Car insurance is a necessary evil that most of us will have to deal with sometime in our lives. And though it's not pleasant to fork over money each month, not having insurance is a sure-fire way to get yourself in a bind -- either through the financial cost of an accident or that of losing a license and/or vehicle registration if you're pulled over. But here are a few easy tips to try to reduce your monthly premiums without much effort.
1. Cut out the middleman
Going directly to the source and bypassing an agent could end up saving you some green. Recent reviews of both Berkshire Hathaway's (NYSE:BRK-B) GEICO division and Allstate's (NYSE:ALL) Esurance division showed that direct selling to consumers saved the insurance companies money, which they then transfer on to customers by offering lower rates.
If you're comfortable entering your information on on the company's Internet site, the process can be fairly quick and easy, with the bonus of savings over companies that use the agent-only model.
2. Check your limits
Do you have an older car? If you're like the average driver on the road, your car is creeping up to the ripe old age of 11 years. If so, you may choose not to have collision coverage, which would reduce your monthly premium. What you need to consider is whether the cost of the damage to your car (and its value) is greater than your insurance deductible and premiums. For example, my last car was a 1993 Mercury Mystique, which I valued (with the help of a certain blue book) at $1,500. Since I like to keep a high deductible (more on that later), I decided not to have collision insurance since the $1,000 was almost as much as the entire car was worth.
On the other hand, if you do need collision coverage, raising your deductible can be another smart way to lower your premiums. If you compare the cost of having a $1,000 deductible versus a $500 deductible, the difference can be dramatic. If you're worried that you won't be able to cover the cost of the higher deductible, here's a tip: Budget your expense in the amount of the premium for the lower deductible. Since the actual cost is lower, you will eventually accrue a buffer that you can save to put toward the higher deductible in the event of an accident.
3. Have no shame
Some insurance companies are proud to offer lots of discounts, so don't be afraid to ask for them. Do you belong to a group or association? Check out if the insurer has a discount for them. I get a discount through my alumni association. Also, don't forget to ask if there's a discount for insuring multiple cars or other vehicles. Homeowners and renters can also take advantage of multi-policy discounts if you get your auto and home/renters insurance from the same company. One other discount to check is the pay-in-full discount. If you pay your entire premium at once, you could get a few bucks shaved off.
Everybody wants to save money, and most insurers embrace that fact.
4. Plug it in
Speaking of embracing discounts, both Allstate and rival Progressive (NYSE:PGR) are promoting use-based insurance technology that can result in pretty large discounts. Allstate's DriveWise and Progressive's Snapshot employ small transmitters that plug into your car's computer to monitor your driving habits. Both programs explicitly state that your rate won't increase because of the data that the insurer collects, and you can get up to a 30% discount.
5. Be a better driver
Insurance is just a way to put the financial burden of risk onto someone other than yourself. Since the insurance company is taking on unknown financial obligations if you get into an accident, the riskier you seem, the more you will pay. By improving your driving habits you can assure yourself a guaranteed way to drop your cost of insurance. Most companies look at your accident history for five years and speeding violations for up to three years. It might take some time to clear off old misdeeds, but you'll be in better standings with your insurer once you do.
Tipping the scales in your favor
When you have a recurring expense like car insurance, it can be tough to figure out ways to reduce its burden. But this list of tips is a tried-and-true way to see those dollars fly off and your monthly obligations lighten a bit. As important as car insurance is, it's also important to know that you don't have to put up and shut up -- make sure to take advantage of the discounts and offers from insurers.