As we all look for ways to trim the fat in our budgets and live as leanly as possible, one area that is often overlooked is auto insurance. After initially signing on with a carrier, people tend to get complacent, excusing any premium increases as a given. But if you view your car insurance as a fixed cost, it's time to rethink that idea. With a little persistence, there are discounts to be had. Here are five ways to grab them:
1. Choose the right car. If you're in the market for a new automobile, consider how the car you choose will affect your insurance rate before you sign on the dotted line. Fancier, more expensive, souped-up gas guzzlers, such as large SUVs or high-performance vehicles, come with jacked-up insurance costs. Consider this: The difference between the cheapest and most expensive premium can be $2,200 annually. Factor that over five years, and you have an $11,000 upswing. How about a less-expensive sedan with fewer high-end options? You get a safe, reliable new car and you'll save a bundle. This is one case where sensible wins hands down over sensational.
2. Improve your credit score. Everyone knows high credit scores reel in lower interest rates on all fronts. But did you know that your good credit can also ensure lower insurance premiums? Check your credit report for free at AnnualCreditReport.com. In fact, you are entitled to a free report annually from each of the three major credit reporting agencies: Equifax, Experian, and TransUnion.
If you spot any errors, correct them promptly. If your score is lacking, start boosting it now: Pay bills on time, as this accounts for 35 percent of your score, and shave off balances as steadily as you can. In short, showing insurance companies your history of personal accountability should come back to you in spades.
3. Raise those deductibles. This may seem like a no-brainer, but you have to understand the long-term effects before making the move. If you raise your deductible from $500 to $1,000 for certain coverages, you need to be sure you'll have this extra $500 on hand in case there's an accident or you need to file a claim. If not, your savings could be depleted. No longer would you go through insurance for the myriad door dings and bumper dents that would cost less than you'd need to shell out with a higher deductible. And do take into account your own safety record. If you're an accident-prone driver, you may not want to go this route.
4. Drop certain coverages. If your car is paid off, you're no longer required to maintain full coverage. If it's an older car with less value, you could save by dropping certain protections. Comprehensive and collision coverage are two prime suspects. The first is when your car is damaged by outside forces, such as theft or, say, a fallen tree limb; the latter is to cover your car in the event it hits something, like a light pole.
Some would say it's wise to keep the coverages just in case, but rather raise those particular deductibles. Other inclusions you arguably don't need are towing and roadside assistance. The savings aren't huge, but every drop counts in this bucket. Just make sure you know what you're giving up.
5. Shop your policy. All auto insurance companies are not alike, so investigate at least three before making your final choice. To streamline the process, shop online or consider enlisting the help of an independent agent. These are people who do not benefit whatsoever by selling a policy through any particular company. Additionally, take a defensive-driving course, ask about good-driver discounts, and use mass transit occasionally so you rack up fewer miles on your vehicle. What you're seeking is a company that responds to that proactivity in dollars and cents.
Final thoughts. When it comes to saving on auto insurance, it's all about knowledge and research. If you're willing to invest in both to determine the many ways to trim, you'll be better off in the end. And in today's uncertain economic times, you can ensure you're at least doing your part.
What other ways do you employ to cut auto-insurance premiums?
David Bakke is a contributor for MoneyCrashers, where he writes about saving on everyday expenses, insurance, and home improvement.