How To Get The Most Out Of Your Auto Insurance Coverage
Recent data suggests that the average driver will spend close to $100,000 on car insurance over their lifetime. That’s a staggering sum of money, especially when you consider estimates that suggest Americans will pay over $500,000 in that time just to own, operate, and maintain a car.
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$100,000 is a lot of money to spend on something that you may never benefit from, something that you’re only buying because your state authorities told you too. But while car insurance policies are essential, the amount that the average consumer spends on them is not.
In this guide, we’ll look at the ways you can save money on auto insurance premiums and get the most value out of this necessary expense.
Build Your Credit Report
Never underestimate the value of a high credit score and a clean credit report. Not only can it help when applying for a car loan, increasing the value of the car you can purchase and decreasing the interest rates you’re charged, but it will also reduce your car insurance rates.
There is no easy and quick way to turn a bad credit report into a good credit report, but there are a few simple changes you can make that could increase your score enough to make a difference. These include:
- Stop applying for new lines of credit.
- Become an authorized user on a respectable user’s credit card.
- Increase credit limits on your active credit cards.
- Pay off as much debt as you can, focusing on credit cards and personal loans first.
- Don’t close your credit card accounts after clearing them.
If you don’t have any credit at all, which is true for many teen drivers getting behind the wheel for the first time, try the following options:
- Credit builder loans
- Secured credit cards
- Lending circles
Choose Your Car Carefully
A new car is a great way to get a high-tech, customized vehicle, but it’s not ideal if you’re looking to save on insurance costs.
New vehicles cost more to insure because they are a greater liability, with more expensive parts and greater overall value. If you want to save on your auto insurance coverage, look for a car that is at least a few years old, has a number of safety features and a high safety rating.
The cheaper, the better, but only to a point. You want something that won’t leave you in complete financial ruin if it’s wrecked in a car accident and you don’t have the insurance to cover it, but something that won’t breakdown every few miles and leave you stranded and broke every other week.
Drive Safely and Prove Your Worth
Your driving record is just as important as your credit report, if not more so. The more at-fault accidents, traffic tickets, and insurance claims you have, the higher your car insurance rates will be.
A single conviction won’t last forever and the impact will eventually dissipate, so even if you have a few blemishes on your record now, just keep driving safely and you’ll be able to reap the benefits before long.
It takes time to prove your worth to insurance companies, but there are a few things you can do to expedite this process. The first is to take a defensive driving course. In some states and for some demographics (mostly seniors and young drivers), you’ll be offered a discount for completing one of these courses.
The next step is to consider a usage-based program. These are offered by most major insurance companies and can track your driving habits to determine what kind of driver you are. If you’re driving safe and doing very low mileage, you could start seeing some noticeable changes in just a few months. The majority of providers will even give you a discount just for signing up.
Pay Everything Upfront
Most policyholders pay their premiums monthly and it may seem like that’s the best thing to do. $100 a month seems infinitely more manageable than $1,200 a year.
It is an attitude that many people have, and it’s one that often leads to debt and poor decisions.
Millions of Americans have credit card debt because a $200 monthly payment seems more achievable than a $5,000 payoff, even though the former carries a phenomenal interest rate. It’s also why countless first-time buyers rush into getting mortgages with small down payments and high-interest rates, even though doing so could mean they are paying twice as much money over the term.
Whenever you can benefit from making an upfront payment, do it. This is true for your loan debt and credit card debt, and it’s also true for your car insurance premiums.
Many insurance providers offer you an upfront payment discount of up to 5%. It doesn’t sound like much, but every little helps. If you have a $3,000 car insurance policy, that 5% adds up to $150. Add a few more discounts and you can save even more money and make an even bigger dent in your insurance rates.
Combine Policies and Vehicles
Insurance companies that offer multiple types of insurance tend to offer discounts when you purchase several products from them.
Known as multi-policy discounts or “bundling”, these offers are common with homeowners insurance and auto insurance, but they are also offered with renters insurance and life insurance.
You can combine several vehicles onto the same auto insurance policy, as well, saving much more than if you were to purchase separate policies.
These discounts are essential for multi-car households, but they are not limited to cars. Many insurers will also let you add boats, ATVs, motorcycles, and other vehicles onto the same policy.
Before you settle on a single policy, shop around, compare as many car insurance quotes as you can, try multiple different insurance options (uninsured/underinsured motorist coverage, comprehensive coverage, collision coverage) and make sure you’re getting the lowest rates for the best cover.
Too many drivers make the mistake of going with the same provider their friends or parents have; the same provider they have used for a number of years. In doing so, they could be missing out on huge savings.
You could be forgiven for thinking that all providers offer similar rates and that the difference between them is minor. But regardless of your age, gender, and state, the difference between one provider and the next could be up to 200%!
Check if You’re Covered Elsewhere
Car insurance companies offer a number of add-ons and optional coverage options. These are enticing, as they cover you for numerous eventualities and some of them cost just a few dollars extra a month. But all of those dollars add up and could result in you paying much more than you need for cover you already have.
Roadside assistance is a great example of this. It will help you if you are stranded by the side of the road, assisting with services such as tire changes, fuel delivery, towing, and more. But if you have a premium credit card or are a member of an automobile club, you may already have that cover.
The same goes for rental car coverage, which is often purchased at the rental car counter. Although it has its uses, if you have an auto insurance policy, travel insurance, and a premium credit card, you’re probably already covered. In fact, many Visa credit cards offer this service completely free of charge when you use your Visa to pay the bill, but only if you reject the waivers sold by the rental car company.
Bottom Line: Best Auto Insurance Companies
Car insurance coverage varies from state to state and provider to provider. There is no “best” company, as even the ones with consistently affordable rates will not be the best option in all states or for all demographics.
In our research, we found that GEICO was consistently one of the cheapest providers for good drivers, bad credit drivers, and even high risk drivers. GEICO also offers personal injury protection, collision insurance, medical payments, uninsured motorist coverage, and more, making them the most complete provider for the majority of drivers.
However, in some states, local farm bureaus come out on top, offering very cheap bodily injury liability coverage and property damage liability coverage, and giving policyholders a level of care and attention that they might not find with the bigger, national providers. USAA, which offers cheap car insurance to members of the military, also leads the way in the majority of states, but only for those who meet the criteria.
Simply put, there is no right insurance provider for you, just like there is no right coverage. That’s why it’s important to shop around, chop and change your coverage options, and don’t assume that any type of coverage or provider is right for you until you’ve looked at the numbers.