How to Reduce Your Car Insurance Costs in 2023 – Car insurance is a necessary expense for most drivers, but it can also be a major burden on your budget. According to the National Association of Insurance Commissioners, the average good driver in the U.S. paid $1,556 a year for car insurance in 2020. However, you can reduce car insurance costs by taking advantage of discounts, lowering your coverage, or taking a defensive driving course. Having a good credit score and maintaining a clean driving record can also help you get lower auto insurance quotes. In this article, we will explore 10 ways to lower your car insurance costs and save money on your policy.
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1. Shop Around for the Best Rates
One of the easiest and most effective ways to reduce your car insurance costs is to shop around and compare quotes from different insurers. Car insurance rates can vary significantly depending on the company, the coverage, the vehicle, and the driver. By getting quotes from at least three insurers, you can find the best deal for your situation and avoid overpaying for the same coverage. You can use online tools like MoneyGeek or EverQuote to compare car insurance rates from multiple providers in minutes.
2. Take Advantage of Discounts
Another way to lower your car insurance costs is to take advantage of discounts that insurers offer to their customers. Discounts can vary by company and state, but some of the common ones include:
- Multi-car discount: If you insure more than one vehicle with the same company, you can get a bulk rate and save money on each car.
- Multi-policy discount: If you bundle your car insurance with other policies, such as homeowners or renters insurance, you can get a discount on both policies.
- Good driver discount: If you have a clean driving record with no accidents or violations for a certain period, you can get a lower rate.
- Good student discount: If you are a student under 25 years old with good grades or test scores, you can get a discount on your car insurance.
- Defensive driving discount: If you complete an approved defensive driving course, you can get a discount on your car insurance. This discount usually applies to drivers over 50 years old, but some companies may offer it to younger drivers as well.
- Low mileage discount: If you drive less than a certain number of miles per year, you can get a lower rate on your car insurance. This discount is especially beneficial for drivers who work from home or use public transportation.
- Safety feature discount: If your car has safety features like airbags, anti-lock brakes, anti-theft devices, or daytime running lights, you can get a discount on your car insurance.
To find out what discounts are available from your insurer, contact them and ask for a list of discounts and eligibility requirements. You may be surprised by how much you can save by claiming the discounts you qualify for.
3. Lower Your Coverage
Another way to reduce your car insurance costs is to lower your coverage or drop some optional coverages that you don’t need. Car insurance consists of several types of coverages, such as:
- Liability coverage: This covers the damages and injuries that you cause to others in an accident. It is required by law in most states and has minimum limits that vary by state.
- Collision coverage: This covers the damages to your car in an accident with another vehicle or object. It is optional in most states and has a deductible that you choose when you buy the policy.
- Comprehensive coverage: This covers the damages to your car from non-collision events, such as fire, theft, vandalism, or natural disasters. It is optional
Ask for Higher Deductibles
A deductible is the amount of money that you pay out of pocket before your insurance company pays for the rest of a claim. By choosing a higher deductible, you can lower your premium, as you are taking on more financial responsibility in case of an accident. However, you should make sure that you can afford to pay the deductible in the event of a claim. For example, if you raise your deductible from $500 to $1,000, you could save up to 15% on your collision and comprehensive coverage.
8. Reduce Coverage on Older Cars
If you have an older car that is worth less than 10 times the premium, you may want to consider dropping some optional coverages, such as collision and comprehensive. These coverages pay for the repairs or replacement of your car in case of an accident or a non-collision event, but they may not be worth the cost if your car has a low value. You can check the value of your car on websites like Edmunds or Kelley Blue Book. You should also review your coverage periodically and adjust it according to your car’s depreciation.
9. Buy Your Homeowners and Auto Coverage from the Same Insurer
Many insurers offer a discount if you buy more than one type of insurance from them, such as homeowners and auto insurance. This is called a multi-policy or bundling discount, and it can save you up to 25% on your premiums. However, you should still compare the total cost of buying separate policies from different insurers versus buying a bundle from one insurer, as you may find a better deal elsewhere.
10. Maintain a Good Credit Record
Your credit score can affect your car insurance costs in many states, as insurers use it as a factor to determine your risk level and premium. A good credit score indicates that you are a responsible borrower and payer and that you are less likely to file claims or commit fraud. Therefore, improving your credit score can help you lower your car insurance costs. To improve your credit score, you can:
- Pay your bills on time and in full every month
- Keep your credit card balances low and avoid maxing out your cards
- Check your credit reports regularly and dispute any errors or fraud
- Avoid applying for too many new credit accounts in a short period
Take Advantage of Mileage Discounts
If you drive less than the average driver, you may be eligible for a low mileage discount on your car insurance. This discount is based on the assumption that the less you drive, the less likely you are to get into an accident and file a claim. Some insurers offer a flat discount for driving below a certain threshold, such as 10,000 miles per year, while others use a device or an app to track your actual mileage and adjust your premium accordingly. You can save up to 10% or more on your car insurance by taking advantage of low mileage discounts.
