5 Tips to Save on Auto Insurance

Auto insurance should have a place in your budget, but it shouldn’t be considered a fix cost.

Shopping around can yield lower rates, but it’s not the only way to reduce payments. Insurers offer a slew of discounts for everything from safe driving to being a loyal customer—but you have to ask.

So before you renew your auto insurance policy, check out these five ways to reduce the amount you have to pay.

1. Shop Around…the Right Way

Calling several auto insurers to compare rates doesn’t sound like the most fun, but it can lead to lower premiums.

Loretta Worters, a spokeswoman for the Insurance Information Institute, says prices can vary “dramatically” from one insurer to the next, but make sure you are comparing the total coverage being offered to make fair comparisons. “When shopping for insurance, it is important to be consistent in comparing the amount and type of insurance you are purchasing.”

She also recommends making sure the company is financially stable and has a good track record. “Your final selection should be based on price, coverage, special service and your overall comfort level with the company or person who will be providing the auto insurance for you.”

2. Safety Matters

The safety records of a car’s driver(s) can go a long way in reducing auto insurance payments.

According to Michael Convery, vice president at MetLife Auto & Home, many insurance providers offer discounts if you complete a qualifying driver safety course. He adds having a household of drivers with “outstanding driving records,” including being claim and violation free for a certain period of time can also bring hefty savings.

Even the type of car you drive can bring discounts. Worters says a lot of insurance companies provide discounts on cars that have features that reduce the risk of injuries or theft.  She pointed to the Insurance Institute for Highway Safety www.iihs.org as a resource to research cars with high rankings in terms of safety features.

3. Consider a High Deductible Plan

Drivers can lower their monthly auto insurance premiums by choosing a high deductible plan—but it means taking on more financial risk if something goes wrong. According to Worters, people can save 15% to 30% on collision and comprehensive coverage by increasing their deductible to $500 from $200. A $1,000 deductible can save you 40% or greater, she says.

While it choosing a high-deductible plan can reduce your expense, Bill Wilson, vice president, education and research at Independent Insurance Agents & Brokers of America, says you have to time it right so you don’t end up with a big out-of-pocket cost if you get in an accident.

“Don't raise the property deductible well past the point of sensible premium reduction on the theory that ‘it will never happen to me’,” he says. “The preferred approach is to increase deductibles during good economic times when you can afford a $1,000 - $2,500 loss while accumulating a deductible fund that can be used during hard times if a loss actually occurs then.”

4. Bundle for Savings

Selling insurance is a competitive industry, and getting different policies from the same provider, referred to as a multi-policy discount, can bring savings.

“Having homeowners, auto, and umbrella policies in the same company will likely save money and, perhaps even more important, will make it less likely that a coverage gap will show up when more than one insurance company is involved in a claim,” says Wilson.

5. Maintain a Good Credit Standing

You credit score doesn’t just play a role in your borrowing capacity, it can also determine your auto insurance costs.

“Most insurers use credit information to price auto insurance policies,” says Worters. “Research shows that people who effectively manage their credit have fewer claims.”

According to Worters, consumers have to protect their good credit standing by paying bills on time and keeping credit card balances as low as possible. She also says to check your credit record on a regular basis, and to take care of any errors right away.