Car insurance is among the costliest auto ownership expenses, and if you haven’t shopped multiple carriers in the last couple of years to see if you’re getting the best deal, chances are you’re not.
Insurance rates are largely based on a policyholder’s statistical likelihood of getting into an accident or having a vehicle stolen or otherwise damaged, and they vary depending on one’s age, sex, marital status, driving record, credit rating, address, and the model driven.
Shopping around is the easiest way to lower your auto insurance rates, even if you can't change any of your personal factors. Simply spending an hour calling three or four agents could save you hundreds of dollars per year. That’s because the so-called actuarial formulas used to compute car insurance rates are moving targets that can vary significantly among companies, with some charging more or less to cover the cost of what’s perceived to be additional risk.
Who pays what and why?
Generally, younger drivers pay the most for car insurance coverage, with premiums being substantially higher for young male drivers than they are for females. Married couples often pay less for coverage than singles, though the differences are usually more pronounced with younger couples than they are for empty nesters. Those having multiple moving violations and/or prior insurance claims on their records will typically pay much more than those having pristine driving histories, with DUIs and reckless driving citations tending to hike up rates the most. Carriers in most states charge higher rates to those with poor credit scores, based on the assumption (correct or otherwise) that they tend to present a greater insurance risk.
Where you live can make a big difference in how much you’ll be charged, with big-city dwellers facing higher rates than those living in suburban or rural areas, given the higher population density and greater propensity for accidents, vandalism, and theft. At that, you might pay less if you park the car in a garage than on the street. Rates also fluctuate from one state to another, based on additional factors that include the number of uninsured drivers on the road, and whether or not state regulations favor insurance companies. If you’re planning a move, be sure to call a few insurance agents to see how much the change in address will affect your premiums.
Okay, so that means a single teenage male driving a sports car in a crime-ridden urban area and having bad credit and serious moving violations on his record will pay the highest car insurance rates of all, but what about you?
For starters, it pays to drive a vehicle that’s inherently cheaper to insure. Luxury cars are more expensive to insure than less-costly models, simply because the cost of repairs and the threshold in value before they become “totaled” in a wreck are much higher. Sports cars are also more expensive to insure, as one might guess, given the fact that they practically beg to be driven aggressively. On the other end of the spectrum, family-minded minivans, crossovers/SUVs, and sedans are generally the cheapest rides to insure. At that, there can be significant differences within given vehicle classes, depending on each model’s claims history, safety ratings and other factors, so be sure to check with your agent early on in the car shopping process to compare rates among the models you’re considering.
Consider your coverage
Even if your current carrier is already competitive on rates, you can often reduce your insurance premiums by tweaking the policy’s coverage.
Every state mandates a minimum liability coverage that every policy must maintain, with dollar amounts set for bodily injury per person and per accident, and property damage per accident. You’ll see this expressed as, for example, $25,000/$50,000/$25,000. While it can be prudent to carry additional liability coverage, especially if you own an expensive house and/or have a great deal of assets to protect, adhering to only the minimum amounts in this regard will result in the lowest rates.
Collision insurance: Pays to fix or replace or your car if it’s damaged or destroyed in an accident.
Another sure way to save money on car insurance premiums is to raise the out-of-pocket deductibles for collision and comprehensive coverage (this applies to physical damage and theft), upping it from, say, $500 to $1,000 per accident or more. If you’re driving an older model that might cost more to repair than it would to replace, you may want to drop the collision and comprehensive altogether. Assuming you and your family are already covered by health insurance, consider canceling or declining the medical payments section that covers injuries to the driver and passengers.
Comprehensive insurance: Pays for damage to your car caused by an event other than a collision, such as fire, theft or vandalism.
You can also save a few bucks by waiving rental reimbursement coverage, especially if you take public transportation to work or own multiple cars that can be called into service if one of them is in the shop. Ditto for towing coverage, which can be redundant if you have a new-car roadside assistance plan or belong to an auto club.
