Let's say it right up front. There is no really cheap car insurance. However, there is almost certainly insurance available that costs less — possibly significantly less — than you are paying now.
Car insurance is one of those annoying expenses in our lives that has no immediately apparent benefit, unlike the cost of a meal in a nice restaurant or the purchase of new music CD. State laws require it and we know deep down we should have it, but that doesn't make it easier to pay for it. Of course, it can bring some peace of mind knowing that we are protected financially if bad things happen. And there is nobody who denies being happy they have insurance when bad things do happen.
Given the fact, then, that insurance is necessary, how do we make sure we pay as little as possible for the coverage we need. Cheap car insurance is not difficult to find if you use the following tips.
Shop online for the cheapest car insurance rates
Car insurance companies charge different rates — differences of $1000 or more a year — for the same car, the same driver, and the same coverage. There are no "standard" insurance rates. Each insurance company sets its own risk-based rates, according to its own data and claim experience. Rates can change multiple times in a year.
Even if your current company had the cheapest rates a few months ago, the rates may have changed such that they are no longer the cheapest. So it pays to shop around and get free quotes from a number of insurance providers. Online car insurance quotes are quick, free, and easy to obtain, especially from online insurance company web sites such as Esurance.com.
It costs you nothing to switch to a different car insurance company that provides better rates and better meets your needs. If you switch, be sure to ask for a refund of any prepayment to your current company.
Auto insurance for teen drivers
Teenagers driving for the first time, especially boys, suffer the highest auto insurance rates of any other category of drivers. The reason, of course, is that, as a whole, this group represents the highest risk of accident claims.
We often get questions such as "What is the cheapest car insurance for teensagers?" or "Where can I find cheap car insurance for a 16 year old?"
Insurance costs for teens can easily be the highest of any other costs associated with owning and driving a car. Without a driving record and credit history, teens automatically get assigned the highest rates. In addition to the tips below, young drivers should work to minimize insurance rates by making good grades, taking driving courses, and avoiding high-powered sports cars. It is also cheaper to be listed as a driver on parents' policy than to get a separate policy.
Select vehicles with lower insurance costs
The car you drive can make the difference between cheap car insurance and expensive car insurance. Cars that cost the least, have the lowest repair costs, are in accidents less often, and are stolen less frequently are the least expensive to insure.
In general, the older the car, the less expensive the car, the safer the car, the less insurance will cost.
Insurance rates for expensive luxury cars are considerably higher than for economy compacts. Sports cars suffer from generally higher rates than family sedans. High performance cars in the hands of teenage drivers will cost a small fortune to insure. Frequently stolen vehicles such as the Cadillac Escalade cost more to insure than cars with less "thief appeal." Surprisingly, some older cars such 1990's vintage Honda Accords are frequently stolen for parts, and are more expensive to insure.
Here's a list of the cars that are least expensive to insure, and a list of those most expensive to insure.
Insurance rates are reduced for vehicles with extra safety equipment, such as stability control and side air bags.
When car shopping, ask your insurance company to quote you rates on each of the different models you are considering – or get your rates on the Internet.
Watch your credit score
Yes, many car insurance companies now use your credit score to set your rates. Studies show that people with low scores tend to submit more claims. People with low scores can pay as much as three times more than those with excellent scores. Therefore, it's wise to know your credit score before you shop for insurance.
Select coverage options that best meet your needs
Collision and comprehensive insurance coverage for your own vehicle pays for the cost of repairs or for the value of your vehicle in case it is totaled or stolen. You could consider dropping collision coverage when your vehicle has aged to the point that your annual collision premiums are significant when compared to the vehicle's replacement value. Be aware that, if you still have a loan on your vehicle, your loan company may require collision and comprehensive coverage.
In their quest for cheap car insurance, many teenage drivers often choose to do without collision and comprehensive coverage. However, this can be a huge mistake. Drivers who have struggled to save money for a car, or have taken out large loans, are devastated when they realize that there is no insurance coverage when their car is stolen or totaled in an accident. It happens all too frequently.
There's one good case for not buying full insurance. If you have enough cash savings that you would be willing to risk to pay for your car's repairs or replacement in the event of an accident, you could "self-insure" yourself and avoid the cost of collision and comprehensive coverage.
Most states have laws that dictate the minimum liability insurance coverage you must carry. In these days of sue-happy accident victims and high medical costs, it is good to have as much liability coverage as you can afford. Remember, if you get sued for an accident and your insurance is insufficient, you may find your personal assets in jeopardy. Financial ruin could be only one accident away.
