Whether leasing, buying, borrowing or sharing, having and driving a car is an everyday necessity for many people. A required responsibility of using a car is having insurance for it; in nearly all the U.S. states it’s not legal to operate an automobile without it being insured against vehicle accidents and other potential hazards. Even in those states that don’t require insurance, drivers are still financially liable for damages if they cause an accident.
As with any sort of product or service, not all car insurance is created equal. There are different types of coverage for different amounts of payment, known as an insurance premium—and a savvy shopper will comparison shop to get the appropriate amount of coverage at a price they prefer to pay.
There are a few tips that could lower insurance costs while maintaining a preferred level of coverage, but first it might be helpful to understand some of the more common features of automobile insurance.
Although personal and commercial car insurance policies are similar, there may be important differences. This article focuses on personal car insurance for an individual’s or family’s vehicle—not a business vehicle.
Common car insurance features to keep in mind when considering coverage
Here are just a few of the basic types of personal car insurance coverage to be aware of:
- Comprehensive coverage can be optional coverage that protects the user against damage to their vehicle caused by some hazard other than collision with another vehicle. This coverage may include, but is not limited to, damage from vandalism, theft, weather events, natural occurrences like falling branches and collisions with animals like deer.
- Towing and labor coverage is for expenses related to moving a stalled, damaged or disabled car.
- Roadside assistance covers services, such as jump starting a dead battery or changing a flat tire.
- Rental reimbursement if a car cannot be driven due to an accident.
- Uninsured motorist/underinsured motorist can help protect against a driver who either does not have insurance, or their insurance coverage is so limited that it does not fully cover repair or replacement costs, or for medical treatment.
- Liability coverage covers costs the insured driver causes related to bodily injury to another person, or property damage to another person’s property.
- Medical payment coverage helps with the cost of treating injuries for the insured driver and passengers resulting from an accident regardless of fault. This coverage may also fund funeral expenses.
Insurance coverages are subject to exclusions and limitations, so it’s important to check your policy terms.
What affects the amount of an annual car insurance premium?
There are a range of factors that can affect how much someone pays for insurance; here are some of the more common ones:
- Younger drivers, especially teenage drivers, can increase premium rates substantially.
- Insurance reports and scores (similar to credit reports) predict how much risk a driver presents to an insurer. Negative reports and lower scores can mean higher premiums.
- Length of insurance history with a carrier, fewer claims and a long, loyal association with the same insurance carrier can provide ongoing discounts.
- State Motor Vehicle Reports will list driving violations on the license holder driving record. This report does not disclose the condition of the vehicle.
- Claims history lists reported insurance claims over a period of time.
- Vehicle type/age/usage is a key factor. Vehicles are rated differently based on the make, model, performance and usage. For example, a high performance vehicle may have a higher surcharge rating than a standard performance vehicle. Also, vehicles used for business may be required to carry a commercial car insurance policy. When considering the age and value of a vehicle drivers may want to consider a specialty policy for classic and antique cars.
- Discounts: Insurance companies offer a host of discounts. Discounts vary with each company, such as good payor, good driver, good student for your teenage driver and claims free just to name a few. There may also be a reduction in rates due to the low mileage usage of your vehicle. , , Loyalty reductions or regularly completing driver safety courses may also be available.
- Payment plans and methods matter, as many carriers will charge billing fees and/or a surcharge for using a credit card.
And now a few tips on how to—possibly—save money on car insurance
- You better shop around…Always shop around for policies. For a competitive premium without sacrificing coverage pay close attention to coverage limits, deductibles, timeframes and annual or semi-annual premiums These factors can also help to ensure accurate comparisons between insurers. Look for resources from industry associations, non-profit organizations or state insurance departments, which may offer tools for comparing policies or ratings on consumer satisfaction. You can also consult companies that evaluate the financial strength of insurers—an important factor when considering which carrier to choose.
- Bundle different types of policies from the same insurer to get a combination discount. While it is always worthwhile to shop around, some carriers will offer good discounts based on having multiple policies with them, such as auto, homeowners and umbrella insurance. There may be discounts for having more than one vehicle—or other recreational vehicles, such as motorcycles or boats—insured by the same carrier. Check first if an insurer offers the types of coverage you need, then check for any cost savings for having more than one policy with them and decide if a combo deal is a good deal for you.
- Give yourself some credit—good insurance reports and scores can lower premiums. A positive insurance report and score demonstrate a favorable risk profile to an insurer and may help reduce annual policy costs.
