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Looking to reduce your car insurance premiums?

June 11, 2015

By Pam Leibfried

If you’re looking to reduce your car insurance payments, you’re in luck. We’ve previously reviewed how companies set auto insurance premiums, and today we’ll examine some ways you can potentially reduce this major cost of auto ownership.

Increase your deductible

If you’re in an accident or your car is damaged in some other way (hail, storm, etc.), the amount you have to pay out-of-pocket before your insurance kicks in is your deductible. If you select a higher deductible and agree to pay more for each claim, you can save significantly on your premiums. Bumping your deductible from $250 to $1,000, for example, could save you as much as 40% on your premium.

Ask about multi-policy discounts

Many insurance companies offer discounts if you have multiple policies with them. For example, the last time I priced out my insurance, I found that I was able to qualify for discounts on both my auto and home policies by switching to a combined policy.

Investigate employee discounts

Some companies offer their employees an insurance benefit: You can get insurance at discounted rates and have the premiums deducted from each paycheck, just like your medical/dental premiums. My former employer offered one of these programs, and it saved me several hundred dollars a year on my auto insurance. Plus, I never had to worry about a late payment or a check getting lost in the mail. And as a bonus, having the annual premium split up across 26 paychecks made it super easy to budget. So if you glossed over the non-medical portion of your benefits enrollment materials last fall, check your company intranet or reach out to an HR benefits team member to find out if insurance discounts are offered by your employer. If they are, it could be well worth your time to get a price quote. And unlike medical benefits, you can generally enroll in this coverage any time throughout the year.

Comparison shop

Don’t just automatically renew the insurance you have for another term…comparison shop! It only takes a few minutes to get insurance price quotes online or via phone, and can potentially save you a lot of money.

Consider dropping the collision coverage on your old beater car

If you own your older-model car outright, it may be smart for you to drop your collision coverage. This isn’t an option if you have an auto loan, as lenders requires you to have specific levels of insurance. Your collision coverage is the part of your auto insurance policy that reimburses you for repairs if your car is damaged (or for part of your replacement costs if your car is totaled). Note that liability insurance and coverage for damage to other drivers' vehicles or to other people is not an option that can be dropped: only the parts of your policy that cover damage to your car can be considered as optional. If your car has a low cash value, it’s worth taking the time to figure out if you’d be better off dropping the collision coverage and taking the chance that you’ll avoid an accident long enough for the savings to outweigh any potential out-of-pocket repair costs.

Here’s how to do the math to help make your decision:

  1. Check with your insurer to find out how much you’d save by dropping collision coverage, then multiply the annual savings amount by 10.
  2. Find out the approximate value of your car using Kelley Blue Book or other sources.

If #1 (annual savings x 10) is larger than #2 (your car’s value), you’re a candidate for dropping collision coverage, according to the Insurance Information Institute. Keep in mind, though, that there are other factors that you should weigh in this decision. Does a family member who drives the car have a history of accidents? Do you have teen drivers? Are you lacking the savings that would enable you to pay for repairs if your current car is damaged? Do you just feel uncomfortable taking the chance that you’ll avoid accidents long enough to make the decision pay off? If the answer to any of these questions is “yes,” you may be better off keeping the collision coverage.