How to Reduce Your Auto Insurance Costs

October 25, 2016

You can only imagine all of the crazy scenarios that go on in your brain when you have had two car accidents in under six months. Unfortunately, these scenarios led me to getting practically every auto insurance option available when we bought our cars. Needless to say, I think I went a little overboard, which of course I figured out when I saw my first auto insurance premium bill. If you find that your auto insurance is higher than you would like, consider pairing down by doing the following:

Shop around: Do not assume that the policy you have is the best you can get. First, contact your current insurance company and ask for discounts for things like: multiple vehicles and good driving records to name a few. Consider getting all of your policies (home, renters, cars) from the same insurer to help reduce costs. Next, review  websites to help you evaluate various auto insurance companies and consider using sites like Esurance,  NerdWallet or  The Zebra to help you price auto coverage.

Deductibles:  In general, the easiest way to reduce your premiums is to increase your deductible. Typically, the more you have to pay out-of-pocket, the cheaper the policy. A rule of thumb is to choose a deductible amount you can easily pay if needed or allocate a portion of your savings to cover the deductible you choose.

Dump unnecessary coverage: Collision insurance covers physical damage to your car if you collide with an object (car or tree) and comprehensive insurance covers other damages like a flood, theft and fire. A rule of thumb is to consider dropping full coverage when the annual cost for the insurance is more than 10% of the actual cash value of your car. If you decide to drop coverage, consider creating a “car budget” to cover the cost of repairs and a newer vehicle.

Ultimately, I ended up increasing my deductible to an amount that I can afford to pay out-of-pocket and I dropped comprehensive coverage on one of the older vehicles we purchased, which lowered my overall premium. Consider annually scheduling a time to review all of your insurance policies. You can use your birthday or you can use your open enrollment period as a time to not only review your benefits at work but to review your auto insurance policies as well. Taking a few hours to review your policy can help you save money that can go towards other goals like paying off debt, building an emergency savings and saving for college.