How to Save Money on Car Insurance

Written by Nickel - 19 Comments

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As a followup to my earlier articles on how to save money on health insurance and life insurance, I thought I’d tackle car insurance. What follows is a list of six tips for reducing your premiums and saving a ton of money.

Keep your driving record clean

In other words, don’t get nailed for speeding like I did a few months back. I was fortunate in that it was a first offense, and I was able to keep my record clean by pleading nolo contendre (no contest) and paying the fine, but… Next time I won’t be so lucky, as I’ll wind up with points on my license and higher insurance premiums.

Increase your deductible

If you’re willing to bear a greater portion of the risk, you can save a significant amount of money. Simply call your agent and ask them to increase your deductible. Just be sure that you have enough cash on hand to cover your out-of-pocket expenses in the event of an accident.

Drop unnecessary coverage

If you’re driving an older car, you might want to consider dropping your comprehensive and/or collision coverage entirely. After all, what’s the sense in paying a ton of money to insure against damage to a car that might not be worth repairing? Note that I’m not suggesting that you drop your insurance coverage entirely, just the portion that pays for repairs on your own car.

Bundle multiple policy types together

I can’t speak for all insurance companies, but we get a nice “multi-line” discount for carrying multiple policies with a single company. We actually have two car policies, our homeowner’s policy, a personal articles policy (for my wife’s engagement and wedding rings) and an umbrella policy all with the same company.

Ask about other discounts

You might qualify for discounts for being accident-free, renewing your policy, driving relatively few miles each year, taking a defensive driving course, etc. Be sure to talk to your agent and get what you have coming to you.

Shop around

Assuming that you’re doing everything else right, another great way to save money on car insurance is to comparison shop. You can either call around to local agents, or check an auto insurance comparison website. Whatever you do, be sure to buy from a reputable company so you won’t run into any problems if/when you file a claim.

So there you have it… Six simple tips for saving money on car insurance. If you have any further suggestions, please be sure share them in the comments.

Published on May 9th, 2009 - 19 Comments
Filed under: Automotive, Frugality, Insurance
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About the author: Nickel is the founder and editor-in-chief of this site. He's a thirty-something family man who has been writing about personal finance since 2005, and guess what? He's on Twitter!

Comments (scroll down to add your own):

Here’s my question; is it cheaper to buy your car insurance policy online or through a local agent?
Comment by AP — May 10th 2009 @ 1:48 pm
AP, I had always purchased policies online until the last time I shopped around. I wanted to combine my policies at one company and add an umbrella policy. The umbrella coverage is a bit less common online so I went to a local agency. I was expecting to see higher prices and more hassle; instead I got better prices than ever and it was a very pleasant, simple process. I’m very happy and won’t be leaving that agency unless they screw something up or stop being able to get me a competitive price. I’m guessing it all depends on your agency.

I also recommend reading every word of your policies. It’s very educational, and they shouldn’t be hard to read. Most of them are written in very plain English these days.
Comment by Ethan — May 10th 2009 @ 2:55 pm
Also look for defensive driving courses.

GEICO offers an online course, its about 50 or 60 bucks, but once you take it, you can save 10% for the next 3 years. I broke even after the first year and over the next 2 years will save a good bit.

The course only took an hour or so to complete! Talk about a good use of time!

Call up GEICO, they had about 10 different online courses that worked, I’m sure the other big ones have similar stuff.
Comment by Mike — May 10th 2009 @ 3:34 pm
AP: I think the answer varies. Your best bet is to check prices both locally and online. You might also be able to get your local agent to cut you a deal if you find a better rate for the same coverage online.

Comment by Nickel — May 10th 2009 @ 5:36 pm
In regards to 3rd suggestion, is there an ‘age’ of the vehicle when you should drop full coverage and carry only liability? I’ve been debating this, as my car is an ‘01.
Comment by TONY — May 10th 2009 @ 6:53 pm
I’m terrible with this because my insurance is pretty cheap a it is. I pay $65 a month currently. Though I am looking to switch because my insurance is held through AIG, I have concerns over what would happen should I need to place a claim. Still, I haven’t looked for insurance in years and I don’t want my rate to jump up either. I have renter’s insurance, so maybe I’ll check and see what the combined rate would be. Even still, since it’s been awhile since I’ve been in the game, I’m glad for these tips, nickel! Very helpful reminders.
Comment by Kristy @ Master Your Card — May 10th 2009 @ 7:01 pm
@ Tony – There isn’t a magic age per se, it really has to do with your current financial position. The question is, ‘If I get into an accident and total my car, do I have enough money to comfortably buy a replacement?’ The definition of ‘comfortably’ varies from person to person, but I would submit that it should mean being able to pay cash without biting into an emergency fund. Until you can comfortably afford a replacement, keep the collision coverage.

Also, when reducing your car insurance costs, be careful to maintain the right level of liability coverage. If you have a high net worth, it’s important that your liability coverage is at least equal to your net worth plus a year’s worth of earnings. It’s great to save money on insurance, but be sure you’re getting the best deal for the appropriate level of coverage.

