Personal Finance

Avoid Paying Unnecessary Car Insurance

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I’ve been trying for years to reduce my car insurance bill. But for some reason, no matter how good of a driver I am and how much older I get, it doesn’t happen. I drive my car less than almost any other American, and I still pay over $100 a month just for liability coverage.

When I bought my Ford Mustang, it had 23,000 miles and today, this car has more than 51,000 miles. More than half of the 28,000 miles came from driving up and down the east coast while in school, but now that I’ve been working from home, I would estimate I drive 25 miles a week. For insurance, I’m paying $1 a mile, which is unacceptable.

Unfortunately, my options are limited as to how I can save money on this expense. I’ve done my due diligence, shopping around for months looking for a cheaper rate, but Progressive is as good as it gets. Owning a sports car and living in Miami is just killing me, and I really can’t change either of those facts. But one of the ways I have been able to reduce the amount of money I spend on car insurance is not to pay for collision or comprehensive. At the time, the decision to only carry the necessary liability coverage was made because I couldn’t afford a $325 monthly insurance payment. Now that my financial situation has improved, I still choose to avoid the added costs because quite frankly, it’s a rip-off.

Dropping Collision and Comprehensive Coverage

The value in collision and comprehensive car insurance comes only if your car is damaged or stolen. After all, it’s insurance, and the only time a customer receives value in insurance is when something bad happens. For a guy like me who never drives, the odds of getting into an accident are slim to none. Also slim is the chance of this car being stolen, as it’s garaged in an “odd” location. Justifying a $200 expense each month, means justifying a $2,500 expense each year and it’s just not going to happen. I receive absolutely nothing in return for my payments, other than the peace of mind I already have.

Instead, I take the $200 a month I would have paid for these services and put it into an online savings account. If the day should come when I have to fix damage to my car, I can draw from the savings account and pay out of pocket. Outside of standard upkeep, which isn’t covered by car insurance anyway, I don’t expect any major repairs to my vehicle for years. So, by the time I actually need to draw from the savings account, I’ll have more than enough saved. Two immediate benefits of this decision are:

  • Even though I have to pay out-of-pocket repairs, my car insurance does not increase because I won’t report the accident.
  • I earn a return on the money I save from not paying car insurance

My choice was not without complete risk, however. I suppose there’s a chance that tomorrow on my way to the grocery store, I’m struck by an idiot who wasn’t paying attention. But by not having paid for collision for more than four years, I’ve saved enough where the risk is covered. And, as I continue to get older, my perfect driving record will only help in reducing my car insurance rate. Perhaps there will come a time when collision and comprehensive insurance are affordable and smart, but that day is not in the near future.

Insurers’ Response to Covid-19

The Covid-19 pandemic has impacted almost every aspect of people’s lives and their driving habits are no different. Many people are out of work or working from home, which means less commuting. Less commuting means less driving overall.

The primary risk that car insurers face is that you’ll have an accident while driving your car, so reducing the number of miles you drive reduces that risk. Some insurers have responded to this by offering refunds or credits to people who are driving less because of the pandemic.

For example, State Farm offered 25% credits on premiums paid during the early months of the pandemic. Many other insurers, including Farmers, USAA, and Progressive offered similar credits.

Other Ways to Reduce Your Car Insurance Bill

The pandemic won’t last forever and people are returning to work. In fact, the pandemic might increase the number of drivers on the road as people may be wary of alternatives such as public transportation.

You can’t rely on credits and discounts from insurers forever, so these are a few other ways you can save on your car insurance.

Take a Defensive Driving Course

Taking a course on defensive driving is a good way to learn techniques that can make you a safer driver and better able to respond to unexpected events on the road. Some insurers reward people who take and pass a defensive driving course with a discount on their insurance premiums.

Not all insurers offer this discount, so you should check with your provider before signing up. Still, the discount that some providers offer can more than match the cost of the course, making this a good way to save money.

Drive Less

One of the reasons that insurers are offering discounts and rebates during the pandemic is that people are driving less. You can translate the same concept into savings during more normal times.

When you sign up for insurance, your insurer will probably ask how you use your car and approximately how much you drive. The more you drive, the higher your premiums might be.

If you reduce your mileage, for example by using public transit or carpooling to work some days, you can reduce the amount that you drive. Many insurers reward this with lower premiums.

Talk to your insurer about its policy for offering low-mileage discounts and see how much you’d need to reduce your mileage to start saving.

Boost Your Deductible

An insurance deductible is the amount that you have to pay out of pocket before your insurance kicks in and starts paying for a covered event. For example, if you need to repair your car and your insurance policy has a $250 deductible, you’ll have to pay $250 out of pocket before the insurance pays for the rest.

The higher the deductible for your policy, the more you’ll have to spend out of pocket if you do have an accident. However, higher deductibles also lead to lower monthly premiums. If your car is in good repair, you’re a safe driver, and you can afford an unexpected expense, increasing your deductible will reduce the cost of your insurance.

Improve Your Credit

When you apply for insurance, many insurers will look at something similar to your credit score, called your insurance score. Insurance scores are tracked by many of the same companies that track your credit and include similar information, such as bankruptcies, missed payments, and the number of credit cards or loans you have.

There is a correlation between good credit and good insurance scores since many of the factors are similar. The better your credit, the better your insurance score will usually be. Typically, better insurance scores lead to lower monthly premiums.

Related: 11 Simple Ways to Improve Your Credit Score Today

Buy an Anti-Theft Device

Car insurance companies have to cover your vehicle for more than just accidents. They’re also on the hook if someone steals your car.

This leads many insurers to offer discounts to people who have anti-theft devices in their cars. Each insurer has different standards for what devices qualify and the discount they offer, but typical devices include car alarms and vehicle trackers.

Bundle Your Insurance

Many insurers offer multiple types of insurance, including home, renters’, auto, and umbrella insurance.

If you get more than one policy from the same insurer, many will offer a bundling discount which an help you save on the cost of all of your policies.

Related: Best Home and Auto Insurance Bundle

Bottom Line – Ask

Insurance agents are people and people tend to want to help each other. They also happen to be very familiar with the insurance products they provide and all of the perks and discounts available.

Call your insurance agent and ask if there’s anything they can do to help you save money on your insurance. Many will be willing to work with you to help you find discounts.

And remember to shop around! It’s important to compare rates often if you’re serious about saving money.


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