Location is important
Auto insurance costs can be dramatically different depending on where you live. If you live in New York state, you pay the highest rates in the U.S..If you live and work in a heavily populated metropolitan area, you pay more than your cousin who lives in a nearby small town.
Should you have a choice in where you live, work, and drive — which many people do not — you can affect your car insurance cost by choosing the right location.
Gap protection
If your vehicle is totaled or stolen, your auto insurance is only going to pay the amount that the vehicle is worth, not what you still owe on a loan or lease. This point is misunderstood by many consumers. If you are "upside down" on a car loan or lease, you'll have to come up with the cash to pay off the remainder of the amount you owe. To prevent this situation, you need "gap" insurance.
Gap coverage is usually included in leases, but almost never for loans. Unfortunately, this type of insurance is a little hard to find. Some auto insurance companies offer it, some extended-warranty companies have it, and some dealers sell it. Fortunately, gap coverage is not very expensive and can be dropped as soon as you pay enough of your loan or lease to exit your "upside down" situation.
Avoid at-fault accidents
Pretty obvious, but one of the factors that contributes most significantly to high auto insurance rates is the at-fault accident history of a driver. Insurance companies typically raise rates after only a single accident, assuming that other accidents will follow. Since accident reports are shared between insurance companies, don't think you can avoid higher costs by switching companies. This might work in the short-term but it will soon catch up to you.
Choose a higher deductible
One of the easiest paths to cheap car insurance is to increase your deductible — the amount you're willing to pay out-of-pocket when you make a claim. For example, raising your deductible amount from $500 to $1000 can reduce your insurance costs by 30%. Just be sure that you would be able to afford the immediate cash expense in case of an accident.
Check your profile often
Contact your auto insurance company and make sure your personal and family's driving profiles are accurate, and that you are getting all the discounts to which you are entitled (see Auto Insurance Discounts). Your driving record, marriage status, age, commute distance, and home address can affect your insurance costs. Your credit history can also have an affect with some companies. Multiple-car discounts are available, as are discounts for vehicle safety features, anti-theft devices, having home insurance with the same company, and even for getting good grades in school.
Avoid making small claims
Making small claims with your insurance company can trigger rate increases. Certainly, if the cost of repairing minor accident damage is less than your deductible, don't file a claim. Even if the cost is moderately higher, consider the cost of a possible rate increase compared to simply paying the cost yourself.
Check insurance company ratings
Cheap car insurance is not so cheap when the insurance company is difficult to deal with, is not responsive to your needs, and doesn't pay fairly. Therefore, take care in choosing your company on criteria other than premium cost.
JD Power, a national research company, publishes a rating of auto insurance companies that can be helpful in selecting auto insurance companies. Some of the companies in the rating only do business in certain states. Furthermore, the evaluations do not include rate comparisons.
Get your own rate quotes
Insurance companies and brokers provide free online rate quotes that allow you to easily compare costs and coverage. The advantage of a broker is that they work with multiple companies and their services are free. We suggest the following companies:
Netquote is a free insurance shopping service that allows you to compare rates from major national carriers such as SafeCo, The Hartford, Progressive, Allstate, Farmers, and more by simply filling out one online form. By matching your profile with multiple insurance companies, their detailed application form ensures you will receive only quotes that best fit your particular situation. Quotes are 100% free.
Esurance is one of the most recognized car insurance companies due to their clever TV commercials. They are a relatively new company, formed in 1998, but have since become one of the fastest growing insurance companies in the country. They are innovative, value their customers, and work hard to provide excellent service. Get a quote from them to find out for yourself. Get free auto insurance quotes.
GEICO is one of the well-known top four car insurance companies in the country with low prices and the top ranked customer service web site of all. You not only get free quotes but you can file claims, view estimates and photographs, contact your adjuster, and get payment status. They also explain exactly how they process a claim, what to do if you're in an accident, and where to find a repair shop near you. A great web site!
InsureMe is an established and popular company, having been around since 1993. They have a network of thousands of participating insurance agents and companies across the United States, including in your neighborhood. Once you complete their online form, they match your profile to as many as five companies, who will provide you free rate quotes that you can compare and choose from. Remember, you are not obligated to accept any of the offers.
Be careful where you buy
Beware of car insurance companies that offer unrealistic low rates for high-risk drivers. Such companies can charge cheap rates because they don't pay claims. Affordable rates are one thing; getting paid when you have an accident is quite another. Be sure to research any such company before you make a decision about cheap car insurance.
