10 Expert Tips for Saving on Car Insurance

My friend Lynn works for a major U.S. insurance company. I recently asked her for tips to help people save money on auto insurance. I expected maybe a few quick ideas, but she went above-and-beyond with the following detailed list. If you own a car, you should read these tips. For readability’s sake, I haven’t blockquoted this, but it’s all Lynn.

Note that every insurance company is different — not all of these ideas work everywhere. The first thing you can do to save money on auto insurance is to self-insure as much as you can afford. Do this in the following ways:

• High deductibles. Everyone preaches this, yes, but it’s usually the easiest way to cut costs. Usually. (If your car is over ten years old, the savings may be minimal.)
• Remove towing. Good maintenance and planning can save you money. Don’t run out of gas. Don’t lock your keys in your car. Make sure you have a spare and know how to change it. Sometimes your car will break down, but if your car is well-maintained, it won’t happen often. You pay $10 – $30 a year over the life of your policy and one tow costs $100. Note that in the event of an accident, towing is almost always covered under collision.
• Remove car rental. Small economy cars cost about $20 – $25 per day to rent. Car rental is $20 – $40 per year. Play the odds. If you rent a car on vacation, your insurance will cover you while driving that car. Don’t pay for the extra coverage. The only things it offers are:
  1. Zero deductibles. You go all year long with your deductibles, why change now? Also, if you pay for the car with a credit card, they may pay for any out of pocket in the even of an accident.
  2. Downtime coverage. Downtime means that while the rental car you wrecked is in the shop being repaired, it can’t be rented out to other customers and they can ding you for the daily fee. This may be an issue if they can show that all other cars were rented out and they lost money because of you — Hawaii is notorious for charging this. But, again, it’s a risk you might decide to self insure rather than pay $21 a day for the insurance.

Aside from self-insuring, there are other steps you can take to save on car insurance.

• Shop ahead. Before you buy your next car, check on insurance. Many people assume that SUVs are expensive and Neons are cheap. This is not necessarily true. Some companies will increase your liability based on the cost of damages your type of vehicle may inflict — big trucks cause big damage. However, they also rate the autos based on how likely they are to be damaged in an accident, how often they are stolen, and how badly driver/passengers are injured. That Neon (or Jetta or Honda) is going to be a lot more expensive than you think. Many companies will have websites that will give you lists of safe and lower priced cars. (Saturn is a low insurance car because it has dent-resistant doors.)
• Think twice about after-market gizmos. If your vehicle is totaled or stolen, the insurance company will determine a fair market or actual cash value. They will look at your vehicle as a “whole package.” Even if you paid for $3,000 in after market items (wheels, spoilers, stereos, exhaust, etc.) they may only add $1,000 in value to your vehicle. It’s not dollar for dollar.
• Have all of your insurance in one place. Often, the more types of policies you have, the more you save in discounts.
• Find out if your insurance company offers any low-mileage breaks that you qualify for.
• Can you take a safety-driving course? Some companies offer a discount for this.
• Do NOT pay monthly. Your carrier will charge anywhere from $3 to $5 per month for this type of billing. Pay every six months if possible. If you must pay monthly, do an auto pay — the charges are less because they only send a bill if the amount changes.
• This might not be a money saving tip, but insurance companies are state regulated. They must file their rates with the state and be able to justify any increases these are public record as are any types of complaints or fines. For example, if you’re in Oregon, you can check out your company and/or agent at http://insurance.oregon.gov/.
• Most companies now use aspects of your credit to determine your rate. It is illegal for them to do this mid-term — as long as your policy is continuous without any lapses, they can’t use external info to change your rate. They can only use claim and ticket info. However, all newly added vehicles can be affected by credit. If you have good credit, this may be to your advantage. You are allowed to request that they re-check your score once per year. However, whatever the score is, you’re stuck with it. If it comes back bad and it raises your rate: too bad. But, if you have a policy that was written when your credit wasn’t so great, request that they check it again after things look better.

These are fantastic tips, full of great ways to save money on auto insurance. Thanks to Lynn for the advice!