12. Ask About Group Insurance
Some insurers offer group insurance discounts to members of certain organizations, such as alumni associations, professional associations, unions, employers, or affinity groups. Group insurance discounts are usually negotiated by the organization and the insurer, and they can range from 5% to 15% or more. To find out if you qualify for any group insurance discounts, contact your insurer or your organization and ask about the eligibility requirements and the savings potential.
13. Avoid Lapses in Coverage
Having a lapse in your car insurance coverage can increase your car insurance costs, as insurers may view you as a risky or irresponsible driver. A lapse in coverage can occur if you cancel your policy, fail to renew it on time, or have it suspended or revoked due to non-payment or other reasons. A lapse in coverage can also affect your legal status, as most states require drivers to have continuous car insurance coverage. To avoid lapses in coverage, you should:
- Pay your premiums on time and in full
- Set up automatic payments or reminders
- Shop for a new policy before canceling your old one
- Notify your insurer if you plan to sell or store your car
14. Consider Usage-Based Insurance
Usage-based insurance (UBI) is a type of car insurance that uses a device or an app to monitor your driving behavior and adjust your premium accordingly. UBI can measure factors such as mileage, speed, braking, acceleration, time of day, and location. UBI can reward safe and low-risk drivers with lower premiums, while high-risk drivers may pay more. UBI can also help you improve your driving habits and reduce your fuel consumption and emissions. UBI is offered by many insurers under different names, such as Progressive’s Snapshot, Allstate’s Drivewise, or State Farm’s Drive Safe & Save.
15. Review Your Policy Periodically
One of the best ways to reduce your car insurance costs is to review your policy periodically and make sure it reflects your current situation and needs. You may be able to lower your premium by updating your personal information, such as your address, marital status, occupation, or education level. You may also be able to adjust your coverage or deductibles according to your car’s value, usage, or condition. You should also check for any new discounts or offers that may apply to you and claim them if you qualify. By reviewing your policy at least once a year, you can ensure that you are getting the best deal possible for your car insurance.
Frequently Asked Questions (FAQ): How to Reduce Your Car Insurance Costs in 2023: 15 Tips and Ideas
What car insurance is the cheapest?
- USAA: This company has the lowest average rates for both liability-only and full coverage policies, at $31 and $94 per month respectively. However, USAA is only available to active-duty military members, veterans, and their families.
- GEICO: This company has the second-lowest average rates for both liability-only and full coverage policies, at $52 and $102 per month respectively. GEICO also has a good reputation for customer service and claims satisfaction.
- Nationwide: This company has the third-lowest average rates for both liability-only and full coverage policies, at $63 and $106 per month respectively. Nationwide also offers a wide range of discounts and coverage options.
Which is a type of insurance to avoid?
- Accidental death insurance: This type of insurance pays a lump sum to your beneficiaries if you die in an accident. However, it has many exclusions and limitations, and it may not cover the most common causes of death, such as illness or suicide. It is also redundant if you already have enough life insurance to cover your family’s needs. You are better off buying a term life policy that covers all causes of death.
- Credit card loss protection insurance: This type of insurance promises to pay off your credit card debt if your card is lost or stolen. However, it is usually expensive and unnecessary, as federal law limits your liability for unauthorized charges to $50 per card. You can also protect yourself by reporting your lost or stolen card as soon as possible and monitoring your statements for any fraudulent activity.
- Extended warranties: These are offered by retailers or manufacturers to extend the warranty period of a product, such as an appliance or an electronic device. However, they are usually overpriced and rarely used, as most products are unlikely to break down during the extended warranty period or can be repaired for less than the cost of the warranty. You can also rely on the original warranty, the manufacturer’s guarantee, or your credit card’s protection plan if you have one.
- Identity theft and cyber breach insurance: These types of insurance claim to protect you from the financial and legal consequences of identity theft or cyber-attacks. However, they are often limited in scope and coverage, and they do not prevent identity theft or cyber breaches from happening in the first place. They also may not cover the most common types of identity theft, such as tax fraud or medical fraud. You can reduce your risk of identity theft by using strong passwords, shredding sensitive documents, freezing your credit reports, and monitoring your accounts for any suspicious activity.