@ Nickel – the best discounts are through the bundle assuming you have a standard driving history. We can’t come close to our current insurance costs with another company when shopping an individual policy.
Comment by Michael Harr @ Wealth...Uncomplicated — May 10th 2009 @ 10:39 pm
re: Local agent vs. online – we switched to online for our auto policy last year when our state started to let insurance companies go competitive on prices instead of the state setting the rates. We were able to save over $350.00/yr. BUT, this year when we went to renew our camper registration (DMV requires stamp from AUTO carrier as they provide the liability coverage when towing the camper) the out-of-state online company declined to stamp, not to mention the fact that they don’t have a local office to go to get that done. Two months of going back and forth with auto insurance carrier & DMV and it still was not resolved. Our local agent, who still holds our homeowner’s & camper policy, called recently to quote less expensive homeowner’s. Agent was able to save (by bundling with one company) $140.00 off of homeowner’s & auto will only be $30.00 more than online company, but I was able to go to the agency’s office (5 minutes away) and have them stamp my camper registration w/o problem because they know how it works in this state.

In the end, online company saved us money, reps were very polite & as helpful as they could be, but local agent knows ins & outs of insurance for our particular state & was able to save us more (overall) by putting H/O and auto with same company. Just having their knowledge available & being able to go to their office and get everything taken care of personally is worth the price of slightly increased auto policy premium, not to mention all the time lost that I spent on the phone & going to DMV to try & get this particular issue resolved.
Comment by Ann — May 11th 2009 @ 5:06 pm
Good tips– shopping around really helps and even threatening to do so helps . . .
Comment by DDFD at DivorcedDadFrugalDad — May 11th 2009 @ 11:25 pm
How do you find which companies are more aggressive in terminating your insurance or raising your rates should a mishap occur? How do you find companies that won’t dink you around when a claim needs to be made?

I can compare rates, but I am having a difficult time with the service aspects.
Comment by chris — May 19th 2009 @ 3:15 pm
Disclaimer – I am an independent insurance agent – Just tossing that out there right away for full disclosure’s sake.

@Chris – Ask your local independent agent. They’ll know how the company would respond to certain types / quantities of speeding tickets, DUIs, etc.

A couple things to consider when you’re shopping around for insurance. Most people buy 100% on price. If money is tight, that is understandable. However, for a savings of $3-$5-$10 per month, don’t overlook your local independent insurance agent. We have more to offer than Geico can ever dream of. We’re there in the flesh and that makes it crucial for us to provide our best customer service every single time.

- I get a lot of 20-something drivers coming in with their Geico policy with abysmally low limits. If they were to injure someone, they would be destitute for the next 20 years trying to pay for someone else’s medical bills. Geico doesn’t really explain the coverage or weigh the benefits.

- At the time of a claim who would you prefer? Someone who knows you and has worked with you to make sure you have adequate coverage or some call center employee #54932?

- Independent agents that are worth their salt are there for the insured, not the company. We fire companies every now and then if they abuse our clients.

We have some people who are price-drive consumers. They come and go. However, if someone has a claim with us they stick with us for 20+ years because our insured’s satisfaction is our #1 priority. You are our meal ticket and as long as you’re not rude to my CSRs, I will bend over backwards to make you happy.
Comment by Ryan — Aug 4th 2009 @ 9:54 am
Somewhat off topic, but I’ve had several attorneys tell me to be sure that my auto coverage is NOT coordinated with my medical insurance.

Ever wonder why coordinated auto plans cost less? Because coordinated coverage means that your auto insurance company does not have to start paying medical expenses until after your medical insurance is used up. Though my rep tried to convince me not to, I happily pay $90 more a year to keep my coverage UNcoordinated.

Should a catastrophic auto accident occur, the last thing you want to have to worry about is making sure your auto and health insurance providers are playing nice with each other AND your hospital. Keeping things uncoordinated keeps both resources available simultaneously. In fact in many cases, your auto coverage will pay medical expenses before your health insurance ever comes into play.
Comment by Phil — Aug 4th 2009 @ 10:43 am
Another good discount to ask for is the “good student” discount. Usually it’s associated with having a GPA of 3.0 or higher.

It’s an easy insurance deduction!
Comment by Maddy — Aug 4th 2009 @ 10:49 am
For those who work from home, check to see if your insurance provider offers a discount when your vehicle is not used for driving to work. This saves me about $50 a year.
Comment by Phil — Aug 4th 2009 @ 10:49 am
Another discount similar to Maddy’s, is if the student lives away at school. For most companies, if the student is more than 100 miles away at school and they didn’t take the car, it’s almost like they are not on the policy. Just check with your agent or company.
Comment by MikeS — Aug 4th 2009 @ 10:53 am
I saved on auto insurance by adding a renters policy. My monthly premium for renters and auto from the same company was less than my monthly premium for the car alone. Go figure.
Comment by Scott — Aug 4th 2009 @ 11:44 am
Another tip is to gradually reduce your insurance coverage as your car gets older and depreciates in value. Be careful whether you choose “agreed value’” or “market value” for your insurance.
Comment by Save Money Hound — Aug 28th 2009 @ 9:40 pm
My son is away at school so his car is parked at our house. I know the cost will be lowered – but what if he decides to take it back to college for a short period of time and he gets into an accident. What would happen?
Comment by Mom of College Student — Sep 10th 2009 @ 1:22 pm
Mom-

I’m pretty sure you’re completely fine. Your son is driving the car much less, which is why the rate is lowered (less driving=less risk).

As long as you still pay and he actually does only drive the amount of miles you say he will, you’ll be fine. If you have any worries, your company should be able to clear up anything confusing. Just make sure he still has a policy, he’ll surely be driving other peoples cars at school occasionally and you need to make sure he’s still covered for that situation.
Comment by Mike — Sep 10th 2009 @ 1:27 pm

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