Ranked: 3 Premium-Cutting Strategies That I Might Try to Save on Auto Insurance
The past few years of rising car insurance costs have been difficult for everyone who owns or leases a car. It seems like even if you're a safe driver, you're still going to suffer from higher premium increases because of overall trends in the economy and higher car repair costs.
But in 2024, I have an especially personal reason to worry about car insurance: My son is about to turn 16 and get his driver's license. So as soon as we add him to our car insurance policy, my premiums are about to go through the roof.
It's time to take action and fight back against the rising costs of car insurance. To help counteract the damage to my personal finances from insuring a teenage driver, I'm ready to get creative about my auto policy.
Here are three strategies to get cheaper car insurance that I'm actually considering for myself in 2024.
1. Raise car insurance deductibles
One of the most important parts of a car insurance policy is the deductible. In case you get in a crash or otherwise need to file an auto insurance claim, the deductible is the number that gets "deducted" from the total amount that your insurance company pays. For example, if you have a $500 deductible and you get in a car crash that costs $5,000 to fix, the insurance company would pay $4,500 toward the costs of repairs.
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My current auto insurance deductible is $1,000, but I'm thinking about raising the deductible to $2,000. By making this move, I'd be taking on a bit more financial risk. If I get in a car crash, I would have to come up with an extra $1,000 out of my emergency fund. But I have a decent fund saved up, and I'm not worried about covering a $2,000 expense -- as long as it doesn't happen every day!
Unless you get in a lot of car crashes, you might be better off accepting a higher deductible in exchange for a lower premium. Then put that extra cash into a savings account and build your emergency fund. Ideally, you won't have to pay an auto deductible anytime soon, but lowering your premiums can give you a new source of cash to save up for that possibility.
The exact amount you can save by raising your auto deductible depends on your state and your insurance policy. But according to Nationwide, raising a deductible from $200 to $500 will typically save about 15% to 30% on collision and comprehensive car insurance premiums, and raising a deductible to $1,000 will save 40% or more.
Depending on how much more expensive it is to pay premiums for a teenage driver, I might be better off accepting the risk of higher out-of-pocket costs in case of a car crash. I'm going to check with my car insurance company to find out how much I can save by raising my deductible.
2. Get pay-per-mile insurance coverage
I don't drive much. I work from home, and I rarely go out for lunch, or go to the gym, or go anywhere, or leave the house.
Is this lifestyle entirely "healthy"? No.
Do I deserve to get cheaper car insurance because of it? Maybe.
Since I don't drive as many miles as the average American, I'm strongly considering signing up for pay-per-mile car insurance. Several car insurance companies offer pay-per-mile policies, where you can save money by paying a premium based on the miles you drive. This can be a good deal for people who (for example) only drive 500 miles per month.
People who work from home, retirees, parents with young children, or anyone who lives a lifestyle where they're not getting behind the wheel every day could benefit from pay-per-mile car insurance. According to our research, pay-per-mile insurance policies can help you save about 30% to 50% on car insurance premiums.
3. Shop around for auto insurance price quotes
The last idea on my list should probably be a higher priority for most car insurance customers: We all should consider shopping around for auto insurance quotes. Sometimes in life, people get a little too comfortable with the bank account, credit card, or car insurance company they already have. People don't look around and see if there are better deals out there.
According to a recent survey from car ownership app Jerry (getjerry.com) called the State of the American Driver Report, despite sky-high auto insurance price increases in 2023, only 38% of drivers attempted to shop around for car insurance. And research from The Motley Fool Ascent has found that 52% of drivers "never" or "rarely" compare auto insurance quotes.
This is a big missed opportunity! Don't assume your current insurance company is giving you the best deal. Another company might be eager to win your business. Some insurance companies offer more creative options to customize your car insurance or bundle home and auto, or offer rewards for safe drivers who agree to share some driving data.
Bottom line
There might not be any good options for me to save money while insuring a teenage driver, but I'm going to try. Raising auto insurance deductibles or choosing a pay-per-mile policy could be good options for people who don't drive much and who can afford some costs of car repairs in case of a crash.
But no matter how much money you have in the bank, don't assume that you have to stay with your current car insurance company. Shopping around for auto insurance quotes can help you find other options to get cheaper car insurance.
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Ranked: 3 Premium-Cutting Strategies That I Might Try to Save on Auto Insurance was originally published by The Motley Fool
