Let’s talk about how much you’re spending on insurance. Boring. Well sure, it’s not a scintillating topic. BUT, what if I told you that shopping your insurance could save you hundreds of dollars each year. Your likely response would be that I sound like a Geico commercial. And that would be accurate. But the truth is, if you want to cut costs in your life and save more for the future, shopping your home and car insurance is one of the quickest ways to cut your annual expenses.
Shop with multiple insurers every year or two
The pricing model for insurance companies changes over time. A company you shopped with a few years back might be less expensive today than they were in prior years. Shopping your insurance with multiple reputable insurance companies is the most reliable way to save.
I’ve found the easiest way to shop for insurance is to use an insurance broker. I actually spoke with two brokers this past go-round and got a lot of quotes. They immediately knew the insurance companies that would be most likely to have great coverage at low rates for someone in my situation. And in fact, one of the brokers mentioned that a company she doesn’t represent would most likely be the absolute best for someone in my position. She was right. I ended up getting quotes from that company on my own and they were the best combination of price and coverage. The singular act of shopping around every year or two for insurance could easily save you hundreds of dollars annually.
- Related post: How to ask for a discount (and actually get it!)
Set a higher deductible
One of the biggest mistakes people make when it comes to insurance is setting a low deductible. If you have a minor accident, it’s best to have savings to self-insure. Filing a claim for $1,000 worth of damage when you have a $500 deductible is a bad move – but one many people make. Raising your deductible creates a barrier that keeps you from making claims which will ultimately raise your rates.
We’ve established that making a claim will raise your insurance rates. But in addition, it could hurt your ability to get coverage in the future. Every time you make a claim, insurance companies put that information on your C.L.U.E. report. Sounds weird, right? The C.L.U.E. report is an industry summary of your claims history. And when you do the aforementioned task of shopping around, insurance companies will check that report to see what sorts of claims you have filed. The fewer the better, of course. So set your deductible high and be ready to self-insure for small claims. Think of your insurance coverage as “worst-case scenario” coverage.
Curious about what’s on your C.L.U.E. report? You can access it for free once a year here.
Don’t go cut-rate on coverage
This might save you money today but it will cost you a lot more tomorrow. Make sure you are adequately covered. This goes for choosing your actual insurer as well as your specific coverages. When choosing an insurer, you’ll want to check out Consumer Reports list of best insurers.
When choosing your specific level of coverage, consult with your insurance agent. Most states have minimum coverage requirements. But meeting those requirements in no way keeps you out of a potential financial headache. Make sure that your limits are set based on your risk level. Specifically consider having Body Injury Liability coverage and Uninsured Motorist Coverage that is higher than state minimums and would substantially cover you in the case of an accident.
Pay your premiums a year at a time
I hate being nickeled and dimed. If you decide to pay your insurance costs monthly, that’s exactly what happens. Choose instead to pay your car insurance either annually or bi-annually. Check with your insurer to see what fees they charge for different payment methods. Just know, most people pay on a monthly basis – and they are paying extra for it.
Check all the discount boxes
Insurance companies offer discounts for a plethora of reasons. You might get a discount based on the company you work for, or based on what college you went to, or for having taken a defensive driving course. These discounts really do amount to huge savings. For instance, I took an online defensive driving course from AARP (at the ripe old age of 33) in order to score massive car insurance savings. The course took me a few hours and cost me just $25. It has saved me hundreds of dollars over the past five years – easily. Check with your insurer before taking a course like this to ensure that they’ll apply a nice discount upon completion.
Military members and veterans are often eligible for substantial discounts with major insurance companies as well. In addition, USAA is always rated as one of the very best insurance companies (by J.D. Power and Consumer Reports) in addition to having some of the lowest rates in the industry. If you are military or family of military, strongly consider USAA.
Choose one insurance company for all your needs
Going with one insurance company for your car and home insurance needs is almost always the best idea. Those companies offer more savings as you add additional policies. So, even though one company might offer a lower rate for your vehicle, you’ll likely end up having to spend more for your home insurance with your current provider. The best way to shop is to get wholistic quotes on all of the coverages you need and to go with the most reasonable overall premiums.
