Looking for a new or used car but you’re stuck on how to get cheaper car insurance? Don’t worry. Here’s a few quick tips that will help you get the right car insurance at an affordable rate.
5 Steps to Cheaper Car Insurance
By buying multiple insurance policies though the same company, customers often get discounts. If you are only shopping for car insurance this discount will not be much help to you, but if you are looking for homeowners or renters coverage, or even to insure multiple cars, you can expect to see lower rates.
Even if it saves you money on your car insurance it is never a good idea to have too little coverage. Having lower liability limits may save you money in the short-term but if an accident occurs it could cost you must more in the long run. It is important to always have enough liability coverage to protect your assets. You should also have an umbrella policy to cover yourself if your auto policy’s limits are high enough.
Although having enough coverage is important, there are other ways you can cut your insurance costs. If you have an old car you can drop comprehensive and collision coverage. You can then use the money you saved in premiums towards a new car. Also, make sure you are not paying for double coverage, for example, if you are a member for AAA you do not need to pay for towing and labor coverage.
3. Usage-based insurance
By giving your insurance company access to more information about your driving habits, you could save even more on your premiums. Insurance companies such as Progressive and State Farm offer usage-based insurance programs.
Usage-based insurance policies involve placing a device in your vehicle that records certain information, including how much you drive, your speed, and how abruptly you brake. If the device shows that you drive less often than average or that you practice safe driving behavior, you’ll receive a discount.
The majority of insurers who sign up for the service do receive discounts, but this is not guaranteed, so keep that in mind. Another concern to some is the privacy issue as the device allows, with high accuracy, where you are driving.
A deductible is the amount you pay for covered repairs before your insurance kicks in and pays the rest. By increasing the amount of your deductible you are also lowering your premium. Keep in mind though that if you are in a situation that you need to pay your deductible that you haven’t committed to an amount that you can’t afford.
5. Shop around
Longtime customers often stick around out of loyalty, a current discount, or lack of time to shop around. But you are also facing the chance of paying higher rates than you would by taking the time to shop around. All insurance companies will offer slightly different rates and some offer better rates to people with teenage drivers or those with a bad driving record. Gather a few quotes around renewal time, even if your insurance needs haven’t changed. Whether you change companies or not, this will ensure you are getting the best rate currently.
Should You Buy Gap Insurance?
Regardless of your financial situation when you buy and finance a car, one type of insurance you might want to have is Gap Insurance. It doesn’t matter if you have AAA credit or have had to get bad credit auto loans. Gap Insurance is an important safety net to have in place.
What is Gap Insurance?
Often misunderstood, gap isn’t really that difficult to comprehend. Let me explain it to you. Gap Insurance basically covers the difference in what you owe on your car and its value should something happen to your car.
Let’s say you’ve just bought a new or used car. Common knowledge tells us that as soon as you leave the car lot, the value drops and you owe more on the loan than the car is worth. Sad but that’s how it works.
Say you financed 10,000 dollars on your car with zero down. When you leave the lot the insurable value of that car drops to about 8,000 dollars (wholesale value not retail). You haven’t made your first payment yet, so the “gap” between what you owe and what your car is worth is 2,000 dollars.
Heaven forbid it should happen to you, but if you should have an accident leaving the lot and “total” your car (damage it to the point where repair cost is higher than its value) or your car should be stolen its first night home, you’d be way behind the curve.
You will still owe your loan and be without your car. Assuming you have car insurance, they are going to pay you the value of your car (8,000) minus your deductible. The numbers are going to come out looking like this.
- Your Loan Amount: $10,000
- Insurance value: $8,000
- You owe: $10,000+ $8,000 = $2,000
You will still owe 2,000 dollars on a car that you no longer have. That sum of 2,000 dollars is your gap. The purpose of gap insurance is to fill in that gap so you don’t end up with a big hole in your finances. Note that if your insurance provider finds that your deductible applies, you will have to pay it. Gap insurance rarely covers it.
If you financed with good credit you can expect to be behind the financial curve for at least the first half of your loan. If you were in a situation where bad credit auto loans were your only option, you could add another year onto that number. That is a long time to gamble.