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10 Ways to Lower Your Car Insurance Premium

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Shuman Roy is an entrepreneur, business owner, and musician. He started RoysNoys, LLC in 2013 as a music production and education service company. He also offers small business consulting and advisory services to help businesses get from start-up mode to turn-key operations. Shuman earned his M.B.A from the Stern School of Business in 2001...

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Joel Ohman is the CEO of a private equity-backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency...

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Reviewed byJoel Ohman
Founder, CFP®

UPDATED: Mar 13, 2020

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Most consumers these days seem to be looking for simple ways to save a buck or two on their car insurance.

Fortunately, there are several ways to accomplish this feat with very little work. Let’s look at the top 10 ways consumers can reduce their auto insurance costs.

And while you’re here, you might want to know why car insurance premiums go up too.

How to Lower Your Car Insurance Rate/Premium

1. Lower Liability Limits to the State Minimum Requirement – Higher liability limits are typically more expensive. You might save a few bucks by lowering your coverage to the state minimum car insurance limit instead. This is not a great idea if you have a lot of assets to protect.

2. Raise Your Collision and Comprehensive Deductibles – Higher auto insurance deductibles will certainly lower your insurance premium. Just be sure you are financially capable of “eating” the deductible if your vehicle is damaged.

[What is the difference between collision and comprehensive coverage?]

3. Drop Full Coverage Altogether – It is only possible to drop full coverage auto if you do not have a loan or a lease agreement (loss payee). Also, be sure to consider that you would be responsible for repairing or replacing your car in the event you damage it. This is probably only a good idea for lower value vehicles.

[Should I buy collision insurance on an older car?]

4. Remove “Bells and Whistles” – Are you currently paying extra for accident forgiveness, ticket forgiveness, and the like? Ditch it. Also, you may have roadside assistance as part of an existing group affiliation or through a credit card agreement. If so, don’t pay twice for this coverage.

5. Remove “No Fault” Coverage – Do you have med pay, personal injury protection or accidental death coverage? Other types of insurance may cover you against these potential losses. Personal injury may not be necessary if you have a good health insurance plan and accidental death coverage isn’t necessary if you have life insurance.

6. Discounts, Discounts, Discounts – Ask your agent or insurer to go over every available discount they have to offer. Perhaps your insurer added a few discounts since your policy was last reviewed. You may have money sitting on the table.

Good Student Discount – Students who maintain a certain grade point average often qualify for a discount on their insurance.

Student Discount – If you have a child on your policy, who is away at school, be sure to let your insurer know. If the student does not have access to the car, your rate may be lowered.

Alumni Discount – If you are enrolled in your Alma Mater’s alumni association, you may be eligible for a car insurance discount.

Multiple Vehicle Discount – Insurance companies assume if you own more than one vehicle, you will not be able to drive either as often; therefore you are less at risk for getting into an accident.

Hybrid Discount – Some companies offer a discount simply for driving a hybrid vehicle.

Credit Discount – Many states are using Financial Responsibility or credit scores as a determining factor in your premium. The higher your score, the lower your rate. So make sure you use credit wisely.

Car Alarms – If you have a car alarm, be sure to let your insurance company know about it. Car alarms deter thieves from stealing your car, and thus will reduce your risk.

Package or Multi-Policy Discounts – If you have a homeowners policy and an automobile policy with separate companies, you may want to contact both to determine if you can place both policies with the same company.

Airbags – If your car has airbags, be certain to let your insurance company know. If you get into an accident in a car with airbags, the bodily injury you suffer is typically less, which in turn costs companies less in the way of insurance claims.

Renewal or Loyalty Discount – If you remain with the same company for a certain number of years, with a clean driving record, you should be receiving a discount.

Good Driver Discount – If you have a clean driving record for at least three years, you may qualify for this discount.

Non-Smoking Discount – If you are a non smoker, your insurance company may offer you a discount.

Defensive Driving Discount – Some companies offer a discount for individuals who take these courses. Many of these courses can be found online.

Elderly or Senior Citizen Discount – Typically, senior citizens do not drive as many miles as younger drivers, which may qualify them for a discount.

Group Member Discounts – Insurance companies often offer discounts to members of certain groups who typically exhibit similar characteristics to one another.Some examples include AARP, AAA, or USAA members.

Credit Unions – While credit unions may differ, some offer their own insurance programs, which will provide discounts simply for being a member.

Military Discount – Many insurance companies offer this discount because service men and women often do not drive their vehicles year round, or typically only drive them within a limited area; on base for example.

Renters Insurance Discount – If you rent an apartment or a home, you may qualify for this discount. It is sometimes referred to as the “renters,” or “responsible citizen” discount.

Proof of Prior – Typically associated with Non Standard auto insurance policies, the “Proof of prior” discount shows an insurance company you have had at least liability insurance for a period of six months or more. This proof of insurance would demonstrate your ability to pay your insurance premiums monthly without a lapse in coverage (missing payments or not having insurance for any period of time), which ensures you will not force the insurer to incur the extra expense of reinstating your policy each month.

ABS – some insurance companies will offer a discount for vehicles that have anti-lock breaking systems.

7. Remove Teen Drivers from Your Policy– It may make sense for you to have your teen get his or her own policy with lower liability limits than you might need. Your current insurer may not have an appetite for teen drivers. There are companies out there that specialize in higher-risk drivers and offer lower premiums than those who don’t.

[How much is insurance for a 16 year old?]

8. Bundle Your Home and Auto – Yes, we know spending time on your insurance is the furthest thing from your mind. However, you might find that you’re missing out on huge savings by not insuring your auto and home with the same company. Take the time to call your agent and see if you qualify for this option.

9. Shop Around – Unless you live under a rock, you’ve noticed advertisements that detail how much money the average person can save by switching insurers. Here’s a tip; this usually only works for those of us who have been with the same insurer for more than two years. Switching every year may only save a couple of bucks here and there, but may still be worth your time.

10. Improve Your Credit – Your credit history (insurance score) is one of the most important factors in determining your premium. Of course, this can’t be done overnight, but working on it for a few months will save you thousands of dollars over your “insurance lifetime.” Open some new tradelines and make a few on-time payments if you are a younger driver. This is “key” to balancing out your inexperience behind the wheel.

BONUS TIP – Buy a GM vehicle in Oregon or Washington and General Motors will pay your first year’s car insurance premium, which is being offered by Met Life insurance.

Enter your zip code below to view companies that have cheap auto insurance rates.

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Last Word

This probably seems like a lot of effort, but you can save some serious money. Compare insurance quotes online and/or visit an independent insurance agent to shop your rate.

Don’t take insurance advice from a paid celebrity and don’t make the mistake of thinking loyalty to an insurance company will pay off in the long run.

Note: It isn’t recommended you rush right in and do everything on this list without weighing the savings versus the risks. Saving $100 per year and not protecting yourself against financial ruin by opting for bare-bones car insurance coverage doesn’t make sense for everybody.

Many of the options below should be considered as a “last resort.” Insurance is more important than satellite television and owning the newest version of the iPhone (and the associated iPhone insurance).

Trust us; you won’t be able to pay for “4G” service if your wages are garnished for 20 years to pay for damages awarded to an injured party in an accident you caused.

Read more: How are auto insurance rates determined?

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