How to Lower Your Car Insurance Premiums

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WrecksWhen it comes to saving money in this economy, it appears that many people are dropping or lowering their auto insurance policies. It’s a bit of a gamble but adjusting your insurances, whether it’s homeowners or auto or anything else, can be a way to save a few more dollars if things are looking tight. However, the subject of how to lower your auto insurance costs has been covered a near infinite number of times already and everyone knows the basics – shop for alternatives, increase your deductibles, drop comprehensive and collision on older vehicles, package together policies for a discount, etc.

I would like to that think you all know that you should shop around for insurance, just as you would shop around for anything else. I would also hope that you understand the relationship between your premium payments and your deductible. Hitting those points really just smashes the some tired old ideas back into your brain and, honestly, wastes your time. So, this post will be about the more novel ways to lower your car insurance costs. Chances are you may not use any of these ideas but it may spur you to think of some clever ideas of your own (that you can share!).

Recreational Classification

One of the benefits of working from home is that I don’t drive my car to commute anywhere. On a whim, I decided to call up my car insurance agent to ask if my premiums could be lowered because I worked from home. As it turns out, I could have my car classified as a “recreational vehicle” and pay much lower premiums. The general rule is that you don’t drive that car to work or school, which I don’t, and that you drive fewer than 7,500 miles in a single year. They confirm this by asking for odometer readings.

The reclassification only saved me a few hundred dollars since I only had liability insurance but I imagine someone with liability, collision and comprehensive could save much more.

Drive Less (Carpool)

Your insurance premium is supposed to reflect your risk as a driver. One of the reasons a recreational classification lowers your premiums is because you are on the road less. Used car buyers often cite 12,000 to 15,000 as the “average” number of miles driven on a car in a year. If you see a used car with a higher average, you should consider passing on the vehicle or decreasing what you’d pay for it. Well, if you want to decrease the total cost of insurance, one way is to drive fewer miles.

This is subtle because driving less will not directly decrease your premiums, unless you’re able to get under the 7,500 annual mileage (which is difficult if you commute to work or school). It does, however, decrease the likelihood you get into an accident and decreases the “expected” cost of insurance and accidents (and premium increases because of accidents).

Maintain or Improve Creditworthiness

It’s not clear why your credit score should affect how risky you are as a driver but insurance companies do use your score in their assessment of your risk. While I’ve never heard of someone seeing their premiums increase because of their score falling, mainstream media has jumped all over this idea and received confirmation from the Property Casualty Insurers Association of America that your credit history is being used to determine rates. Whether you like it or not, data suggests that credit risk and car accident risk are related.

If you can maintain a good credit score or improve your credit score, you might see a decrease in your rates. Not every insurer uses your credit history to determine rates so give your agent a call to find out more. Also, it’s important to review your reports regularly even if it won’t do anything for your insurance premiums.

Do you have any less obvious ways to help lower your car insurance premiums?

(Photo: mcgraths)

{ 12 comments, please add your thoughts now! }

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12 Responses to “How to Lower Your Car Insurance Premiums”

  1. live green says:

    If you are driving the average amount of miles and switch to only driving to work one day a week, you could easily bring that number under 7,500. On top of that, you could essentially be cutting your gas expense in half. Not too bad by just switching to car pooling.

  2. Ted says:

    Another choice if you have the cash in your savings account is to pay for the whole year in one lump sum. The fees and price difference can amount to the equivalent of up to a 10% interest rate.

  3. cubiclegeoff says:

    Some companies also offer a discount if you have a monthly transit pass, since that shows you do most of your commute in urban areas by transit.

  4. zapeta says:

    I agree with Ted, if you can pay up front you can usually get a discount. I’ve found that taking public transit has saved me a lot of money in gas and it does decrease the likelihood I’ll be in an accident.

  5. Nick says:

    Great points in addition to the “over written” stuff. Combining these with shopping around, combining policies and the other “vanilla” saving stuff can save a lot.

    Also, on the other stuff, many people don’t know that you don’t need to wait until your policy is “up.” So if you can take advantage of a lower rate because you will not carpool or your credit has improved, etc., shop around (including with your current provider). You may be able to cut your bill by a BIG amount because of your improved situation, even in the middle of a term.

  6. Another thing that will help is to take a defensive driving course. Of course, you can always increase the deductible and put the difference in savings!

  7. freeby50 says:

    I know It doesn’t apply to a lot of people… but if you have a classic car (like a ’65 Mustang or something) that you only drive occasionally, then you can save a LOT by getting a specialty insurance policy specifically for classic or antique cars.

  8. Shirley says:

    When my mother wanted to transfer the title of her car to me, I went to AAA Insurance Co to make the arrangements for the policy to be transferred.

    Our town has two zip codes and when I gave the agent the zip code of my home, she said that premiums would be $100 per year more. Asking why, I was told that different zip codes have different rates… even if the move is only one block. Needless to say, we kept the car at her house in my name.

  9. Yana says:

    My favorite way to reduce this expense is to pay for the whole year, rather than by the month. That avoids the interest I never want to pay. I also saved by rejecting the insurance agent’s suggestion that I increase the coverage for medical payments. I wouldn’t do that because I realize that the sky is the limit when it comes to medical charges, and no amount of coverage could ever be sufficient. We have AAA insurance with all possible discounts, and I am very happy with the company.

  10. jsbrendog says:

    i just got car insurance yesterday and the rate i got is extremely cheap. i did register as a recreational vehicle because I take public transpo to and from work.

  11. CreditShout says:

    I had no idea that the first policy even existed! That’s a great idea. I don’t have to drive that far, and my significant other drives the majority of the time. I’m definitely going to look into this. It’s so easy to ask for a discount! The worst they can say is no, right?

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