If you're looking to trim your expenses as much as possible, you might be eyeing your auto insurance bills. There are many ways to tinker with your insurance coverage to slash your premium.
You could call your insurance company and:
- Lower your liability coverage to the minimum required by state law.
- Drop your collision and comprehensive coverage.
- Keep collision and comprehensive but increase your deductible to $1,000 or more.
- Drop your uninsured-motorist coverage.
How low can you go? You can likely chop your car insurance bills in half by reducing your liability coverage to 25/50/10 from the typically recommended 100/300/50 and dropping rental-car, collision and comprehensive coverage. Many states have minimum liability limits of 25/50/10, but others' are higher or lower.
(The three numbers refer to insurance, in thousands of dollars, for bodily injury per person, bodily injury per accident and property damage per accident, in that order.)
In our savings experiment, we kept uninsured-motorist coverage when we reduced our liability limits. You could save even more by dropping it.
Average annual savings by reducing coverage:
| Vehicle | Liability coverage of 100/300/50 plus uninsured-motorist, comprehensive, collision and rental-car insurance | Liability coverage of 25/50/10 plus uninsured-motorist coverage; no comprehensive, collision or rental-car insurance | Savings |
|---|---|---|---|
$1,773 | $662 | 63% | |
$1,142 | $530 | 54% | |
$1,233 | $583 | 53% | |
$1,232 | $589 | 52% | |
$1,263 | $632 | 50% |
Data are from September 2010. Average premiums were calculated for a 40-year-old single male driver with 100/300/50 liability coverage limits and a $500 deductible on comprehensive and collision insurance. Model year 2005 was used for all quotes.
But remember this: Dropping your car insurance to a bare minimum opens you up to substantial risk.
"You want to consider that very carefully. You're trying to protect the assets you have," says Robert Passmore, a spokesman for the Property Casualty Insurers Association of America, an industry trade group.
Passmore notes that the most expensive coverage dollars are the first dollars. In other words, $100,000 in coverage does not cost twice the price of $50,000 in coverage. "It's like getting a volume discount," he says.
More ways to save on car insurance
Whether you choose high or low coverage levels, here are 10 more ways to reduce your auto insurance bills:- Comparison shop. Prices vary from company to company. Obtain car insurance quotes from at least three insurers. But don't shop on price alone: Look at the companies' reputations, their customer service and the types of coverage and discounts they offer.
- Buy a low-profile car. Cars that are expensive to repair or have high theft rates have higher car insurance costs. Before purchasing a specific car, the Insurance Information Institute, or III, recommends you consider both the insurance costs and the overall safety record of the car. The Insurance Institute for Highway Safety assigns ratings to cars based on their safety features.
Continued: Take advantage of low-mileage discounts
