If you own a vehicle, which 95 percent of American's do, then you need to have car insurance. In 2014, the average cost of car insurance per year was $907.38, according to a study by Quadrant Information Services. Add in the cost of the vehicle, maintenance, and gas, and traveling by car is just about the most expensive way to get around.
Car insurance is required by law, so, unfortunately, it's not one of those things you can just go without (and honestly, going uninsured is never a good idea). There are ways you can save money on your car insurance right now that may be easier than you think.
What Are the Key Coverage Types?
As a motorist, you should learn more about the various policy types available to you. These include:
- Comprehensive – This policy covers expenses if someone steals your car or a non-accident event damages the vehicle.
- Personal Injury Protection – With this policy, you get reimbursed for lost wages if you must miss work after an accident. It also pays for the medical expenses of all passengers involved in an accident, including you.
- Collision – Here the insurance company covers your car repair costs after an accident.
- Underinsured/Uninsured Motorist Coverage – If someone with no or minimal insurance coverage hits you, this policy takes care of costs you incur.
- Property Damage Liability – If you cause an accident and damage someone else's vehicle, this vehicle pays for all costs incurred.
- Bodily Injury Liability – If you are at fault in an accident, this policy covers the medical costs of people wounded in the crash. Pay attention to the numbers in this policy type to figure out the maximum liability the insurance company is willing to cover. For example, a 30/60 policy means that the insurer will pay up to $30,000 in medical costs incurred by one person injured in a collision you caused, and up to $60,000 in hospital expenses incurred by everyone injured in the crash.
- Liability Coverage – If you cause an accident, the insurance company will fork over money to cover expenses and liability, directing the cash to individuals you hit.
How Much Auto Insurance Coverage Do I Need?
Now that you understand the various policies that are out there, you should make a decision on what the coverage amount you need. If you drive a financed vehicle, meaning the lender still holds the title, the creditor would require that you get comprehensive and collision, among others. For the lender, the objective is to protect the value of the vehicle, which in this case serves as collateral for the loan.
So, decide which policy types you need, that is, one that will give you peace while you are on the road, as well as the respective numerical thresholds – meaning liability maximums – you would be comfortable with if the worse were to happen.
Five Ways to Save on Car Insurance
We all know the more common ways, such as having a good driving record or purchasing only the amount of coverage that you need, but what about the less common ways? Here, we're sharing five practical, yet often missed, ways to save on car insurance.
1. Use an Online Coverage Calculator
Over the last few years, I have used Yahoo! Autos' Auto Insurance Coverage Calculator and found it very resourceful. The tool gives you a "bumper-to-bumper" analysis, walking you through several steps to determine how much you should spend on car insurance.
I suggest you play around with the tool and tweak your data as you wish to get a better idea of the coverage amount and types you need.
2. Become a One-Car Family
If you don't absolutely need two cars, consider becoming a one-car family. Most likely, your parents were a one-car family at some point and I can almost guarantee that your grandparents were. Sure, times have changed, but having only one vehicle drastically reduces the amount you pay in car insurance. You'll also save on gas, repairs, and maintenance of that second vehicle.
3. Switch Insurance Companies
We see ads all the time on how switching car insurance companies can save you money. While that can be true, make sure to read between the lines and know what you're signing up for. Is your coverage the same? Why is one company able to charge less? Are there any hidden fees?
These are all questions you'll want to ask the new company you're inquiring with. Also, before switching, call your current provider and let them know you found a company that offers a less expensive plan. Your current provider may be able to match that in order to keep you as a customer.
4. Drive Less
Did you know that most insurance companies offer a discount to motorists that drive less than average? Give your provider a call and ask them if they will reduce your premiums if you, in turn, reduce your driving. Instead, you can carpool, take the bus, walk or ride your bike. Also, plan your errands accordingly. Instead of going to the grocery store one day, Costco another and the bank another day, try to accomplish all of your errands in one fell swoop, choosing the route with the least amount of miles.
Bonus: Driving less also decreases your chances of being in a car accident. Car accidents automatically increase your insurance premiums.
5. Drive a Car That is Less Expensive to Insure
Typically, small cars that are able to zip in and out of traffic are the most expensive ones to insure. And, of course, the more expensive your vehicle is, the more it's going to cost you in insurance. You can avoid paying high insurance rates by driving a car that is cheaper to insure.
Car Insurance Tips Recap
Estimating the type and extent of car insurance coverage you need requires familiarity with policy types and your own situation. Other critical elements include your risk profile, people who rely on you financially, how much in liquid assets you have, and the size of your long-term portfolio.
What are your tips for saving money on car insurance? Share in the comments!