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7 silly ways to waste money on auto insurance

By Margarette Burnette Posted : 01/10/2011

Driver wasting money on car insuranceAre you wasting money on auto insurance? There's a good chance the answer is "yes" – not because you are a bad driver or a high risk, but because you overlook some of the best ways to save.

Here are seven silly ways you may be wasting hundreds of dollars on car insurance.

1. Failing to comparison shop

You may be the type of driver who sticks with an insurance company year after year, through thick and thin. And in some cases, that's just fine, says Christie Hyde, spokesperson for AAA.

If you have a solid history with an insurance company, that could be the best bet -- you're not going to find a better deal."

However, it can't hurt to shop around. In some case, you could end up saving a lot of money by going with another provider. You may also gain new insights into possible holes in your coverage simply by having an outside agent provide "another set of eyes" to look over your insurance needs.

For that reason, Hyde says it's a good idea to take an annual look around at what's available.

"We recommend doing it once a year, when you have your policy come up for renewal," she says, although she emphasizes that drivers can look for better rates at any time during the year.

2. Not combining policies

Most insurance companies provide deep discounts if you have both your home insurance and auto insurance policies with the same provider, says Angela Preciado, auto product management director at USAA in San Antonio.

"If you can combine multiple policies with the same company, you can save big," she says.

Many auto insurance companies, such as Allstate and Farm Bureau Insurance, advertise multi-policy discounts that can save you 10 percent or more off your premium.

Hyde also urges drivers to see if they can save by keeping multiple insurance policies with one provider.

"When you package it together, you can see some cost savings," she says.

3. Keeping car insurance deductibles too low

If your deductibles are small, your premiums may be too high.

Increasing your deductible from $200 to $500 could lower your premium by about 20 percent, according to the Insurance Information Institute.

However, if you do raise your deductible, make sure you have access to enough money to pay your deductible should you need to make a claim, Preciado says.

Keep the money in an emergency savings account you won't touch unless you cause an accident, she says. If you never file a claim, you keep the savings. Either way, you won't waste money on higher premiums, she says.

4. Not asking for discounts for which you are eligible

Teen drivers with good grades in school may receive discounts for auto insurance, Preciado says. 

In addition, members of some organizations, such as AARP or a college alumni association, often receive discounts for auto insurance.

Hyde says there's no guarantee that membership in an organization like AAA will save you money on car insurance. But many members do find savings, plus emergency road assistance,  discounts on shopping and other benefits, she says.

"Better rates on insurance could be one of those benefits," she says.

Talk to your insurance agent to see if you qualify for special car insurance discounts.

Also, ask your agent about other discounts for which you may be eligible, such as a good-driver discount or a premium reduction for having anti-theft features in your vehicle.

5. Paying unnecessary fees

Some auto insurance companies charge you a service fee each time you make a monthly payment, Preciado says. The amount is usually between $1 and $7 each month – which can add up.

To lower auto insurance rates, look for companies that don't charge extra for monthly payments, Preciado says. Or, try to save up and pay the entire premium when it's due, eliminating the need for monthly charges.

"In my opinion, it is plain silly to pay an extra fee just to make the payment that you're already required to make," Preciado says.

6. Buying coverage that won’t pay off

If you have an older model car that isn't worth a lot of money, it may not make sense to pay extra for comprehensive or collision insurance, Preciado says.

That's because any claim you make probably won't exceed the amount you'd pay in premiums over many years and the deductible by a significant amount, she says. So consider dropping the coverage.

You may also be wasting money if you already have health and disability insurance, but are paying extra for medical payments coverage as part of your auto insurance policy.

Medical payments coverage requirements vary by state. So before dropping any policies, check with your agent or state department of insurance to understand what's required, he says.

7. Forgetting savings from mileage reductions

If your commuting distance to work has decreased, or you're not working at all, you may be eligible for a low-mileage discount, Preciado says.

According to the Consumer Federation of America, policyholders who reduce the number of miles they drive each year to less than 10,000 could save on average about $100 off their annual premium.

If you've changed your driving usage, make sure your agent knows, Preciado says.

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7 Responses to "7 silly ways to waste money on auto insurance"
  1. Alex Roger 21, Mar, 2013

    I would like to say article is great, but do what ever you want in Canada especially in Toronto its hard to get a cheap Toronto car insurance rates. Easy, the legal way, move out of Toronto, or don't%uFEFF drive.

      Reply»  
  2. David Yost 29, Dec, 2012

    Nothing interesting here. I know all of this. Tell me something that I don't know.

      Reply»  
  3. Dan Andrist 13, Nov, 2012

    As an attorney with 20 years experience chasing insurance coverage for clients, I advise against shopping for any kind of insurance on the basis of price. If you want the coverage to be there when it counts, shop -- and I mean compare -- on the basis of policy language. There are plenty of websites that will tell you how to read and compare insurance policy language. Regret is a terrible thing.

      Reply»  
  4. Phil 21, Oct, 2012

    Do not forget to ask about and research the cost of an umbrella liability policy. Many times, if you have combined auto and homeowners policies with the same high coverage limits of liability, you can save by lowering limits on the two policies and instead having an umbrella kick in to supplement those lower limits. Thus an auto and HO combination having 100k limits can be increased to a million dollar liability coverage package by buying a low premium umbrella that pays the amount after 100k up to a million.

      Reply»  
  5. Dan Yamamoto 13, Oct, 2012

    Never assume you have the lowest rates. Check your rates every year by getting a quote from other companies. Start by using the exact same parameters so there is no games involved. Then if the quote is cheaper you can then do things to lower it even more with deductible increases or changing the limits. Dan http://themoneywhisperer20.blogspot.com/2011/07/15-minutes-can-save-you-over-150-by.html

      Reply»  
  6. Jon Davis 11, Oct, 2012

    thanks for sharing this piece. As an Ontario car insurance brokerage, I can agree with your comments especially concerning raising your car insurance deductibles and removing collision coverage under the right situation. These tactics can save you more than you may think%u2026.it could add up to hundreds in car insurance rate savings each year. Use a quote comparison tool like ours to play with different scenarios to see what works best with your budget%u2026 http://www.thinkinsure.ca/car-auto-insurance/car-insurance-rate-ontario/car-insurance-compare-online-quotes.php Jon D.

      Reply»  
  7. Mindy Watson 31, Aug, 2012

    In ref. to the comment about asking for discounts; at state farm that is part of the job. To make sure customers aware of discounts that will provide coverage & lower their premium.

      Reply»  

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