Auto insurance can be expensive and a lot of people don’t seem to factor this in when they buy a car. The everyday American spends an average of $1427 annually on a full coverage policy.
Even if you opt for the bare minimum liability coverage, it would cost you around $600 a year depending on where you live and how risky the insurer considers you.
However, don’t let this end your dreams of buying a car. There are a handful of ways to reduce the costs of your premiums and that’s what we’ll be discussing in this article.
1. Compare Diligently
The auto insurance industry is a hot market in the US. There are more than 300 auto insurance providers offering their own products. With that, you’re bound to get a bargain if you look hard enough.
You can consult an insurance broker, but you’re limiting yourself to the insurance companies they’re affiliated with. Nowadays, you can compare various auto insurance plans from an online insurance policy comparison site.
The biggest benefit is that you only need to fill in your details once, and the algorithms in these sites will show you the best plans available for your budget.
2. Drop the Non-Essentials on Old Cars
This will depend on your circumstances. If you’re leasing the car, you might not have this flexibility.
But as a rule of thumb, it’s not worth paying for collision and/or comprehensive insurance if the yearly premiums alone are worth more than 10% of the value of the car.
Example: Paying $500 a year for insurance, when your car’s total value is $3500.
Remember, if an accident were to happen, you would still be paying a deductible before the policy kicks in. The policy will only cover the value of the car and nothing more just because you’ve paid hefty premiums on it.
You can get an estimate of your car’s value by contacting a bank or a car dealer.
3. Combine Homeowner’s and Auto Insurance
If you already have homeowner’s insurance, it’s a great idea to ask if they also have auto insurance policies. You may be eligible for discounts, as some insurers have policy bundles that combine both the homeowner and auto insurance. These are called multi-policy discounts.
By bundling both policies from the same insurer, you could be getting a discount of 15-20%.
Obviously, your current insurer would love to have your business. But keep in mind that you shouldn’t be complacent. Because different insurers have different ways of calculating your premiums, you could end up saving much more money by getting a separate auto insurance policy.
4. Ask for Higher Deductibles
If you have a decent amount of cash you don’t plan on spending, consider asking for a higher deductible from your insurer. In the long run, this will save you tons of money because the higher your deductibles, the lower your premiums will be.
This is because the insurer would be paying less if you were to file a claim. On average, if you increase your deductible from $500 to $1000, your premiums go down by 5-10%.