Reduce Vehicle Insurance Costs without Compromising Protection

How to Build an Affordable Auto Insurance Policy

Every driver wants the best policy at the best price, but very few know reliable ways of obtaining it. In reality, you can reduce costs easier than ever now, provided you use a few key tactics in your search. Setting your limits and deductibles strategically, utilizing discounts, and capitalizing on fierce competition from the major industry players are just a few of the ways you can secure cost effective protection.

We will equip you with the requisite information and strategies to find the cheapest policy that suits your needs. The more informed you are as a policyholder, the more likely you are to acquire the plan you can afford.

Ten Smart Cost-Cutting Strategies

The first step toward an affordable car insurance plan is finding cheap quotes. Shopping for quotes the smart way will pay off for years, potentially allowing you to save hundreds of dollars annually on your coverage. Blindly searching for a plan with an attractive price tag is not the answer, though—you need a strategy going into the process. To help guide you, we've listed ten ways to make sure you get the cheapest quotes possible.

  1. Choose the highest deductible you can afford. Finding a policy that is light on the wallet is much easier to get if you're willing to agree to fairly high deductibles. Even changing from a $500 to a $1,000 deductible can make a significant difference in price.
  2. Adjust your liability. You should always carry at least the legal minimum for liability insurance (more if you have valuable assets), but keeping this protection to a minimum will help control your costs.
  3. Choose a policy with a year-long term. Usually, you're more likely to get lower quotes on 12-month policies than on six-month coverage because you're committing to remain with the provider for longer.
  4. Give an accurate daily mileage estimate. In most cases, insurers will overestimate the number of miles you drive per year, which will in turn raise your premiums. If you basically only drive to work and back every day, you may fall into the feasible low-mileage category.
  5. Request at least four quotes. You have a much better chance of finding a cheap online quote if you solicit offers from at least four or five companies. The more quotes you obtain, the more options you'll have.
  6. Eliminate unnecessary add-ons. The quote you receive may be artificially inflated if the plan it refers to contains coverages that you don't need. For example, if you operate an older vehicle, collision and comprehensive are probably unnecessary. Similarly, if you have an excellent health insurance policy, don't worry about medical payments coverage.
  7. Optimize your payment method. Depending on the provider, you may be able to reduce your payment by choosing a certain payment method. For instance, an insurer may offer you a lower estimate if you sign up for automatic payments or agree to pay the premium in full instead of on a monthly basis.
  8. Research discounts thoroughly. Don't start evaluating quotes until you're sure all the discounts you qualify for have been applied to the product. Most drivers will qualify for at least two or three valuable discounts.
  9. Investigate multiple policies. If you're willing to buy more than one type of product from the same insurer, a low cost quote is much easier to come by. For example, you might try choosing the same insurer for home and auto policies.
  10. Equip your vehicle. You can get the best deals if you have safety devices, such as a car alarm or LoJack system, installed in your vehicle.

Structuring an Economical Plan: Include Only What You Need

Find an Economical Plan

Chances are, you are overpaying for a policy, and the most likely culprit behind those inflated premiums is unnecessary add-ons. By jettisoning these superfluous add-ons, operators can find a plan that doesn't break the bank. Don't let an insurer give you a pricey one-size-fits-all policy when customizing your plan is the easiest way to save. Read on to find out what you might want to eliminate when you search for the desired product.

  • Personal injury and medical payments. If you have a solid health plan, your auto protection doesn't necessarily have to include this coverage. Medical payments will pay for your medical expenses following an accident, but these expenses are already taken care of if you have health insurance. Keep in mind, however, that a few states require certain levels of PIP or medical payments coverage. Similarly, if you have high deductibles on your health plan, you might want to carry a small amount of PIP to cover them in the event of an accident.
  • Collision and comprehensive. You'd be surprised how much more affordable an plan can be if you drop physical damage protection, otherwise known as collision and comprehensive coverage. Physical damage will only reimburse you for damage up to the actual cash value (ACV) of your vehicle. If the ACV of your car is low, you'd be better off choosing a cheap auto policy without physical damage and saving the difference. Of course, if you operate a newer vehicle or a car with an ACV that you couldn't afford to pay out of pocket, collision and comprehensive are worth the additional premiums.
  • Excessive liability. Liability coverage is required by law in most states and safeguards your assets against lawsuits in the event of an at-fault collision. Always carry enough liability protection to comply with the requirements of your state and protect the full value of your assets, including your home, savings, retirement accounts, and so on. However, excessive liability protection is superfluous and expensive. By lowering your limits to reflect the actual value of your personal assets, you are more likely to find a plan you can easily afford.
  • Miscellaneous optional add-ons. Insurers commonly offer optional products like rental reimbursement, towing, roadside assistance, and car audio coverage. Some of these, such as rental car reimbursement, are worthwhile, but others are nothing more than a waste of your hard earned dollars. For example, your provider might include roadside assistance by default unless you request its removal. For most motorists, roadside assistance is an unnecessary part of a policy because they already have similar protection through their vehicle warranty program or auto club membership. Staying away from costly options will make It easier to find affordable quotes.

