The annual cost to own and operate a vehicle in the United States is $8,558, according to AAA’s 2016 calculations. While that figure represents a six-year low thanks to falling gas prices, the insurance portion of that figure is up 9.6 percent (+$107) since last year to $1,222.
In a strange twist of fate, the lower gas prices are the likely reason why insurance rates have increased: People are driving more, resulting in a greater number of collisions and higher insurance payouts.
How can drivers keep their car insurance premiums low while continuing to enjoy the privileges of automobile ownership? Here are a few tips:
1. Buy a used car: There’s no way to make buying a new car pan out financially, especially as regards insurance. The age of the car being purchased will have a real impact on your auto insurance rates simply because older cars are less valuable. Yet, keep in mind that the car’s individual history and the model’s reputation may also impact your rates. Consider for example, these automobiles, ranked top five worst 2015 brands in initial quality by J.D. Power: Fiat (206 problems per 100 vehicles), Smart (154 per 100), Chrysler (111 per 100), Subaru (142 per 100) and Jeep (141 per 100). The report examined problems experienced by vehicle owners during the first 90 days of ownership.
If you must have a new car, however, consider that today’s newer safety features may decrease insurance costs, as rates are determined partly by the expected damage to your car in the case of an accident. As well, many older vehicles with long model lines are actually more expensive to insure because of their high theft incidences. Newer cars are actually targeted for theft less often, being equipped with modern anti-theft devices and GPS tracking systems. As a matter of fact, the National Insurance Crime Bureau (NICB) reports that seven of the top 10 most commonly stolen vehicles in 2012, the latest year for which statistics are available, were models dating from 1991 to 1999.
2. Own your car outright: If you lease or borrow to finance your vehicle, you lose control over the type of insurance you must purchase. You’ll be required, for instance, to have comprehensive insurance, which is usually protective overkill required by the rather conservative businesses that own other drivers’ cars (see No. 3 below).
3. Forgo comprehensive insurance: Of the two types of automobile insurance, liability and comprehensive, only liability is a required cost of car ownership, and it’ll cost you a fraction of the cost of a comprehensive policy ($600 to $2,000 a year, depending on the car’s value). Liability insurance covers expenses for the other driver’s damage when you’re at fault in an accident, while comprehensive covers costs if a car is stolen or damaged outside of an accident (e.g., natural disasters, falling objects and animal run-ins).
Instead of paying for comprehensive insurance, take care to safeguard your vehicle. Don’t park it under half-dead trees; use your garage.
Then again, if you live in tornado alley or drive down deer-filled country roads, think twice about forgoing this coverage, especially if you cruise in a vehicle with a high value. And you might want to get the additional coverage if you live in one of the nation’s top cities for car theft, according to NICB: San Francisco; Bakersfield, California; Stockton-Lodi, California; Odessa, Texas; Modesto, California; and Spokane, Washington. Plus, if you finance your car, many lenders require that you carry comprehensive coverage.
4. Select high deductibles: First, check into whether your health insurance coverage includes injuries resulting from auto accidents (it usually does). If your gut is still telling you that you need collision and comprehensive insurance, go ahead and get it but raise your deductibles (the amount of a covered loss that you pay before your policy benefits kick in) nice and high. This will lower your premium considerably. $1,000 is the most popular deductible for this type of coverage. That way, you’ve got the security of the insurance while saving money as well. This may be the best option for drivers with used cars and a hefty emergency fund.
5. Drive less: Insurers simply want to know how likely you are to cause an accident and cost them money. So, they want to know how much you actually drive. The less the better. Think about ways you can cut back on your time behind the wheel. For instance, will your employer allow you to telecommute some days? Can you walk or bike shorter distances instead of driving? Anything you can do to lower the miles you travel each year will lower your auto insurance premiums.
These are not your only options for reducing auto insurance premiums, though they are your best bet. Others include requesting available discounts for a good driving history, carpooling, maturity (50 years old or more) … even not smoking. Be sure to shop around and ask a lot of questions before signing on the dotted line.