The purpose of car insurance is to help mitigate the extraordinary financial costs that can arise from unforeseen circumstances. For example, a single at-fault accident can result in tens of thousands of dollars in property damage and medical care for injured parties. An unexpected flood or fire might destroy your vehicle, leaving you without transportation, and responsible for thousands of dollars on an outstanding auto loan. Auto insurance reduces the risk, spreading it across a large pool of policyholders. The goal is to pay as little as possible while maintaining the coverages you need.
As you compare quotes between insurers, it’s important to remember that low-priced car insurance often requires compromise. The key is to determine whether the sacrifices you’ll be forced to make are worthwhile. We’ll explore this issue in more detail below.
Dropping Non-Mandatory Coverages (Endorsements)
One of the quickest ways to lower your rates is to drop collision and comprehensive coverages. Both are expensive. Together, they can add up to nearly 40 percent of your total premium. Other endorsements, such as damage to non-owned automobiles and loss of use coverage, tend to be less costly, but will still increase your rates.
The problem with dropping these endorsements is that you’ll need to pay for repairs and rental cars out of your own pocket should the need arise. For example, suppose your car is vandalized. Damage would normally be covered by the comprehensive portion of your policy. Were you to drop comprehensive coverage prior to the vandalism, you would have to pay for repairs yourself. Bear this in mind.
Qualifying For A Low-Mileage Discount
Most insurers will reduce their policyholders’ rates if they drive fewer miles than normal. The reasoning is that these policyholders are less likely to be involved in circumstances that generate claims.
If you normally drive very little – for example, you work from home, and can avoid a daily commute to the workplace – take advantage of this discount. However, actively reducing the number of miles you drive may pose a greater cost than the savings you’ll enjoy. Driving less may be less convenient, depending on your circumstances.
Consolidating All Policies Under One Company
Another discount is given to policyholders who bring multiple insurance policies under a single company. For example, if your auto, property, and health insurance coverages are held at three insurers, consolidating them is likely to lower your rates.
A possible issue is that the insurer under which you bundle your policies may not offer the lowest rates for one or more insurance products. For instance, you may enjoy a significant discount on your auto insurance, but not on your property, health, and life policies. The only way to make an objective decision is to compare quotes between insurers to determine which offers the lowest rate.
The Cost Of Raising Your Deductibles
Increasing your deductibles will result in lower premiums. The reason is because higher deductibles lower the risk of loss to your insurance company. In many cases, consumers keep them too low, and end up paying more than necessary for their coverages.
The drawback to raising them is that doing so exposes you to more risk. For instance, suppose you increased the deductible on your comprehensive coverage from $250 to $1,000. If a vandal damages your vehicle, you would need to pay $750 more out of your pocket before your insurer agrees to cover the rest.
This is a good method for lowering your premiums, especially since the likelihood of experiencing a covered event is slight. But make certain that you understand the risk.
Hidden Sacrifices When Switching Insurers
One of the most reliable ways to consistently enjoy low-priced car insurance is to request quotes from multiple insurers each time your policy is about to expire. Many people find that their current providers no longer offer the lowest rates despite doing so for years. Comparison shopping brings this fact to light.
If your current insurance company offers you little value, and you have uncovered lower rates elsewhere, choosing the other provider is a good idea. But if your current company provides exemplary service, numerous discounts for which you will soon be eligible, and other benefits, reconsider. You may be sacrificing more than is immediately clear.
Our purpose in highlighting the issues above is not to dissuade you from doing everything possible to lower your car insurance premiums. Rather, we hope to help you make objective decisions based on your circumstances.
