Should You Follow These 5 Dave Ramsey Tips for Lowering Car Insurance Costs?

Auto insurance is a necessary expense, albeit not a fun one. Drivers need coverage both to comply with state laws and to make sure paying for an accident doesn't empty their checking account and devastate them financially. The good news is, options exist to reduce premium prices without cutting essential coverage.

In fact, finance expert Dave Ramsey offered five tips to help make insurance less expensive. Here's what Ramsey suggested doing, along with some advice on whether this tip can work for drivers in different situations.

1. Increase the deductible

Ramsey's first suggestion is to increase an auto insurance deductible in order to drop insurance premiums. "If you have at least $1,000 saved for emergencies, raise your deductible," Ramsey suggested.

When a driver increases their deductible, they will need to pay more out of pocket for covered losses. With a $500 deductible versus a $250 deductible, a policyholder would get stuck paying $250 more when a covered event happens. But the premiums would be lower since the policyholder would be taking on more risk.

Ramsey is right that raising a deductible usually makes sense -- especially for drivers who have the money to cover it. But it's important to decide whether it is worth paying higher premiums to protect against lower expenses later. Some people would prefer to have a fixed monthly premium that's a bit higher, rather than facing the chance of uncertain expenses later.

2. Eliminate unnecessary insurance

Ramsey's next suggestion is to get rid of coverage that may not be actually necessary. Some examples he gives include Personal Injury Protection (PIP), if it's not required by the state, as well as Guaranteed Asset Protection (GAP) insurance.

PIP insurance pays medical bills and partial lost wages regardless of who is to blame for a crash. It may be worth having for some drivers who want to make sure their care costs are covered. GAP insurance pays the difference between what a driver owes on a car loan and what the insurance pays out if the car is totaled (which is based on what the car is worth at the time of the incident).

Drivers who have a car loan should absolutely not get rid of GAP insurance unless they are certain their car is worth less than they owe on it. This is not a good way to save money, as it could mean a motorist has to come up with the extra cash to pay off a car loan if an insurer doesn't pay enough for the loan to be paid off in full.

3. Bundle policies

Ramsey also advises bundling different policies such as home and auto insurance. "Some companies say they can save you up to 25% when you bundle your insurance, and it might not be a bad idea to investigate whether that's a promise they'll keep," Ramsey said.

He did warn that this won't always provide savings, which is true -- it's important to shop around. But it could also be an issue if an insurer has a good reputation for handling some kinds of claims well but not others.

Policyholders should make sure they have the right insurance coverage for each situation, regardless of whether bundling is cheaper or not.

4. Compare insurance options

Ramsey's next tip is to compare quotes from multiple insurance providers, and he's absolutely right on that. Comparison shopping over the internet is easy and there is no reason not to do it. There could be a wide variation in premium costs and coverage terms among insurers, and drivers will only find out about it if they shop around.

5. Get help from an insurance agent

Finally, Ramsey suggests getting help from an independent insurance agent. But while this is possible and may be the right choice for some people, many consumers don't really need this type of added assistance and can simply compare quotes for coverage online and sign up for a good policy without involving an agent.

Ultimately, some of these tips could help consumers get the right kind of car insurance, but those who are shopping for a policy should pick and choose which ones make sense for them to follow.