5 Ways to Save Money on Car Insurance
Money Girl has 5 savvy tips to pay less for car insurance without sacrificing your safety.
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Tip #1: Assess Your Insurance Needs
Now that you know the specific coverage that auto insurance gives you, carefully assess what you need. For instance, if you don’t have ample savings to repair or replace your car if it were destroyed or stolen, then you definitely need collision and comprehensive.
But if you have an older car that’s paid for, then consider dropping collision and comprehensive. A good rule of thumb is not to buy those coverages unless the annual premium is 10% or less of your car’s Blue Book value. Otherwise you’ll pay more in premiums than you could ever collect in benefits.
However, no one should go without liability and injury coverage because if you’re in a serious car accident you could be sued for a huge amount of money. Each state has minimum requirements for how much liability coverage you must have—but it’s possible that you may need more.
For instance, if you live in Florida, your insurance must pay up to:
- $10,000 to cover medical costs for each individual injured, or up to a $20,000 limit per accident
- $10,000 for property damage liability
- $10,000 for personal injury protection per person
These are very low limits that aren’t likely to protect your assets, like real estate, savings, and investments, if you’re found at fault in a lawsuit. So never scrimp on liability coverage because that’s where insurance really gives you a strong financial safety net.
Tip #2: Maintain Good Credit and a Clean Driving Record
You might be surprised to know that your credit plays a big factor in the rates you’re quoted for car insurance. Insurers use credit scores as a tool to help gauge how risky a customer might be. So that’s just one more reason to maintain good credit scores by paying your bills on time and managing credit accounts responsibly.
Another factor car insurers use to gauge risk and set premiums is your driving record. Having multiple moving violations and accidents on your motor vehicle record generally will cause you to pay higher insurance premiums.
Tip #3: Raise Your Deductible
A deductible is the amount of money you must pay before insurance benefits begin. For auto insurance, you typically can choose a deductible such as $200, $500 or $1,000. The higher your deductible the lower your premium will be.
But the tradeoff with a higher deductible is that if you have a car accident, you’ll have to pay more of the repair cost out of your own pocket. So never raise your deductible unless you’re confident that you’d have enough cash to cover it if you ever needed to make a claim.