I've only owned three cars in my life.
An Acura Integra,
a Toyota Celica,
and a Toyota Venza. (since the original posting, we've purchased a Toyota Highlander)
For two of those vehicles, both of which I bought used, I never had comprehensive coverage.
Comprehensive coverage is insurance that protects your car against damage that is not related to a collision. If your car gets stolen, that's comprehensive coverage. If there's a natural disaster, that's comprehensive coverage. If a riot breaks out and your car gets flipped over, that's comprehensive coverage.
By opting out of comprehensive coverage, I was able to save hundreds of dollars a year and was fortunate in that my gamble paid off. I never had the guts to eliminate collision coverage though! (covers my car in the event of a collision)
That's just one of the (more riskier) ways you can reduce your auto insurance premiums.
(if you read our guide to lowering your homeowner's insurance premiums, many of these will sound familiar — just skip to Cut Collision and Comprehensive Coverage) for auto-specific)
- Ask Your Agent
- Shop Around
- Bundle Up
- Increase Your Deductible
- Join Associations & Organizations
- Maintain Good Credit
- Cut Collision or Comprehensive Coverage
- Update Your Driving Patterns
- Take a Driving Class
- Shop Around Annually
Ask Your Agent
Your insurance agent will know what you can do to lower your insurance premiums, including the organizations you can join, the classes you can take, and any modifications to your vehicle or your habits. They have a laundry list of items, just go through and see what you need to do to qualify for each one.
Your agent wants to help you because it means they can keep you as a customer. You can save yourself a lot of time guessing and get recommendations directly from someone who knows your exact policy.
Don't be afraid to go through the list of discounts to see what you can do to qualify for them. You can get a discount based on what you do for a living (occupational discount) to paperless statements to having anti-theft systems to being a good student. Ask.
Sometimes your agent needs help to get you a lower rate (and sometimes it doesn't matter). Either way, to get a better deal you might have to get quotes from other insurance companies as a bargaining chip.
Insurance companies make it easy to get quotes – they can look up a ton of information without you having to enter it. With just your name and a few other personal details, GEICO, Esurance, and several other companies were able to pull up both of our vehicles. I entered in some more information and had a quote within minutes that I could screen grab and send to my agent for comparison.
Buy all of your policies from one place and you will almost always get a discount. Every company offers anywhere from 5-15% off if you get 2+ policies. Keep shopping around after that because you don't usually get a bigger percentage off with more policies, you could find that 3rd policy for cheaper elsewhere.
Increase Your Deductible
Deductibles are what gets deducted against a claim before the insurer pays out. If you have a $1,000 deductible and you have damage to your car of $1,500, the insurance company will pay you $500. Increase your deductible and decrease your premium.
Just remember to put the savings in your emergency fund, you're now partially self-insuring and will need to increase your emergency fund to help bear the load.
Join Associations & Organizations
Years ago, while with GEICO, I joined the National Military Family Association for a discount on my auto policy (it's a Military and Federal Organization that gets a discount as part of GEICO's membership discounts program). Membership was a mere $20 then (only $15 now), went to a good cause, and I saved far more on my annual insurance bill (7-8%).
Your insurance company will have a list of related organizations that, if you were a member, would afford you a discount on your policy. Ask them, they will provide it if they offer this type of discount, and join if it makes financial sense.
Maintain Good Credit
Your credit is used to determine your premiums and you can reduce your premiums by increasing your credit score.
If you haven't reviewed your credit in a while, review our guide on increasing your credit score for what you should do.
Cut Collision or Comprehensive Coverage
I cut comprehensive coverage with my first two cars and was able to save hundreds each year. When the insurance company doesn't have to cover you in the event of non-collision perils, they will give you a big discount. It's certainly a gamble, I'd be in big trouble if a tree fell on my car, but I took on that extra risk and put the savings in my bank account.
If you do not own your vehicle, whether it's on a lease or you have a car note, you will not have this option. Leases and loans will require you to have this coverage.
When you look at your policy, review your policy coverage and you'll see exactly how much collision and comprehensive coverage is costing you.
We currently have coverage on our 2011 Toyota Venza and it's costing us $72.40 (collision) and $17.15 (comprehensive) per six months, with a $1,000 deductible. For a relatively new car worth about $18,000 – that coverage makes sense.
We also have the same coverage on a 2004 Honda Civic — $77.41 (collision) and $20.19 (comprehensive). The car itself is worth about $3,000 and we're paying $200 a year to get about $2,000 in maximum protection. That's a scenario in which removing that coverage makes sense.
If you do this, put your savings into your emergency fund and be aware that you are taking on added risk.
Update Your Driving Patterns
If you drive less than 8,000 miles a year, you may qualify for a low mileage discount. Many companies offer a low mileage discount and the number of miles will vary, but it's typically in the 7000-8000 region. Some insurers offer different discounts based on the tier you fall into, so you may get a discount – be sure to ask.
If your driving habits change, let your agent know. Perhaps you changed jobs and now the office is closer to your home. Perhaps you quit and are now self-employed (yay! congrats!). Or you started carpooling because you love the Earth — let your agent know.
You will need to periodically update your agent on your vehicle odometer, to confirm you are driving less, so you can't just say you drive 7,000 miles when it's 10,000.
Take a Driving Class
Many insurers will give you a discount if you take a defensive driving course. Some states mandate the discount. In New York, as part of the Point & Insurance Reduction Program, you will get a 10% reduction of the base rate of your auto insurance premiums every year for three years).
Check with your insurance provider before you sign up for a class because they cost money and time, so you don't want to be wasting it on a class that won't save you money.
Shop Around Annually
Put a recurring event in your calendar to review your auto insurance every year. It's worth shopping around each year and at the very least, gives you a reason to contact your agent to see if there are new discounts you qualify for.
In writing this article, I contacted my agent at State Farm and chopped $100 off our annual premium because my wife no longer drives ~20 miles each way to graduate school every day. A few emails back and forth for $100? A deal I'll take any day.