At the start of every new year, people set goals. Many of the most common resolutions set during the new year are financial in nature. For instance, some people resolve to pay off their debt before the year ends. Others want to decrease their spending and save money.
If you’re one of those people who want to save money, decreasing your car insurance premium is one way to get closer to your financial goals. Here are seven hacks to help you save on car insurance this year.
1. Review Your Car Insurance Every Year
One of the simplest ways to reduce your insurance premiums is to shop around once a year. It may seem unnecessary, but comparing rates from a variety of insurance companies can be beneficial. Firstly, it gives you a sense of how much your car costs to insure on average. Secondly, doing your research lets you determine if you have the best car insurance for your budget.
Remember to compare quotes from at least three providers before making a decision. But what if your current insurer is the cheapest option?
2. Get Rid of Coverage You Don’t Need
Another way to decrease your car insurance costs is by dropping unnecessary coverage. In most states, drivers are legally required to have liability coverage and personal injury protection, or no-fault coverage. In states like New York and North Carolina, drivers must also have insurance that protects them against collisions with uninsured or underinsured motorists. Beyond that, rates vary by state and personal preference.
Types of Car Insurance to Consider
- Liability Coverage: This coverage protects you against the costs of covering the medical bills of other drivers after an accident. Liability insurance may also reimburse you for damage to your car. If you don’t have a significant savings cushion or other assets to cover the cost of large claims, liability insurance will protect you financially in the event of an accident.
- Collision Coverage: If you’re financing your vehicle, chances are the bank will require this coverage as well. Collision insurance will pay for damage to your car resulting from a collision with another vehicle. It does not cover car damage from potholes, broken windows, fire, or theft.
- Comprehensive Coverage: This is like collision insurance, but it covers damage from non-collision incidents. The most common kinds of incidents are floods, vandalism, hitting an animal, or striking a non-moving object.
- No-Fault Coverage: This type of insurance protects you against the medical bills of other drivers after an accident. Unlike liability insurance, your own insurer pays your claim; it then submits a claim to the other driver’s insurer. If you have this coverage, maintaining a high deductible can be beneficial because it reduces your premium.
As you review your vehicle insurance, make a list of your state-mandated coverage, bank-mandated coverage, and ones that make sense for your location. For instance, if you live in a town that is known for seasonal hurricanes, floods, or fires, dropping comprehensive insurance might not be the best idea. Consider working with an agent who is familiar with your area.
If your car is older, consider dropping collision and comprehensive insurance. Then, set aside an emergency fund that amounts to your car’s market value.
3. Ask Your Insurance Company about New Discounts
Your insurer may provide discounts for a variety of reasons. For instance, some insurers offer a “good student” discount for teens with good grades. Others may give discounts to drivers who are members of the military or attend certain types of college. If you are enrolled in an accredited driver’s safety course, contact your insurer about getting a discount for completing the class.
Save on Car Insurance by Paying Your Premium Annually
Payment methods can also affect your car insurance premiums. Most insurers offer a discount if you pay a year’s worth of premiums upfront. If you can’t afford an entire year’s worth of premiums at once, pay at least the minimum amount necessary to qualify for this discount.
4. Downsize Your Car
The most effective way to save money on car insurance is by driving a car that costs less to insure. The type of car you choose will depend on your budget and preference, but there are a few things to consider.
For instance, the cost of repairs and parts for some vehicles can be high. Secondly, there are insurance companies that offer discounts to drivers with hybrid cars or vehicles that use alternative fuel.
When you’re looking for a new vehicle, find a safe one with the lowest possible insurance rates. Talk with your insurer, and get online quotes from other car insurance providers to compare costs.
Related Read: What Credit Score Do I Need to Buy a Car?
5. Drive Safely to Save on Car Insurance
Driving safely is often underrated. If you’re a cautious driver, you might qualify for a reduced premium. When calculating your rate, insurance companies consider the following factors:
- The type of car
- Your driving history
Improving your driving habits could save you money each month. Plus, it’s safer for everyone on the road. If your current vehicle doesn’t have an accident history, you might also want to consider increasing your deductible, which can save you money.
6. Increase Your Car Insurance Deductible
If you drive safely, you could lower your monthly premium by raising your deductible. Increasing your deductible from $200 to $500, for example, will decrease your monthly premium. And since you know how much your deductible is ahead of time, you can set aside the amount in an emergency fund.
7. Consider Usage-Based Programs
Another way to save on car insurance is by participating in usage-based programs. With this type of coverage, you put a device in your car that records your mileage and driving habits. This data is then sent to your insurer, who can use it to determine how much you should be paying for coverage. Among the common usage-based options are:
- Pay-as-you-drive: This program charges you for the miles you drive. Your insurer will typically take mileage into account when calculating your premium.
- Pay-how-you-drive: With this program, you pay for your insurance based on safe driving behavior. In some cases, your insurer might offer discounts if you’re an ideal driver.
Takeaway: Saving Money on Car Insurance
There are plenty of tactics to help decrease your monthly insurance costs if you take the time to assess your habits and your vehicle insurance needs. Once you know what must stay and what needs to go, contact your insurance company to make the necessary adjustments.
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