How to Get and Maintain Low-Cost Auto Insurance

With ongoing financial hardship, many American families and working-class citizens are looking under every stone they can find for ways to save money. And when their policy is up for renewal, low-cost auto insurance is one common way that Americans are realizing these cost-savers. Rather than racing for the bottom, however, understanding the potential consequences of different cost-cutting choices will help you achieve the savings necessary to make ends meet while minimizing your future exposure to financial calamity.

5 Ways to Get and Maintain Low-Cost Auto Insurance

    • Evaluate State Minimums for Auto Insurance: With all the high-value cars in California, it's hard to argue that the state's $5,000 minimum for property damage is sufficient insurance coverage. Likewise, given that seniors are more vulnerable to bumps and bruises, it's hard to justify the state's $20,000 minimum for bodily injury liability. (Maine, by contrast, has a $25,000 minimum for property damage and $100,000 for bodily injury liability.) Yet, if your goal is to achieve the lowest possible insurance premiums, opting for state minimum coverage is often the fastest and easiest way to cut costs, if not always the wisest.

    • Choose Higher Deductibles: There are many ways to nibble around the edge of your auto insurance costs, but few variables have the immediate impact of lowering coverage limits or raising your deductible. Not only do higher deductibles reduce the financial risk you pose to insurance companies, but they frequently discourage customers from making claims at all. If you cause $1,300 in damage and have a $1,000 deductible, it may make better sense to avoid making an insurance claim at all so as to prevent your premiums from going higher when it's time to renew your policy.

    • Drive a Less Expensive Vehicle: Virtually everybody remembers to account for the extra expense of "tax and title" when shopping for a new car, but few realize how much their new vehicle will add to their auto insurance premiums. In fact, it's not impossible that your insurance costs could more than double, especially if you don't currently need to carry collision and comprehensive coverage. True, if your new vehicle has additional safety features, some of this cost can be offset, but rarely do these savings compare with the added cost of insuring a new vehicle. And, as the years pass, more and more used cars have quality passenger safety systems.

    • Auto Insurance Discounts and Customer Profiles: There are dozens of potential auto insurance discounts out there, some of which you've probably heard and others you haven't. Some of the most common discounts include good student discounts, low mileage discounts, safe driver discounts, good credit discounts, and multiple policy discounts. In some sense, what counts as "discounts" and what is simply calculating your risk to insurance companies is arbitrary. The key to low-cost auto insurance is getting estimates from as many insurance companies as you can because some companies give more weight to certain data points than other companies.

  • Pay Upfront: Nearly any auto insurance will offer you discounts if you're willing to pay their entire policy premium upfront. This may feel like the insurance company is worried that you'll pay in full down the road. Indeed, this is part of the concern and also explains why insurance companies look at your credit rating when setting your auto insurance rates. The bigger factor, however, is that the sooner you pay, the sooner the insurance company can invest those dollars and generate extra revenue for the company's balance sheets.

Too High a Price to Pay for Low-Cost Auto Insurance

Who doesn't want cheap auto insurance, right? Unfortunately, lowering your auto insurance costs any way you can tends to lead to gaping financial risks. Too many people who don't do their research find themselves on the hook for thousands or even tens of thousands of dollars when they're involved in a serious accident. In fact, it's imperative that keep in mind that while lowering coverage limits and raising deductibles are the fastest and easiest ways to get low-cost auto insurance, driving responsibly and racking up consecutive years of a clean driving history is by far the most effective way to maintain low-cost auto insurance.