People are driving again. An analysis published by Apple shows that mobility is significantly up in the US since last year, when the COVID-19 lockdown was much firmer. With the school year in full swing and many employees returning to the office, a lot of people are traveling and driving more. Though some insurance carriers reduced premiums and offered discounts during the height of the pandemic, according to the Insurance Information Institute, as the world slowly returns to normal, some experts are forecasting an auto insurance cost spike.
If you’re driving more, your auto insurance premium might be increasing. But there are plenty of ways to keep your money in your pocket. Here’s an overview of ways to mitigate increasing insurance costs.
1. Increase your deductible
Increasing your deductible can lower your premium, meaning when you make a claim you’ll increase the amount you have to pay out of pocket before your insurance plan starts to pay out. This move could cost you later if you’re in an accident, though, as you’ll have to dish out more money before your carrier covers damages. But if you aren’t driving a lot right now, aren’t accident-prone and need to reduce your monthly costs, it could be worth it. The most important thing to keep in mind, however, is to make sure you’ll have enough money to pay the higher deductible if you do end up in an accident.
2. Lower coverage for older vehicles
Older cars may not deserve the same insurance attention as your shiny new Tesla or all of the bells and whistles of a Mercedes-type policy. If your old car is in its last go-round, you may want to cut out collision coverage or comprehensive coverage for that vehicle, both of which cover damages to your car.
Whether you should drop coverage depends on the value of your car and the relative cost to cover it. Experts suggest that if your car is worth less than 10 times the annual premium, purchasing coverage for that vehicle may not be a cost-effective option. One of the quickest ways to check the value is by scrolling through Kelley Blue Book online.
3. Lower your mileage by using mass transit or carpooling — aka drive less
Carriers may offer discounts if you have a low mileage count, meaning you drive less than the average number of miles per year compared to other Americans. Typically, you’d be considered a low-mileage driver if you drive less than 7,500 miles per year, but this isn’t a bright-line rule, as what determines whether you’re a low-mileage driver depends on factors like your state, age and gender. The national average annual premium for Americans who drive 5,000 miles or less is about $1,612, according to Bankrate.
State Farm offers one of the cheapest monthly premiums at $128 for low-mileage drivers, according to an analysis.
If there is mass transit in your area, taking a bus a few days per week (or carpooling with others), could make you eligible for low-mileage discounts. If you don’t live in an area with mass transit, you might also consider carpooling to work or school to bring your mileage down.
And of course, if you transitioned to working or studying from home since the start of the pandemic and still haven’t shifted back to in-person, contact your carrier to let them know — and take advantage of any savings.
4. Bundle your insurance
One of the most straightforward ways to save money on insurance is by bundling your home and auto insurance, meaning you purchase multiple insurance policies from the same company. You can get discounts on your premium anywhere from 5 to 25% depending on the carrier.
5. Safe travel discounts
If you pride yourself on being a safe traveler, you’re in luck. Carriers offer discounts for safe driving and modest claims history, and there are a number of discounts to take advantage of here. Call your carrier to ask how you can enroll in these types of programs and once successfully enrolled, you should see your premium go down on your next bill.
State Farm, for example, offers both accident-free discounts, where you’ll get a discount if you’ve gone at least three continuous years without an accident, in addition to good driving discounts, a discount on your premium for three or more years without moving violations or at-fault accidents.
Telematics insurance programs are also a great way to obtain safe drivers discounts, and it’ll factor in low-mileage discounts, too. These programs monitor your mileage and driving behavior through a phone app or a car plug-in device. Just call your carrier to enroll in the plan, and while discounts vary by carrier and state, you could be looking at savings as large as 30% off your premium. You’ll start at a base rate that will be adjusted depending on the telematics report, which will include factors like your average speed and braking habits. For example, State Farm will review your telematics data every six months to determine how safe your driving has been, and based on those measurements, it’ll apply a discount to your policy ranging anywhere from 5% to 50%, according to Bankrate.
6. Buy a cheaper car
If you are looking to buy a new or used car, consider comparing the insurance costs among different vehicles. Auto insurance premiums are calculated through a variety of factors, and some of those factors are based on the car itself, including the car’s price, repair costs and general safety record.
“This is the thing that people forget about: You can buy a Honda or a Kia, and it’s less expensive, or you could buy a Mercedes or a Tesla — it’s going to be more expensive,” said Janet Ruiz, a chartered property casualty underwriter and director of Strategic Communications at the Insurance Information Institute.
And the difference in the cost of insurance for a Mercedes compared to a Honda is stark: The average cost to insure a 2019 Mercedes-Benz is about $4,201 annually, compared to an average of $2,151 annually for a Honda. That means you’ll pay an average of $179 on a monthly basis for the Honda compared to $350 for the Mercedes.