- Heighten your deductible and lower your costs. For insurance, a deductible is a fixed amount of money a policyholder pays out of pocket before insurance coverage is triggered. Some insurers may lower continuing premium rates by if the insured is willing to take on a higher deductible. Typical personal insurance deductible amounts can start at several hundred dollars and then ramp up to approximately a couple of thousand dollars per claim. Keep in mind that the deductible operates on a per incident basis; that means that every time a first-party claim is filed, the deductible amount will have to be paid to whomever is managing the vehicle and its repairs; the cost could be shared by towing companies, mechanics and body repair shops. Regardless of the number of companies involved in the car moving and repair effort, after the deductible limit is reached then insurance begins paying for whatever parts and services are needed to get the car back to the policyholder’s desired specifications.
- School yourself with a defensive-safe driving course. Taking a defensive driving course—online or in person—every two to three years may qualify you for an annual premium discount of 5% to -10% with some car insurers. These courses usually take six to eight hours to complete. The resulting discount often lasts two to three years, and when this post was published there were several online options available for less than $40 through insurance companies, non-profit organizations and associations. More information about some types of defensive driving courses is offered by the National Safety Council, a nonprofit safety advocate. Defensive driving courses are also explained by the nonprofit membership organization the American Association of Retired Persons® (AARP®) and the American Automobile Association, a privately held not-for-profit national member association.
- Stay loyal and be rewarded with lower costs. Before deciding on an insurer that meets your needs, check for benefits that become active for long-term policyholders. Are there discounts for five, 10-, 15- or 20-year customers? Are there other loyalty perks that will help influence your choice of carrier and the policies you buy?
- Think about getting a vehicle with lower insurance costs because of its make, model and age. Insurance costs can vary based on the type of vehicle and its age. A two-year-old luxury minivan may have lower annual insurance premiums than a new model high-performance sports car. Depending on the vehicle and insurer, a vehicle with extensive safety features may also result in lower insurance expenses.
- Check whether you can have a short drive into a low-mileage discount. Some car insurers will provide discounts if you can prove that annually you drive fewer miles than the average urban or suburban motorist.
- Volunteer for telematics monitoring with your car insurer. Telematics is also known as usage-based insurance, and using this service could provide savings on car insurance premiums. Using software and electronics—such as a software application on a mobile phone—telematics programs regularly monitor driving activities such as vehicle speed, braking, mileage and time of day. This data is then analyzed by insurers to determine individual driver risk more accurately. The result of this tracking is that safe drivers may be rewarded with lower insurance premiums, while riskier driving behaviors could result in higher insurance rates. Before using the program, a driver would have to be comfortable with the monitoring and with their insurer’s policies regarding the privacy and security of their driving data.
The above suggestions are only some of the methods for lowering car insurance costs. Upcoming blog posts may have more money-saving ideas on insurance and lifestyle choices.
What if I have questions about car insurance or want help comparing policies?
Delta Community offers more than just banking services; through its wholly owned subsidiary Members Insurance Advisors*, it offers several types of insurance for the Credit Union’s members, including auto, life and homeowners. But this insurance does not come from just one well-known insurer.
Members Insurance Advisors’ agents use a consultative approach to understand Credit Union members’ current and future needs to help them find the right type and amount of flexible insurance coverage to protect themselves, their homes, vehicles and other possessions at every stage of their lives. Rather than relying on the policies offered by just one insurance company, Members Insurance Advisors representatives research and compare multiple A-rated insurance carriers to find the best quote for the appropriate coverage tailored to a member’s unique lifestyle and situation.
If you are shopping for insurance, consider contacting an experienced Members Insurance Advisors representative to discuss what you’re looking for.
How about a few more ideas that might save money when buying insurance?
For more information that may help you manage your costs and finances, look into the free Delta Community Financial Education Center webinars on a range of practical, “how to” financial topics, such as understanding the costs of car ownership, or how to buy a car in the current market. Please visit the Financial Education Center's Events & Seminars page to review and register for its on-demand webinars.
The Credit Union’s blog has more information that could help with car costs:
*Members Insurance Advisors is a wholly owned subsidiary of Delta Community Credit Union. Insurance products are not deposits of Delta Community Credit Union and are not protected by the NCUA. They are not an obligation of or guaranteed by Delta Community Credit Union and may be subject to risk. Any insurance required as a condition of an extension of credit by Delta Community Credit Union need not be purchased from Members Insurance Advisors and may be purchased from an agent or an insurance company of the Member's choice. Business conducted with Members Insurance Advisors is separate and distinct from any business conducted with Delta Community Credit Union. The insurance offered is not a deposit and is not federally insured or guaranteed by Delta Community Credit Union.