Side note: Major car and home insurance companies are likely not going to be your best bet for life insurance coverage. Stick with providers like Haven Life and Policy Genius when shopping for that.
Drive an older vehicle
One thing that will majorly change how much you pay for car insurance is being able to stop paying for full collision and comprehensive coverage. If you drive a car that is completely paid off, it might be time for you to drop that excess coverage. You’ll first want to determine whether you have the funds to replace your car should you be in a major accident and you’ll also want to assess the gap between your deductible and how much your car is worth.
A good rule of thumb is that if you car is worth less than twice what your deductible is, it’s likely best to ditch that comprehensive coverage. For example, if your car is worth $3,500 according to KBB.com, and your deductible is set at $2,000 – ditch comprehensive coverage and start banking that savings.
Improve your credit score
Many insurance companies factor your credit score into your premium prices. I’m not a huge fan of this practice and it’s actually illegal in some states. But, if you live in a state where insurers are allowed to set prices in part based on your credit standing, make sure your score is solid.
One of my favorite places to check my credit score for free is Discover’s CreditScoreCard.com. And here’s a list of different ways to boost your credit score!
Drive fewer miles
Driving less (or even living fully without a car) is something few people are willing to do. But it can save you money on insurance costs and save wear and tear on your car. Consider riding your bike for short trips to the grocery store on the weekends and attempt to combine errands so you are taking fewer trips overall. The magic number that could lead to some significant insurance premium savings is if you can cut your driving down to fewer than 7,500 miles a year.
If you’re a 2 or 3 car household, could you downsize to just a single car? This would allow you to ditch a full policy altogether!
Let your insurance company monitor your driving
Many insurers have devices that will monitor your driving habits by plugging them into a port on your car. That “telematic device” is able to tap into and store information from your car’s computer system. By installing these devices, you can save a substantial amount of money. My particular insurance company says you can save up to 30% by installing one of these devices. Another major insurer claims that installing these monitoring devices can save you up to 50%! I don’t drive very much and I also tend to drive pretty carefully. Using these monitoring devices from my insurance company has saved me hundreds of dollars in annual premium costs.
With these devices the insurance companies are essentially monitoring how much you drive, if you drive a lot at night, how quickly you accelerate, and how quickly you brake. That means that if you actually drive your car a LOT (more than 15k miles a year) and are prone to excessive speeding and coming to quick stops, you’ll likely want to avoid these monitoring devices. They might tip your insurance company off to some driving habits that are best kept to yourself.
Saving money on insurance costs is a no-brainer
I’m the kind of guy that never wants to leave money on the table. And not shopping your insurance every year or two is likely doing just that. Be sure to pay attention to all of these areas to maximize your savings. Just remember, it might seem like a pain in the butt, but this step could literally save you hundreds of dollars this year. And that money is, of course, way better off in your pocket!
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Lots of great tips here! I once took a defensive driving course that I found on Groupon. Don’t remember the exact price, but it did lower my insurance rate.
Nice! Yes, and it lowers your rate usually for a minimum of 5 years. Easily worth the time and small amount of money you spent too get those big savings.
Great write-up man. I recently shopped around for insurance for my wife’s car, and it’s crazy the price discrepancy between companies, for similar coverage, definitely worth putting in the extra time.
No doubt, Travis. The difference in numbers between different insurers can be astounding. I’m a huge fan of shopping with at least 4 or 5 different companies. Using a broker makes that much easier.
Joel, thanks for the post. Every time I go shopping around for car insurance I find the odd startup deal but that goes up after a year and eventually, you will run out of them. Also, the broker I am with is always the cheapest so tend to stick with them so the bit about “Shop with multiple insurers every year or two
” may not work out for everyone.
I didn’t know that taking a defensive driving course may be able to have you save money on insurance through discounts. My daughter is excited to buy her first car this summer, but I want to make sure that I can find some affordable insurance for her so that she will be covered when she drives to work each day. I’ll be sure to look for an insurance company that offers discounts.
How do you find a broker who deals with both home and auto and multiple companies?
Hey Mike. There are a lot of independent agents who will shop both for you. So I would do an internet search for your area with those keywords. Also, consider trying PolicyGenius’ free service. You give them your info and they work to see if there’s a better deal to be had on your behalf.