Five ways to save money on auto insurance

Face reality - Auto insurance is not cheap

Have you noticed the volume of TV and print advertising devoted to saving money on your auto insurance? The amazing amount of money spent by major insurance companies, trying to convince you that their programs can save you large sums compared to their competition, is driven by the fact that auto insurance is actually quite expensive.

As the number of drivers and automobiles increases, the volume of traffic accidents continues to rise, also. Combine the number of incidents with the current cost of automobiles, and the result is expensive insurance coverage. All insurance companies are trying to "tweak" their coverage to bring a value added component since it is difficult to simply cut premium costs.

For example, Allstate currently offers "accident forgiveness", allowing you to have an accident and not be subject to a huge premium increase or termination of coverage. While this is certainly a wonderful, valuable, and potentially important feature, in periods of personal economic turmoil, you may find that you're unable to afford the premiums for this car insurance coverage.

Here are some ways to save money that may allow you to take advantage of some of the newer value added car insurance programs.

1. Shop. Shop. Shop.

Many people assume that, because most states set insurance rate maximums, all companies simply charge the maximum to make the most money. This assumption forgets the magic word, "competition". Insurance companies are constantly balancing the combination of maximizing income, recent and projected losses, need for profit and funds to put into reserves (for losses), and competition efforts. This balancing act often results in different premiums for similar coverage, with or without value added privileges.

2. Consider higher deductible options.

Premiums can take a welcome nosedive if you increase your car insurance deductible amounts. For example, changing a $500 deductible to a $1,000 level might save you 15% to 30% or more on collision and comprehensive coverage. Investigate this option as your accomplishing tip #1. But – consider this money savings method carefully.

Can you afford a higher deductible in the event of an accident? Do your potential premium savings on your auto insurance coverage provide the relief you need in light of the higher deductible clause?

3. Consider purchasing multiple policies from your insurance company.

Many insurance companies offer reasonable discounts if you cover both your auto and home with them. This feature, sometimes combined with your years of loyalty to one company, can result in excellent savings for BOTH insurance coverages. Once again, shop around as the level of savings can vary from company to company.

4. Compare projected insurance costs before you buy that new car.

Many people assume that their auto insurance premiums involve only the cost of their vehicle. However, there are other equally important components of car insurance premium calculations. The reliability of the vehicle, the cost to repair the car, the number of incidents and losses incurred, and the general profiles of typical drivers all influence the cost of insurance.

For a moment, eliminate the sticker price difference and compare a Corvette and a Corolla. Just consider the cost to repair a fiberglass-bodied Corvette versus the standard steel Corolla. Get an insurance quote when you compare makes of autos and consider the premium difference as part of your buying decision.

5. Maintain a good credit report.

Many car insurance companies not only request a credit report, but also will discount some premiums for customers with good credit. As you might imagine, those with poor credit scores typically pay more than standard auto insurance rates.

You may question the relationship between credit scores and insurance, but the companies believe that good credit customers are more responsible than those with credit issues. Saving money on auto insurance premiums is another benefit of maintaining a good credit score.

Other considerations

Along with these five primary ways to save money on your car insurance premiums, there are a few other things you can do. Consider reducing insurance on any older cars in your garage.

For example, many experts recommend that you eliminate collision and comprehensive coverage once the value of your older vehicle equals less than ten times your insurance premium for covering it. If an older car costs you $700 per year for collision insurance but it's worth only $3,500, consider removing this coverage and keeping liability and uninsured motorist protection only.