Anyone who drives a car in the United States needs to have auto insurance in order to legally get behind the wheel, so it is something that everyone should have included in their budget. Unfortunately, auto insurance can be expensive, especially for those who have been in several accidents or for those who live in the city.
According to Rate Watch Research, the average American pays $1,844 in insurance premiums each year. If you are trying to cut costs in your budget, auto insurance might be a good place to start. Here are a few tips to help reduce your monthly payments.
1. Pay in Advance
You might think that paying for auto insurance monthly is more convenient, but it actually ends up being far more expensive in the long run. Insurance providers will charge you a premium to receive monthly bills, while they will actually offer discounts to anyone who can pay yearly or in six-month increments instead. Find out what kind of advance discounts you can receive if you pay for your auto insurance in advance.
2. Drop Your Collision Insurance
If you are driving an older car that is worth just a few thousand dollars, it may be worthwhile to drop your collision insurance. Remember that your provider will reduce to pay for repairs that add up to more than your car is actually worth, which might be the case if you are in an accident with a very old vehicle. Says Tobie Stanger of Consumer Reports, “We recommend that you consider dropping collision and comprehensive when the annual premium is about 10 percent or more of your car’s book value.” Consider dropping your collision insurance and instead pocketing your monthly savings in order to purchase your own new vehicle in the event of a serious crash.
3. Comparison Shop For a New Policy
The average American gets just three quotes before making up their mind and then choosing an insurance provider. Keep in mind that you don’t need to stop shopping around once you have a policy. You might quality for better rates at a competitor, so spend some time shopping around online in order to find better prices. Each company uses their own algorithm to determine rates, so it is worth it to ask around at more than a handful of different places.
4. Ask Your Provider to Recheck Your Credit
When you first bought your car and applied for an auto insurance quote, the insurance provider will have searched for your credit score in order to determine your monthly payments. If your score is much better than it was when you first got the policy, ask them to rerun your credit scores. If your scores are significantly higher, you can save a staggering amount each month on auto insurance payments.
Each of these tips can help to reduce your monthly auto insurance payments while still protecting your car, your finances and yourself. If you really want to lower rates in a hurry, it may also be worthwhile to increase your deductible in the short term.
About the Author: Mike Smith writes for several insurance sites including Kanetix.