There’s nothing like getting the keys to your first car! For most of us, it’s a huge sign of maturity as well as our ticket to freedom.
Unfortunately, schools don’t often teach teens about the cost of driving. Sure, we know that cars can be expensive to buy and maintain, which is why many of us drive beat-up jalopies until the wheels fall off—then we just put the wheels back on and keep on going. But there’s another expense: car insurance.
I have a degree in insurance and have worked in the industry for over 15 years, but even I have to work at getting good coverage at a good rate. Just this week, I re-quoted our policy and was surprised by the cost differences and the changes introduced by self-service online systems. I can only imagine how hard it is for teens (and even adults!) who haven’t been schooled in insurance. It’s enough to make you throw your hands up and say, “Forget it!”
But we can’t do that. Getting the car keys is only a sign of maturity because it carries responsibility. We have to take care of ourselves and others on the road, as well as the car we’re driving. Whether we like it or not, car insurance is the best way to protect our car and our cash.
So whether you’re new to the road or an experienced driver, here are my best tips to help you save money on your car insurance while getting the coverage you need
Save Up Front
1. Buy It – Car insurance is legally required if you own a vehicle. There are strict penalties for driving uninsured, so be sure to buy insurance!
If you’re looking to buy a car, then call around or go online for quotes first. Insurance prices are based on a lot of factors, including the value of the car, the security and safety features, and the type of car (whether it’s a sports car that you’re likely to drive fast or a station wagon to haul your drum set around). If you have a monthly budget, make sure you can afford the car payment, the insurance, and maintenance fees combined.
2. Combine Forces – Companies usually offer multi-policy discounts, so if you need renters or homeowners insurance, have the company quote both policies.
Also, take advantage of discounts that are available to you through special memberships. For instance, AAA and credit unions often obtain discounted rates for certain insurance companies, but you have to be a member to qualify.
3. Talk with an Agent – Agents are educated and licensed to sell insurance in your state, so they know the laws that affect you. While they actually represent the insurance companies—not you—they do have a “fiduciary responsibility” to sell you only the coverages you need, want, and can afford.
Today, you can buy insurance online by answering a few questions. However, you won’t know if you’re getting the best prices and options or if you’re missing important coverages. If you do shop around online and find a quote you like, call the company to speak with an agent. Your insurance policy is a legal contract, so be sure you understand it before you make a payment or sign on the dotted line. (If you have any questions or concerns, contact your state’s department of insurance.)
4. Understand the Quote – A quote is a cost estimate based on the details you provide. Oftentimes, companies will give you an initial quote based on a few basic facts. If you like the quote, they’ll perform a credit check and pull your claims history. After considering this information, the price (called the “premium”) can change drastically. That’s why it’s important to provide honest, accurate information up front (and another reason why you should avoid bad credit and aggressive driving).
5. Careful with Payment Plans – Most companies offer a monthly payment plan, but it can be more expensive than paying it all upfront. (In one quote I received, the difference between the monthly and single-pay plans was $150!) If you can’t pay it all at once, look for a company that offers a better monthly rate.
6. Watch out for Bells and Whistles – Many companies now offer special programs like accident forgiveness or new car replacement. These can be extra coverages or special tiers (or programs) that can cost you more in the long run. If you see these bells and whistles, ask for a quote without them for comparison.
Save Going Forward
7. Watch for Your Renewal – The standard length of car insurance contracts is only six months. At the end of the policy term, the company can decide not to renew your contract or can increase your premium. That’s why it’s important that you look out for your renewal—or non-renewal—about a month prior to your policy’s expiration date. Even if your policy renews at the same rate, you may want to shop around to see if other companies can give you a better offer.
8. Ask for Better Rate – Companies change their rate structures frequently, but they may not apply a reduction automatically. That’s why it’s important to call your agent (or the company directly) before each renewal and ask if there are ways to cut the cost. Be sure to report any changes that could lower your premium, such as reducing your annual mileage by working from home instead of 30 miles away. (I just saved over $400 by having my company re-quote me in a different tier with a lower annual mileage!)
9. Take Care – Your car insurance policy won’t cover regular maintenance, but that doesn’t mean it’s not necessary. In fact, the company assumes that you’ll take proper care of your vehicle. If you drive with a known maintenance issue and have an accident, it won’t be your car’s fault, it’ll be yours, and that can lead to an increase in your premium. Besides, you really don’t want to be stranded on the side of the road because you failed to change the fluids!
10. Be Diligent – Accidents are expensive! Not only can there be big upfront costs, but the company can increase your premium for years by removing discounts and applying additional charges.
But accidents impact more than just wallets. According to the National Safety Council, about 100 people die every day in car crashes. When considering all crashes, up to 94% are caused by driver error. One of the biggest distractions is talking on the phone while driving. In fact, the NSC states that drivers using phones (handheld or hands-free) are four times as likely to be involved in an accident. Bottom line: if you want to save money and be safe, then keep your focus on the road.
It’s true that buying car insurance can be a pain, but it doesn’t have to cost a fortune. With these 10 tips, you can use insurance to protect your cash and your car without breaking the bank.
