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Auto insurance premiums have gone up by more than 17% in the past year, dramatically outpacing inflation. But that doesn’t mean drivers are stuck paying their current high premiums. By settling for rising prices, policyholders may be snoozing on a better deal.
That was the case for Jamie Means, a 27-year-old Nashville, Tennessee, resident who, until earlier this year, drove a 2017 Hyundai Elantra. For years, that car was insured with Progressive, but when the renewal rate for her six-month full-coverage policy came in at $911, Means started to think she could probably get a better deal for her coverage.
Soon after that, Means found a full-coverage policy with Allstate that offered her a $574 six-month premium. She had not been convinced switching insurers would make such a difference until she got an offer from Allstate in the mail. "I think seeing the breakdown was very helpful for me," Means says.
By switching insurers, increasing her deductibles and signing up for a program that tracks her driving and rewards her for safe habits, Means managed to cut her insurance cost by 37%.
But how exactly did each of these changes affect Means’ coverage, and why did they help her lower her monthly insurance bill?
Shopping around for auto insurance can help you save
NerdWallet recommends comparing auto insurance quotes at least once a year to ensure you’re getting the best deal for your coverage.
According to Ben Galbreath, an Ohio-based independent insurance agent at Wallace & Turner, shopping for insurance can help drivers lower their premiums, even when rates are on the rise overall. “I recommend to my clients that I shop for them every two to four years, depending on how the market looks,” he says.
Safe driving telematics programs can land you a discount
If you’re open to granting insurers access to your driving data, enrolling in a safe driving tracking program can lead to savings. Some insurers offer a discount when you sign up for the program and may reduce the premium even further if you consistently practice safe driving habits, such as avoiding hard braking and using turn signals.
Although telematics programs often come with savings — Means’ enrollment in Allstate’s Drivewise program came with a $46 discount — they don’t always. Additionally, data privacy concerns make this an unattractive option for many.
Weigh the option of increasing your policy’s deductible
Increasing your deductible is a surefire way to bring down your insurance premium, but it can cost more in the end if you happen to file a claim. Means increased her comprehensive and collision insurance deductibles from $250 to $1,000. Although this change significantly helped reduce her premium, she now stands to pay four times as much out of pocket if she files a claim under these coverage types.
Both comprehensive and collision coverage pay for damage to your own car after a wreck, and payouts are limited to the value of your car after you’ve paid your deductible.
While raising deductibles can be cost-effective for some, Galbreath suggests having a deductible you’d be comfortable paying and ensuring the lower premium makes up for the higher potential out-of-pocket costs. “How many years are we going to gamble with saving that?” he says.
Other ways to lower your auto insurance payments
The changes Means made to her car insurance policy helped her save but might not be the best option for everyone. If you’re looking to cut down your auto insurance payments, consider:
Asking about any discounts you aren’t getting.
Signing up for pay-in-full and paperless billing.
Bundling your auto insurance with other policies.
Buying a car that’s cheap to insure.
Building your credit. (In California, Hawaii, Massachusetts and Michigan, insurers can’t use your credit to set car insurance rates.)
Get quotes for usage-based insurance if you don’t drive frequently.
Some coverage is not worth cutting
There are plenty of areas where car insurance expenses can be trimmed, but liability insurance, which covers damage and injuries you may cause in an accident, is one to think twice about. Medical bills can reach six figures after a bad accident, and should you get sued, liability insurance covers your defense and costs.
“The one thing I'll say you never want to do is compromise your liability,” says Judith Bell-Williams, senior vice president and personal lines practice leader at Univest Bank & Trust Company. “A lot of carriers actually give discounted pricing for higher limits,” she adds, explaining that insurers see people who seek more coverage as more responsible citizens.
With auto insurance premiums on the rise, it’s easy to want to cut costs above all else. But don’t settle for insufficient coverage to make that happen — shop around to find a more affordable policy offering the coverage you need.