Finding an Affordable Provider That Doesn't Compromise on Protection

Some auto insurers are known for their customer service, others for their policy options, and some for their affordability. If cost is a top priority for you, you are more likely to find low cost plans with certain carriers than others. Remember, though, that a low cost auto insurance plan is not always the best product. Poor-quality car policies may actually end up costing you more down the road, so try to balance your cost concerns with an emphasis on quality.

When choosing a carrier with affordability in mind, the size of the insurer is one consideration you should make. Sometimes, smaller carriers can offer more reasonable prices because they lack the name recognition of larger companies. For instance, J.D. Power and Associates reports that policyholders rated small insurer Amica Mutual five out of five stars in both pricing and overall satisfaction in their most recent survey.

On the other hand, you might also be able to capitalize on the economies of scale offered by larger carriers, such as State Farm and Allstate. These carriers have more policyholders and thus are better able to spread risk more evenly, resulting in lower premiums. The bottom line is that every carrier calculates risk differently, so you would do well to request quotes from a variety of different carriers, both large and small.

Considerations for Young Drivers and Students

Did you know the accident rate for 16-year-olds per million miles driven is six times higher than the rate for drivers aged 20-24? What's more, young motorists are three times more likely to die in a car accident than those aged 25-64. With sobering statistics like these, it's no wonder that young motorists pay the highest premiums of any demographic group.

A combination of recklessness and inexperience in young motorists leads to an elevated number of auto claims, and more claims mean higher premiums. In fact, adding a teenage driver to a plan typically causes premiums to rise by 50 percent to 200 percent. But take heart—coverage for a young motorist does not have to be exorbitantly expensive. Below, we've listed ten effective tips to help young drivers and students find low cost solutions.

  1. Hit the books. Auto insurers have found that good students also tend to be good drivers, and the student discount car insurance is the result. Most offer some type of good-student discount, but how they define a "good student" will vary. Contact your insurer to see how high your GPA or class rank has to be in order to qualify.
  2. Drive carefully. Good motorists are much more likely to find discounted rates, so keep your record free of accidents and tickets.
  3. Look into the low-mileage discount. If you live close to campus or generally don't operate your vehicle very often, you probably qualify for the low-mileage discount with your car insurer. For younger motorists, this can help offset elevated standard premiums.
  4. Stay on your parents' policy. Depending on your situation, affordable young driver protection is far more attainable if you can get on or stay on your parents' auto plan. In some cases, however, it may be cheaper to have your own.
  5. Keep your credit report clean. Pay your bills on time, and don't rack up a large amount of credit card debt. Auto insurers partially base your premiums on your credit score, so keep yours high.
  6. Complete a defensive driving course. You might be able to get cheap young driver or student insurance if you successfully pass an approved defensive-driving class.
  7. Never drive uninsured. No matter how expensive it may be for students and younger motorists, don't ever forgo a plan. Not only is doing so against the law, but the gap in coverage will also make the premiums on your next policy higher.
  8. Don't drive under the influence. Cheap student or young motorist auto insurance is basically a guaranteed impossibility if you get a DUI or DWI on your driving record. Don't operate any vehicle after you've been drinking...ever.
  9. Choose your vehicle wisely. Usually, young motorists and students are in need of affordable coverage for their first car, so be selective about what vehicle you choose. The year, make, and model of the vehicle you operate will have a profound impact on the rates you pay. Before you make a decision on your first car, research quotes on what your premiums would be for the models you're considering.
  10. Think about going without a car. Young motorists and students have an advantage in that they usually can get by without a car if they live near campus, have access to public transportation, etc. Going without a vehicle for a few years until you reach an age where your premiums will drop can save you a bundle in the interim.

The Gender Disparity Issue: Do Women Actually Pay Less?

If you're like most drivers, you probably believe that men pay more for protection than women. In reality, that belief is only partially true. In specific cases, men do pay more than women, as outlined below. However, the gender disparity in premiums does not hold true with the majority of policyholders. The fact is, men drive significantly more than women, which means they tend to have more accidents simply because they are on the road more. Per million miles driven, however, men and women have the same number of accidents. Despite that fact, women pay roughly the same premiums that men do even though they drive less frequently. Consequently, on a per-mile basis, adult female operators actually pay more than male operators. Adult men still may pay slightly higher premiums in certain cases, but the gender disparity overall becomes much less significant the older men get.

Scenarios Where Men Will Pay More

Young men, or those between the ages of 16 and 25, represent an inordinately high claims risk to car insurers. They have more accidents, more traffic violations, and more vehicular fatalities than women in the same age group, which is why young men pay more for auto insurance. In fact, on average, male motorists age 16-25 pay 6.8 percent more for protection than their female counterparts. The elevated premiums offset the higher risk young male drivers pose to insurers. So for drivers between the ages of 16 and 25, it is true that finding low cost insurance for women is much easier than finding an affordable plan for a man.

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