Slashing your car insurance premiums

When it comes to saving money these days, even those expenses normally thought of as fixed are fair game — like auto insurance.

The cost of insuring your car remained fairly stable in 2008, with average increases of 2.5 percent to 3 percent, according to Carolyn Gorman, vice president of the Insurance Information Institute, or III. But that doesn’t mean you can’t find ways to cut your premiums.

In fact, industry insiders and consumer advocates are full of suggestions on how to do just that. Some apply equally well to everyone, while others are better suited for families with teen or senior drivers. Several moves, which involve cutting or minimizing certain types of coverage, will work better in some situations than others, so consider all the angles before you try them. And then there are the “old reliables” — classic insurance tips that never go out of style.

We’ll break the money-saving techniques down into four categories:

All drivers

Track the mileage on each vehicle. Insurance companies always ask how many miles your car is driven annually, and the answer is factored into the premium. If you’ve cut back on driving because of volatile gas prices, you may be in line for a rate reduction. Similarly, if you’ve started driving a smaller car in the family fleet rather than the big sedan or SUV, you’re probably putting fewer miles on the old gas guzzler. Even if you add another car, don’t assume you’ll be driving it the same number of miles as the first car. Many times, the total miles driven gets split between two cars, and the better mileage model often gets driven more nowadays, says Mark Savage, senior attorney for Consumers Union. Give your agent an accurate assessment of how many miles you putt on each of your cars — but make sure you don’t overestimate — and you could be in for some savings.

Get the volume discount.By covering your home and auto (or more than one car) through the same company, you can save up to 15 percent on each premium, says Madelyn Flannagan, vice president of education and research with the Independent Insurance Agents & Brokers of America.

Shop around.Consumers see it as perfectly natural to comparison shop for the best prices on electronics, household goods and food, but they don’t do the same for auto insurance. One driver can see “massive differences in the premiums” with different companies, Savage says. But make sure you’re comparing the same coverage, he says. Be alert to differences in policies and terms. Also important: getting service in a format that works for you. Do you want a local office and agent? “You may pay a little extra for the privilege,” Savage says. Conversely, a company that contacts customers almost exclusively through long-distance phone calls, mail and e-mail might offer a lower price but leave you cold in the personal service department. “It’s important that the consumer know what he or she wants,” Savage says.

Pull your credit report.The importance of your credit rating “is huge in today’s insurance environment,” says Jack Hungelmann, author of “Insurance for Dummies” and an agent/consultant with Corporate 4 Insurance Agency in Edina, Minn., who says that he’s seen discounts of 15 percent to 20 percent for great credit.

For some consumers and consumer advocates, that practice is deplorable. “It’s not a valid factor because it does not measure the risk of getting into an accident,” Savage says. But most insurers insist it’s a valid use. “There is a direct correlation between the way a person manages their credit and whether they will file an insurance claim,” Gorman says. But even when it’s used, it’s just one of many factors, says Robert Hoyt, a professor of risk management and insurance at the University of Georgia and past president of the American Risk & Insurance Association. “No state allows a credit score to be the only basis of a decision,” he says. And that makes it “all the more important to shop around,” he says. “Not everyone is weighing it in the same way.”

To protect yourself, review each of your three credit reports at least once a year and have any errors corrected. (You can get all three for free through If you find any errors, have them corrected, then request that your insurance company rerun your credit, Hungelmann says.

Families with teens or seniors:

Get schooled — or reschooled.Taking a safe or defensive driving class will frequently net you a nice savings on your premium. In Minnesota, for example, taking a class that runs about $20 will save you about 10 percent on your auto premium for the next three years, Hungelmann says. Usually this move will net the greatest payback for new drivers and seniors, Hoyt says. But don’t be afraid to call your company and ask “what will I save?” he says.

Keep teens on their toes (and heels).Driving teens drive up auto premiums. If your teen doesn’t have a driver’s license — and doesn’t drive without one — the insurance company can’t put him on the policy. Find out what it will cost you before you take Junior for the driver’s test. If your family can’t afford the increase, keep them walking or pedaling a while longer. Of course, that means you may get to play chauffeur more often. If your teen is already licensed but having trouble or acting irresponsibly, consider surrendering the license, suggests Hungelmann, and watch your auto rates go back to normal.

For risk-takers only:

Reduce or eliminate no-fault medical coverage. If you have health insurance, you can cut back on premiums by carrying only the state-required minimum for no-fault medical — sometimes called personal injury protection, or PIP — insurance on your auto, Hungelmann says.

PIP pays medical bills for you or your passengers after an accident. If you already have health insurance, you’re duplicating the coverage provided by your own health insurance. That means the only real beneficiary here is your health insurance carrier, he says. Because whatever dollar amount of coverage you have “is money your health insurance company doesn’t have to spend,” Hungelmann says. So if you and all of the other people who ride in your car have health insurance, you can cut your no-fault medical coverage to the state-required minimum.

Two caveats: Some states require a certain amount of coverage. If your state is one of them, you’ll have to carry at least that amount. Secondly, if you transport non-family members who may not have health insurance (carpooling co-workers, the kids’ soccer team, non-driving neighbors, or nannies), this move might not be for you. In that case, coverage that would pay a passenger’s medical bills after an accident could prevent injured passengers from filing more expensive lawsuits, Hoyt says.

Drop collision insurance.Clearly, this move isn’t for everyone. But if you’re driving an old clunker that’s paid off, and either don’t need to replace it or could come up with cash equal to its full value if something happened, dropping collision coverage from your policy could shave 10 percent to 15 percent from your premium, Flannagan says.

A word of advice: If you really can lay your hands on the money, set it aside now. Check Kelley Blue Book or Edmunds to get an idea of what your car, in its current condition, is really worth. Stash that amount in a place where you can easily access it but won’t be tempted to spend it. That way, if anything happens, you’re prepared.

The ‘old reliables’

Increase deductibles. If you’re carrying deductibles of $100 or $250, you’re probably paying for coverage you’ll never use. Raise them to $500 or $1,000 (see which nets you better savings for your money), and put more cash in your pocket. Raising deductibles cold save you 10 percent to 15 percent of your premium, Flannagan says. But keep deductibles at an amount you can comfortably pay out-of-pocket.

Take advantage of all your discounts.Auto insurance companies give discounts for all kinds of things: low-mileage driving, anti-theft devices, teens who earn good grades, etc. And some of these breaks can save you from 5 percent to 15 percent off your premium, Flannagan says. Without them, “You might be paying a lot more than you have to be paying,” she says.

Call your agent and talk about changes to your lifestyle — like carpooling or cutting back on mileage — to learn what discounts might apply to you.

Beware of gaps.Simple but vital, Savage says. If you switch auto insurance companies, always verify that the new policy is fully in force before you cancel the old policy.

For more information about insuring your car or to get a free rate quote, visit