Shop around for the cheapest auto insurance
Car insurance rates vary widely from company to company, as much as $1000 difference or more a year — for the same coverage, same car, and same person.
The single best way to get the lowest car insurance rates is to request online rate quotes from multiple providers who are competing for your business. Using a broker site such as Esurance.com lets you fill out one form and automatically get multiple quotes.
Even if your current company had competitive rates a year ago, their rates may have changed. So it pays to shop around and get free quotes from a number of insurance companies. Even if you are happy with your insurance company, you should check for better rates at least once a year.
It costs you nothing to switch to a different car insurance company that better meets your needs. If you switch, be sure to ask for a refund of any prepayment from your current company. There is no penalty for switching companies.
Get the right car – it makes a difference
If the cost of auto insurance is important to you, the car you choose can have a dramatic effect on how much you pay.
The car makes and models that cost the least and have the lowest repair costs, are in accidents less often, and are stolen less frequently are the least expensive to insure.
Generally this means, for lowest insurance rates, buying non-luxury family 4-door sedans, minivans, and small or mid-size SUVs.
Sports cars and sporty 2-door coupes have generally higher rates than 4-door sedans. High performance cars in the hands of teenage drivers will cost a small fortune to insure. Frequently stolen vehicles such as the Cadillac Escalade cost more to insure than cars with less “theft appeal.”
Get the right coverage
Most states have laws that dictate the minimum liability insurance coverage you must carry. In these days of lawsuit-happy accident victims and high medical costs, it is good to have as much liability coverage as you can afford. Remember, if you get sued for an accident and your insurance is insufficient, you may find your personal assets in jeopardy.
Collision and comprehensive insurance coverage for your own vehicle pays for the cost of repairs or for the value of your vehicle in case it is totaled or stolen.
You could consider dropping collision coverage when your vehicle has aged to the point that your annual collision premiums are significant when compared to the vehicle’s replacement value.
Be aware that, if you still have a loan on your vehicle, your loan company may require full collision and comprehensive coverage, even though you might prefer to only have less expensive liability coverage.
Set your deductible amount as high as you can afford if you have an accident. You can save a lot of money on your auto insurance by increasing your deductibles.
Gap insurance is good
If your vehicle is totaled or stolen, your auto insurance is only going to pay the amount that the vehicle is worth, not what you still owe on a loan or lease. This point is not well understood by many automotive consumers.
If you are “upside down” on a car loan or lease, you’ll have to come up with extra cash to pay off the remainder of the amount you owe on your loan after insurance has paid for the “cash value” of your car. To prevent this situation, you need “gap” insurance.
Gap coverage is usually included in leases, but almost never for loans.
If you plan to buy a car with little or no down payment, have no trade-in vehicle, and take out a long loan (48 months or more), then you’ll be upside down for most of your loan term, and you’ll need gap insurance.
Unfortunately, gap insurance is a little hard to find. Some auto insurance companies offer it, some extended-warranty companies have it, and some dealers sell it.
You won’t need gap insurance after your loan has been paid off or paid down such that you are no longer upside down. So you can cancel it when you reach that point.
One of the easiest ways to reduce your car insurance premium is to raise your deductible. For example, raising your deductible amount from $500 to $1000 can reduce your insurance costs by 30%. Just be sure that you would be able to afford the increased out-of-pocket expense in case of an accident. Lease companies often specify a maximum deductible, meaning you can’t raise it any higher without violating your lease contract.
Contact your auto insurance company and make sure your personal and family’s driving profiles are accurate, and that you are getting all the discounts to which you are entitled.
Your insurance company won’t automatically notify you of new discounts. You have to ask.
Your driving record, marriage status, age, commute distance, and home address will affect your insurance costs. Your credit history can also have an affect with some companies. Multiple-car discounts are available, as are discounts for vehicle safety features, anti-theft devices, and even good grades in school.
Auto insurance company ratings
JD Power publishes a rating of auto insurance companies that can be helpful in selecting a new insurance company. Some of the companies in the rating only do business in certain states. Furthermore, the evaluations do not include rate comparisons.
Most expensive states for auto insurance
According to Insurance.com, the most expensive states for buying auto insurance are, in order: District of Columbia, New Jersey, Massachusetts, New York, Connecticut, Delaware, Nevada, Rhode Island, Louisiana, and Arizona. These are states in which smart insurance shopping can achieve the biggest payback when comparing rates from different companies.
Get your own rate quotes
Auto insurance companies and brokers provide free rate quotes that allow you to easily compare costs and coverages right online. The advantage of a broker is that they work with multiple companies and their services are free. We recommend the following company:
Unfortunately, there is no such thing as really cheap auto insurance, although it’s always possible to get the lowest rates by simply being aware of the factors that affect rates and shopping online for the best rates for your particular needs.