards, but only if you pay off your cards every month (see Chapter 49).
30.4 Pick a Low-Priced Insurer
After you find the best offers, it’s time to investigate insurers.
□ 30.4.1 Talk With Friends
Ask if they have experience with any of your prospective insurers.
□ 30.4.2 Research Customer Satisfaction
Some insurance companies pay off claims quicker than others. Review ratings in Consumer Reports and at JDPower.com. To view customer complaint records, click on the map of your home state at NAIC.org/state_web_map.htm.
30.5 Follow Up
□ 30.5.1 Keep a File
Maintain copies of your policy, endorsements, declarations page, price comparisons, and buying guides.
□ 30.5.2 Maintain a High Credit Score
At many insurers, those with higher credit scores qualify for lower premiums. Maintain your score by paying bills and loan installments on time. Check with the three major reporting agencies each year to make sure that your credit history is accurate. To request a FREE copy of your report, visit AnnualCreditReport.com.
□ 30.5.3 Avoid Moving Violations
You pay twice: first you pay a fine and then your premiums jump.
□ 30.5.4 Don’t Drink and Drive
Convictions trigger sky-high premiums (see 14.3).
□ 30.5.5 Avoid Small Claims
A new claim raises your premium and sometimes makes it difficult to obtain insurance in the future. Self insure for smaller losses and file claims only for major catastrophes.