Overview: How much you can save
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Put on the brakes
Put the brakes on high insurance costs
Everybody wants to save on car insurance. But most people can’t figure out
how to do it without either reducing coverage or increasing the deductibles.
We got some better advice from a seasoned insurance expert who’s worked
with dozens of major insurance companies.
Insurance laws vary by state, so some of these cost-saving methods may
not apply in your area. But if you follow these tips, you should be able to
save an average of $300 per year, or possibly more, on your car insurance.
We’ll work with a model of a two-car household with two 57-year-old adults
and one college-age driver. This household’s annual premium is $2,300
based on one accident and one speeding ticket.
Tip 1: Pay in advance – Save $60
You pay lots extra if you’re paying your
car insurance monthly. Find out the
least expensive pay-period—
usually six months. If you have
the cash, you could save even
more money by paying the full
year’s premium in advance
(check with your agent).
Tip 2: Pay promptly – Save $15 to $50
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Mail your check promptly
Some companies offer a prompt payment discount.
Some companies offer attractive
incentives for paying the invoice
within 10 days, rather than taking
the full 30 days. We’re not telling
you to pay your mortgage late so you
can pay the insurance company
early. But if your insurer offers a
“prompt pay” discount (ask for one),
it may be worth your while to reprioritize
your bill payment schedule. If
you’re temporarily short on cash, it
may even make sense to pay with
your credit card.
Tip 3: Complete a “senior driver” training (and refresher) course - Save $200
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Significant savings
Brushing up on your driving skills results in significant savings.
Most insurance companies offer a discount
for each driver 55 and older who
takes an authorized driver safety education
program (some states mandate this
discount). The initial course is eight
hours, and some companies (and states)
allow you to take a four-hour online version. Classroom rates
vary. You’ll be a safer driver and can
pocket the savings every year. For
more information, contact your
insurance agent, AARP,
AAA or your local adult
education center, or
search the Internet
for “senior driver”
Tip 4: Kid at college? – Save $400
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Off to college!
A kid away at school means fewer drivers and lower rates.
This one’s a no-brainer. If your kid
is away at college, minus the family
car, your insurance rates will be
lower. Tell your agent that your kid
is at school and work out arrangements
for those few days when he
or she is home. If your student has a
car at school, you should still notify
your agent. The rates may be lower
based on the school’s location.
Tip 5: Change jobs or retire? – Save $60
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Reduced daily mileage
Fewer work miles or no commuting miles at all will lead to lower rates.
If you drive 20 miles to
work every day, you’re
paying a higher premium
than people who
drive only 5 miles. So if
you get a new job closer
to home, tell your agent
immediately. Also, if
you’re lucky enough to
retire, tell your agent so
they can reclassify you
as a “pleasure driver.”
You’ll see a drop in
your premiums in both
cases.
Tip 6: Track your tickets – Save $100
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Oops! A traffic ticket
Notify your insurance company when a traffic ticket drops off your record.
Insurance companies check
your driving record regularly
and increase your premium on
the very next bill if they find a
traffic violation. But they’re not
always so quick to reduce your premium
later when the violation falls off
your record. So keep track of the dates of
your tickets and ask for a reduction once your
record is “clean” (usually three years, but check with
your state’s Department of Motor Vehicles).
Tip 7: Avoid small claims – Save $200
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Fender bender
Avoid making small claims on older cars.
If you get a small dent or other
minor damage on an older car,
think twice about filing a claim and
getting it fixed. To avoid rate hikes,
it might be worth your while to just
live with it if there are no safety
issues. And if you have towing coverage
on your policy and use it to
get your jalopy towed every six
months, be ready for a 10 percent
rate increase on your next renewal.
Buy a roadside assistance plan
(available from AAA, AARP and
other vendors) instead. It’s cheaper.
Tip 8: Shop early – Save $50
Everyone should shop
around for new insurance
rates every three years.
Insurance companies
reward early shopping (30
days before renewal is perfect)
by giving better rates.
Last-minute shopping
(less than 10 days before
the policy expires) makes
insurance companies
think you’re irresponsible,
and that will be reflected
in a higher quote.
Tip 9: Drop collision and comprehensive coverage when it makes sense – Save $300
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The old beater
If your collision insurance is about 1/3 the value of the vehicle, consider dropping it.
Let’s face it—old cars (10-plus
years) aren’t worth much. So
certain point it doesn’t make
sense to keep paying for collision
and comprehensive (C&
coverage. Find the “book” value
of your vehicle on the Internet
(nada.com, edmunds.com
kbb.com) or at the library. Then
add up the annual premiums
C&C. Chances are, you’re paying
for the full value of the vehicle
every three years. If you’re comfortable
accepting a low level
risk, cancel your C&C coverage
and put that money away. You’ll
probably come out ahead.
Tip 10: Install an alarm – Save $100 to $200
The discount varies by location, the
make and model of the alarm, and
the theft likelihood of your particular
vehicle model. But insurance companies
give the largest discounts for
installing a “stolen vehicle recovery”
system like MobileGuardian, LoJack,
VehicleRECOVER or GM’s OnStar.
These systems can locate a stolen
vehicle within minutes and prevent a
total loss. The discount alone may
pay for one of these systems in just a
few years.
You can learn more about these
systems by visiting lojack.com, vehiclerecover.com and mymobileguardian.com.
Avoid These Insurance Mistakes
Don’t let your car insurance
lapse. If you’re up against the
payment deadline, overnight the
check or contact your agent’s
office to see if you can drop off
the check, or put it on your credit
card. Renewal of a lapsed policy
can cost you an extra 20 percent
for several years. That’s IF the
company even agrees to reinstate
you (it doesn’t have to).
Don’t reduce your liability
coverage to save money. It won’t
save you much and may actually
cost you more in premiums. You
risk your home, savings and a
garnishment of future earnings if
you injure someone and you’re
underinsured.
You can settle fender-bender
claims on your own, but you
still have to report the accident
to your insurance company! You
probably won’t see a premium
increase because you paid for
the damage yourself. But if you
don’t notify your agent and the
other person makes a delayed
claim for injury, your company
can deny coverage.
Check out all the details of
“first accident forgiveness” policies
to be sure you’re not paying
more up front. Also check out
whether a second accident or a
driving violation on this type of
policy results in far higher premiums
than a traditional policy.
Never cancel an existing policy
until you receive the new policy
paperwork. Insurance companies
can refuse to “underwrite”
you even after they’ve
accepted your check and issued
a “binder.” If that happens, you
may not be able to reinstate it.
