Our society is finally experiencing a massive shift towards an à la carte form of consumption. This movement has led to many cost saving opportunities. For instance, you now have the choice to purchase what you need rather than what they want to sell you thanks to the competition provided by the internet and especially aggregator sites.
Car insurance can be reduced greatly thanks to this push towards highly-tailored plans. Even if you wrecked your car after “bumping” Bambi, you might still have affordable options (And yeah, keep telling the kids that Bambi is okay… they don’t believe you).
Here are our top ideas:
A Higher Deductible Lowers Car Insurance Premiums
This almost goes without saying, but you should have as large of a deductible as possible to reduce your car insurance bill. It is important to have the cash (or access to funds that can be easily liquidated) so that you can pay your full deductible should you need it.
When I was in college, I had a $200 deductible because that was all I could afford were I to get in a wreck. Now that we’re debt free and have an emergency fund, we’ve upped that to $1000 and earmarked a portion of the emergency fund to cover the deductible.
This led to around a 35% savings on our car insurance bill, saving us $142.80/year!!!
Think Before You Buy
Whether right or wrong, two things really like shiny red cars: cops and high insurance rates.
If you’ve read this blog before, hopefully you already know that the new fancy car sitting on the dealer’s lot can permanently separate you from financial freedom. If not, read this article!
New cars lose their value like a sinking ship. A two year old car costs significantly less than a brand new one. This is why it’s also much cheaper to purchase car insurance for that slightly older car.
Many other factors can result in lower premiums including: color, body style, age, etc. For a detailed list, consult the Insurance Institute for Highway Safety’s website: http://www.iihs.org/iihs/ratings.
Don’t Lease (or Take Out a Loan)!
As mentioned above- new cars suck the life out of your bank account indefinitely. When you lease a car you lose all control over how your vehicle will be insured- the dealer sets the rules.
Similarly, when you take out a loan for a car, you are also at the mercy of the loan provider’s terms. These terms always dictate maxing out your car insurance policy. It makes sense because they want to protect the asset that’s technically theirs so the moral of the story is buy a used car with cash or pay off every last cent as quickly as possible.
Skimp for an Older Car
If your car is getting older, consider eliminating comprehensive coverage. A general rule of thumb is that if the car is worth less than 10 times the annual premium, it’s statistically not worth paying for. This advice really relies on your own cost analysis judgement and depends on if you have a robust emergency fund that can handle a hit such as paying cash for a new (to you) car.
For instance, our 2008 Chrysler Sebring is worth about $4,000 – $5,000. Our monthly premium (including comprehensive) is around $34/month or $408/year. $408 x 10 = $4080 which is less than the 10x premium. At this point in our financial journey, paying $408/year is more tenable than draining our emergency fund down by $4 grand should the worst case scenario occur. However, we may revisit this policy in a year or two as our car continues to depreciate and as we build a car replacement fund.
The competition between insurance agencies works to your advantage when seeking a lower premium (Why don’t we do this for health insurance and have across state line policies!??? -rant over).
If you’ve had your policy for a few years, get some free quotes from other companies. This can be done completely online and is a relatively short process.
Also consider bundling your homeowners insurance with your car insurance to potentially save even more!
Avoid the Computer, Pick up the Phone
Aggregation sites are great, but sometimes you aren’t always getting a good deal. Sometimes you can have more success by calling the insurance companies and making an offer to the sales representative over the phone (This tactic is a great way to lower your Cable/Internet bill as well).
For your convenience, I’ve listed some of the major auto insurance companies below with the numbers you should call.
Allstate: 866 704 9900
State Farm: 1-800-782-8332
When you get connected with a sales representative, tell them that you have an offer from company A at price B. Ask if they can offer a better rate. They usually have the flexibility to lower rates to ensure business acquisition, while the website does not.
Finally, ask if they can adjust the deductible to a level that fits your particular needs, and saves you money. Make sure you have enough money in cash to meet your deductible! Go through this process once a year to negotiate lower premiums. If your driving record increases, your premiums should go down over time.
Bonus: Look for Discounts, Get Married, or Fast Forward to the Age of 25
Some large employers offer discounts with car insurance policies (especially if they are unionized). For instance, when my wife was a teacher and belonged to the National Education Association, she was offered several discounts to her car insurance policy.
Put a ring on it already. According to actuaries, married couples are more likely to drive safer as the likelihood of driving your brood recklessly to the local soccer match is highly unlikely. However, if you are getting married just to save money on car insurance, this might not be the one- just saying…
If you’re under 25 just admit it- you suck at driving. You will face way higher premiums until you reach the golden age of 25 which actually makes sense when you take into consideration that nearly 1/3 of all traffic fatalities are caused by drivers under the 25.
Do you negotiate your car insurance policies every year? Do you have any great tips to add to this list of ways to save on car insurance? Share in the comments below!