Affordable Car Insurance: How to Lower Your Bill

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.

Worried driver

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.