The average cost of auto insurance varies from state to state, but count on this - expect to pay at least $1,000 annually on auto insurance, or more if you don't have a good driving record, lack solid credit and live in a state that has more onerous coverage mandates that lead to higher costs. How can you curb those costs and start driving auto insurance prices down? Start with these ten tips.
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Editors' pick: Originally published July 28.
The best way to cut one's auto insurance bill is to increase your deductible, says Todd Erkis, visiting professor in finance at Saint Joseph's University and a former insurance industry actuary. Moving from a $250 deductible to a $500 deductible saved Erkis $371 per year and moving from a $250 deductible to a $1,000 deductible saved him $785 per year. "Of course, a person has to pay more if they have a claim, but I advise not making claims if they're small, as insurance companies will increase your premiums if you make too many claims," states Erkis.
"Working with an independent insurance agent who can help you compare options from many companies is a great way to find an affordable car insurance rate," says Joel Ohman, a financial planner and founder of the website CarInsuranceComparison.com.
One type of insurance discount that many people never even think about can come from an employer, Ohman notes. "Many large Fortune 500 companies offer various discounts to their employees if they purchase a policy through a preferred insurance provider that the employer may have some type of special arrangement with," he says. "Often, employees don't even think to check with their employer or they forget to bring it up to the insurer."
One of the newest ways to cut your rates is to allow your carrier on-board access to your vehicle, says Joshua Berman, personal injury and insurance attorney in Washington, D.C. "State Farm, for example, offers their customers an app which will monitor your driving activity such as speed, sudden breaking, and the amount of usage," he says. "After a certain period of time, the app rewards safe driving with discounts up to 15% off your bill."
Ask your agent about creating a package deal, advises Tia Gagnon, an insurance marketing specialist at Chalmers Insurance Group. "They may be able to help you package your auto, home and other policies for a discount," Gagnon says.
A major factor in auto insurance is actually your credit score, says Matthew Cooper, co-founder at Earnup, an automated loan payments services company. "This score is roughly used as a rating," Cooper says. "A better score potentially means you are safer to insure."
Check your policy for unnecessary add-ons that might have made sense when the policy was first written, advises Timothy Wiedman, an associate professor of management & human resources, in Lincoln, Neb.
"For example, it may cover emergency road service when you also carry separate AAA coverage." Wiedman says. "Or, it may pay for a rental vehicle during a covered collision repair. Rental coverage may not be necessary in a two-car household -- or if you live near a city bus line that provides a cheap and easy commute to work."
"Most auto insurers provide a slight rate reduction if you pay your premiums semi-annually, instead of making monthly payments," says Wiedman. "Also, depending on your circumstances, a rate reduction might also be available if you complete a defensive driving course, or a similar type of driver-improvement training."
Getting auto insurance for a new, teenage driver can be particularly prohibitive. Cut those high costs by maintaining good grades, states Campbell Risk Management. "The thought of your teens driving may be a bit less scary when you think of the money you can save," the company notes. "You can get a reduced cost on teenagers if they carry good grades. Many insurance providers offer a good student discount for pupils that maintain a B average or higher for drivers Under the age of 23 and who are full-time students. That can save you up to 25%, depending on the carrier."
"My husband and I cut our monthly auto insurance bill in half by switching
from Progressive Insurance to Metromile," says Ky Trang Ho, founder of Key Financial Media in Los Angeles. "Metromile charges us a base rate of $56 and 8.9 cents for each mile we drive our 2006 Toyota Prius."
Ho says that, since she and her husband are not frequent drivers, going to a "per use" insurance model makes good sense. "It's perfect for us because my husband prefers to take the bus to work so he can read or work on his laptop," she says. "I work from home and do most of my shopping online so we hardly drive at all. We take the bus or Lyft as much as possible. Some venues in Los Angeles charge a lot for parking and so it might cost the same to take a Lyft."