How to keep your car insurance costs low amid rate increases
Auto insurance rates are set to rise in the year ahead but drivers can follow these steps to keep their premiums low. (iStock)
Recent data from the Bureau of Labor Statistics (BLS) shows that car insurance rates have risen in the last few months, following a decrease amid the COVID-19 pandemic.
Car insurance rates surged 16.9% in May, and the jump follows an increase of 6.4% in April, according to the BLS data released on July 13. Amid these rate increases, there are several expert-recommended tips you can follow to make sure you aren’t overpaying and to help you obtain cheap car insurance.
In order to compare how much you are paying for your car insurance policy, it's helpful to know the average cost of car insurance. Currently, the average cost of insuring a medium-sized sedan with a full coverage policy was $1,245 in 2020, according to Andrew Latham, managing editor at SuperMoney, a platform that connects consumers with certified personal finance counselors.
"Your best auto insurance rate is based on multiple factors, such as your age, the car you drive, your credit history and where you live," Latham said. "Therefore, the only reliable way to determine if you have a good car insurance rate is to compare your current coverage with several carriers. Just make sure you are comparing apples to apples and use the same coverage."
If you're shopping for new car insurance, visit Credible where you can compare multiple auto insurance companies and quotes at once and see your personal rates.
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When looking for ways to lower your auto insurance rates, here are four tips to keep in mind:
- Compare multiple auto insurance providers
- Consider your deductible
- Work on your credit score
- Be careful of what you do to lower your rate
1. Compare multiple auto insurance providers
Loyalty doesn’t pay when it comes to lowering your auto insurance rate, and shopping around to compare options can be a great way to lower your car insurance premium.
"Most people who switch carriers find better rates," Latham said. "However, low rates are not everything. Although it is smart to compare several quotes to find low premiums, you also want a carrier with fair and fast claims settlements and great customer service."
You can search for affordable car insurance in just a few minutes by visiting Credible. There, you can fill out your basic information and coverage preferences to view offerings from multiple car insurance companies.
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2. Consider your deductible
Opting for a higher deductible can be a simple way to significantly lower your monthly auto payments. In fact, increasing your deductible from $500 to $1,000 can lower your insurance premium by 10%. Drivers can also drop other extra coverage options to reduce their premiums.
"Consider dropping comprehensive and collision coverage when you have an older car," Latham said. "A good rule of thumb is to drop extra coverage (collision and comprehensive) when your annual premium is 10% or more of the car’s Kelly Blue Book value. For example, if you are paying $1,500 a year in auto insurance and your car is worth $10,000, you probably should drop extra coverage."
Other extras drivers could drop from their policy includes medical payments coverage and personal injury protection. While these could be good to have in an accident, health insurance could already cover them. Also, drivers who have a second car or can rely on public transportation may want to do without the rental reimbursement coverage. Oftentimes, homeowner's or even renter's insurance also covers some of these extras.
3. Work on your credit score
Aside from a clean driving record, — either by having no at-fault accidents or by taking a defensive driving course — there are also other records that come into play when determining your auto insurance premium. In some states, your credit score can help you get a better rate, so improving your credit score can work to your benefit for car insurance. This is true for every state except California, Hawaii, Maryland, Massachusetts, Michigan, Oregon and Utah, which prohibit or regulate the use of credit scores by auto insurance carriers, Latham explained.
But it’s important to note that shopping for auto insurance will not hurt your credit score, Latham said. Auto insurance companies use a soft inquiry, which means the check will show up on your credit report but it will not affect your score.
To make sure you have the cheapest car insurance available to you, shop around and compare multiple insurance companies to find the best rate. You can visit Credible and compare multiple providers at once and view your potential auto insurance policy without affecting your credit score.
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4. Be careful of what you do to lower your rate
While there are various ways to get car insurance discounts, there are areas where it's not wise to cut back on your coverage — such as bodily injury liability — since it can be detrimental in the long run.
"Don't skimp on liability coverage," Latham said. "Drivers who don’t have that many assets to protect may be tempted to drop liability coverage altogether. However, remember that your wages could be garnished if you are at fault in an accident. I recommend a minimum of $100K per person, $100K for property damage and $300K per incident."
To sum it up
There are several ways to save on your auto insurance premium including comparing multiple auto insurance quotes, raising your credit score and cutting unnecessary extras. Oftentimes, veterans and military members can also get a policy discount, so be sure to ask your provider about that. Additionally, teen drivers will typically pay more for their insurance but could get special offers like a good student discount.
To see what kind of auto insurance discounts are available to you, get started today by visiting Credible to get your free car insurance quotes.
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