You’ll also save money by insuring more than one vehicle on the same policy, and by bundling car and home insurance with the same carrier, which is the insurance industry's version of a “volume” deal.
Demand the discounts
Further, make sure you obtain every applicable discount for which you’re entitled, though be aware that the availability and amount of such reductions will vary from carrier to carrier, and often from state to state.
Insurance companies usually give discounts to cars equipped with airbags, antilock brakes, and other safety features, as well as anti-theft devices like alarms, ignition kill-switches, and GPS vehicle recovery systems. Teens who’ve taken approved driver training courses and/or get good grades will often receive a discount, as will older drivers who’ve completed a defensive driving course.
You’ll also typically save a few bucks by paying a year’s premiums all at once, rather than stretching out payments on a quarterly or monthly basis, and you might also catch a break by receiving your bill online and/or setting up automatic payments. You may also qualify for a discount with a given carrier via affiliation with your employer, school, or other organization, like AAA or AARP.
You may also qualify for a usage-based discount if you drive fewer miles than a given insurance company’s threshold, which can be anywhere from 7,500-15,000 miles per year. Some insurers will grant their customers additional rate deductions for having a high-tech device installed on their vehicles – via the “OBD II” diagnostic interface included on all cars since 1996 – that monitors their driving habits. The one pictured above is the Snapshot from Progressive. Some might feel the “Big Brother” aspect of the deal to be intrusive, but those maintaining low miles and going easy on the accelerator and brakes could see their premiums drop significantly. Of course, the downside is that getting busted for aggressive driving and exceeding the set mileage limit will surely hike up your rates in the bargain.
Comparing the Quotes
As the television ads suggest, spending a few minutes checking with various carriers can, in fact, save you money. While there may be at least 100 companies big and small offering auto insurance in your state, start with the major auto insurers that can generally be relied upon for stalwart service and efficient claims processing. The major players in most of the U.S. remain Allstate, Farmers, GEICO, Nationwide, Progressive, and State Farm. You can either call a local agent or use their websites to obtain a quote. You might also want to contact an insurance broker who deals with multiple insurers and can help steer you to the company that offers the lowest rates and best coverage given your driving record and other circumstances. As a higher-tech alternative you can also visit any of the myriad websites that provide quotes from multiple carriers, but ultimately you should speak to an agent to ensure you’re getting all the coverage you need and all the discounts for which you’re eligible.
Be aware that the major players may decline providing you coverage if you’re, say, under 25 and/or have a blemished driving record or a rock-bottom credit rating. If this is the case, you’ll have no choice but to expand your search to smaller carriers, which are often called “nonstandard” companies. Many states’ insurance regulatory agencies can provide information on all of the auto insurers that do business within your state. For example, the Illinois’ Department of Insurance provides car insurance shoppers information via phone, mail, or the Internet on how long a given company has been licensed, the number of complaints made against it in recent years, and its A.M. Best financial rating, among other information.
The major players in most of the U.S. remain Allstate, Farmers, GEICO, Nationwide, Progressive, and State Farm.
When checking rates, be prepared with the make and model of car, the name of your current auto insurance carrier, and the date of the policy’s expiration, and details regarding any past insurance claims and moving violations on your record. Also, always examine a written copy of the policy before signing on the bottom line. Keep an eye out for unexpected exemptions and limitations. For example, while many policies allow a policyholder to lend a car to any licensed driver, some companies will either disallow or limit coverage for non-policyholders. Likewise, some carriers may or may not extend coverage while driving a rental car.
Finally, keep in mind that you don’t have to wait until your current policy is about to expire before comparing costs among the carriers that do business within your state. Even if you’ve already paid for six months or a year of car insurance, you’ll be reimbursed for the unused coverage if you decide to switch companies. But by all means, never let your current coverage lapse while you’re shopping around for a better deal. Not only could you be subject to legal penalties for driving without insurance and responsible for liability costs if you get in an accident, you’ll pay higher rates to get your policy reinstated and might even find it difficult to obtain new coverage from another company.