This post is from guest author Jesse Johnson.
From rising gas prices to outrageous costs for repairs and regular maintenance, owning a car is expensive. Over time, car insurance can be one of the largest expenses you may never actually use. Many people pay too much for coverage they don’t need, and they don’t understand their options for lowering payments and avoiding higher rates. Here are some of the most common strategies for keeping your car insurance payments low.
Shop Around Every Year
One of the best ways to save money on car insurance is to research the available policies. Insurance companies often adjust their rates in order to compete with each other or to account for overall risk changes within their customers. Some insurers will offer a loyalty discount if you keep a policy with them over time. However, it’s also possible your payments will increase annually with the same company as they trust you will pay more for the convenience of not having to switch policies. If you are insuring your car for the first time, be sure to compare the rates of at least three policies before making a decision.
Most insurance companies will offer a personalized quote in person, by phone, or online. Though you may get information more quickly by speaking with an agent, online research can give you more time to process the details of a policy without the risk of an insurance agent pressuring you or upselling. Aside from seeking information directly from insurers, online comparison tools can estimate the rates you might pay with different companies.
If you do decide to switch policies, make sure you don’t allow for a gap in coverage as you might appear to be a higher risk, which would affect the rate a new company will offer you. Some companies will even offer a discount if you switch to their coverage before your previous policy expires. Also be sure of the terms in your policy. Insurers may offer you a low price in order to convince you to switch to their insurance only to raise their rates after an introductory period.
Avoid Distracted Driving
Though you can’t account for people in other cars, you can do a few things to avoid an accident, thus keeping your car insurance payments low. Of course, texting and driving is one of the greatest culprits behind distracted driving. Many people feel confident in their ability to text and drive, yet the amount of attention it takes to come up with a response and input that into a phone significantly decreases a person’s ability to respond to sudden traffic situations. This results in over 3,000 deaths related to distracted driving every year.
Distracted driving isn’t limited to phone usage. Eating, adjusting the radio or air conditioning, reaching for objects inside the car, and even talking to a passenger can all result in distraction-related accidents. Though some people suggest and may even believe they are capable of concentrating on many things at once, it’s important to understand why multitasking doesn’t work. Studies have shown that multitasking changes the way our brains function, causing people to retain less information and make more mistakes. So next time you have to choose between finding just the right radio station and efficiently controlling a two-ton vehicle moving at 70 mph, make the right decision.
Seek Out Discounts
Some insurance companies offer a variety of discounts for qualified drivers. For example, insurers may offer your policy at a lower total cost if you pay for six months of coverage up front. You might also qualify for a discount if you do any of the following:
- Drive a low annual mileage.
- Install an anti-theft device in your vehicle.
- Take defensive driving courses.
- Remain a long-time customer.
- Insure more than one car.
- Avoid accidents or moving violations for a certain number of years.
- Belong to an organization, such as an employer or alumni group, that offers group insurance discounts.
- Earn good grades.
- Choose to receive paperless billing statements.
- Join the military.
- Park in a garage rather than on the street.
Adjust Your Coverage
One way to lower your car insurance payments is to ask for a higher deductible and a lower premium, meaning you’ll pay more out of pocket if you get into an accident but less month to month. You can also enroll in the minimum amount of coverage available. This means choosing liability coverage instead of comprehensive insurance. In case of an accident, liability will only pay for other people’s property or injuries. With liability, you’ll also have no protection against damage from natural sources, such as a storm, a tree falling, or a flood.
Alternatives to Car Insurance
Though it is illegal to drive without proof of financial responsibility in most states, there are alternatives to traditional car insurance. Some states allow drivers to invest in a surety bond in order to prove they can pay for any damages resulting from an auto accident. With these, an individual will typically pay 1 to 15 percent of a much larger amount, based on your credit.
For example, if you buy a $10,000 surety bond at a rate of 1 percent, you may be able to avoid monthly insurance payments in lieu of an annual cost of $100. However, if you get into an accident, you’ll be responsible for paying back any money taken out of the bond along with interest. You’ll also be responsible for any damages that exceed the value of the surety bond, making this a risky investment.
For most individuals, traditional car insurance is the safest choice. That doesn’t mean you should pay so much every month. By regularly researching available insurance polices, staying safe on the road, limiting your coverage only to what is essential to your needs, and actively seeking discounts, you can stay insured at a price you can afford.