Whether you have a brand new car or an old clunker, car insurance is an unavoidable expense that you really must have — except, oddly, in New Hampshire. But just because you have to get insurance for your vehicle doesn’t mean you should be spending an arm and a leg on your monthly bill.
Here’s how much money you should be paying for car insurance and how to lower the cost if you’re feeling just a bit financially strained.
Factors That Influence Car Insurance Costs
According to MarketWatch, the average cost of full coverage car insurance in the United States is $2,008 a year. This breaks down to roughly $167 a month.
However, various factors can determine your car insurance payment. This includes your age, location, and driving record. It also includes your vehicle’s age, make, model, and current condition. Local regulatory policies can also influence the cost of car insurance.
Paul Boudreau, insurance broker at Rowat Insurance, gave an example to illustrate how one person can pay more — or less — for car insurance than another.
“The average 20-something-year-old can expect to pay $200 [per] month and more, but the average 30-something can pay less than that,” Boudreau said. “Unique circumstances may cause some outliers, more commonly on the higher end, although generally, it will be higher for those ages 20 [to] 25 and then drop after that point.”
Calculating Your Ideal Car Insurance Payment
Here’s what you can do to determine how much you should be paying for car insurance:
- Review your budget and see how much flexibility you have after paying for all essential expenses.
- Calculate your current monthly debt payments and make sure you have room for an additional payment.
- Consider whether you have any upcoming financial obligations that could affect your ability to make the insurance payment.
Some financial experts suggest that you spend a maximum of 20% of your monthly take-home pay on all vehicle-related expenses, including your auto loan, gas, maintenance, and insurance. But if you’re already struggling to keep up with the bills, you might need to lower this amount.
Tips for Lowering Your Car Insurance Costs
Whether you found yourself a great initial deal on car insurance and want to lower it now, or you’ve been paying more than you should, it doesn’t hurt to lower your monthly payment.
Here are some of the top ways to do this, according to experts.
Re-Evaluate Your Car Insurance
It’s important to reevaluate your current car insurance every year, or whenever a major financial change occurs in your life. You can do this on your own, or by going through a trusted insurance broker who can help you compare insurance coverage options and costs.
“Reevaluation ensures your coverage keeps pace with changes in your car’s value and helps you avoid being underinsured in case of a claim,” said Travis Hodges, managing director of Omni-Channel Sales and Service at VIU by HUB. “For those who don’t know the nuances of reevaluating coverage, this is where the value of an independent agent’s advice really comes in.”
With an agent at your side, you can also rest assured that they’ll tell you exactly when it’s time to reevaluate your coverage and what gaps your current policy might have. This can also be beneficial if ever you need to file an insurance claim, such as in the case of an accident.
Shop Around for Different Options
If your current car insurance is more than you can afford, shopping around could help you get a lower rate.
“Pricing auto insurance is a very complicated process. The best way for consumers to get a gauge of what they should be paying is to shop around with multiple carriers,” said Stephen J. Crewdson, CPCU, senior director of Global Business Intelligence Insurance at J.D. Power. “Oftentimes, different carriers will price the same customer very differently based on the specific experiences they have had with different types of customers.”
Gather a few quotes from insurance companies and compare them to find the best deal possible.
Switch to Usage Based Insurance (UBI)
If you’re a safe driver, you might benefit from switching to a usage based insurance plan.
“Look for an insurance policy with usage-based insurance,” Crewdson said. “”When an insurer can access data on the way you drive, as an individual, they can set your insurance premium based on your individual driving, not based on groups of other people.”
This option isn’t available in all states. Some insurance companies won’t offer it either. But it’s still worth looking into if you’re trying to lower your payment.
Upgrade Your Vehicle’s Safety Features
Another way to lower your automotive insurance bill involves upgrading or replacing the current safety features in your car. Depending on the upgrade, your insurer might give you a cheaper policy.
“For example, you may be able to get a discount if your car has anti-theft protection or an advanced car alarm system in place,” Boudreau said. “Even things like being equipped with winter tires may lead to a certain level of discount with different insurers, depending on the season.”
Check for Discounts
Some insurance companies offer discounts to loyal customers, so contact yours to see if there are any available options.
“Speak with your insurer to make sure you are receiving all discounts you qualify for,” Crewdson said. “Insurers offer many discounts that customers are not always aware of and these savings can really add up.”
Boudreau suggested checking for promotional offers as well.
“You should also look into specific promotional offers based on your driving history because many insurers offer discounts based on your record,” Boudreau said. “For example, if you have been driving without an accident or ticket for some time, you might be eligible for an accident-free discount.”
Bundle Insurance Policies
If you have multiple insurance policies, see if you have the option to bundle them into one overarching plan. This could save you money and help you stay on budget.
“Many insurance companies offer specific discounts for purchasing multiple policies from them, instead of just one,” said Boudreau. “The most common bundle is auto and home, so many insurers offer discounts on these packages. Additionally, bundling is simply the most convenient option for people dealing directly with their insurer instead of shopping around themselves.”
Reassess Your Current Coverage
Depending on the insurance policy you currently have, you may be paying for things you don’t need or use. If that’s the case, reevaluating your plan and removing these items from it can significantly reduce your bill.
“Take a look at your coverages and deductibles,” Crewdson said. “You may be able to realize significant savings by lowering coverage limits, removing unneeded coverages, or by raising deductibles.”
Review Your Current Deductible
Last but not least, if your car insurance costs more than you can afford, it might be time to change your deductible.
“If you are a generally safe driver (i.e., do not do a lot of highway driving or overall drive less), you may consider a higher deductible to lower your premium cost,” said Boudreau. “If you are the opposite, it may be more affordable in the long run to opt for a lower deductible so you pay less out of pocket in the event of a claim.”
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