8 ways to slash your car insurance bill

By Julie Bawden-Davis

Unless you live in an area with great public transportation, chances are you need a car. But what you don't need is a high car insurance bill every month. Fortunately, it's easy and painless to lower your monthly expenses by examining your car insurance premiums.

Keep your auto insurance costs low and your saving accounts growing with these money-saving tips:

1. Do your homework

Auto insurance prices can vary widely, so performing a thorough search could save you a substantial amount of money. Get multiple quotes from several types of carriers, including online and conventional insurers. Be certain that the carriers you consider are financially sound and honor their auto claims by checking the companies out with your state's insurance department -- especially before purchasing.

2. Raise your deductible

Bumping up the amount you pay upfront in the case of an accident or damage to your car can significantly lower your insurance premium. Generally, the higher your deductible, the less you pay each month. For example, according to the Insurance Information Institute, by increasing your deductible from $200 to $500, you can potentially lower your collision and comprehensive costs by 15 to 30 percent. Raising your deductible to $1,000 can mean paying 40 percent less in auto insurance.

But if you decide to raise your deductibles, make sure you have an adequate emergency savings fund available to cover this out-of-pocket expense in case of an auto claim.

3. Drop some coverage

If your car is old, the Insurance Information Institute suggests dropping the collision and comprehensive coverage if your car is worth less than 10 times your premium. For instance, if your car is worth $2,000 and your premium is $300 a month, you can consider dropping the coverage that pays for your car if there is an accident. Forgoing such insurance requires that you have money set aside for a new car in liquid savings such as a money market account, because you won't be receiving any compensation for the car if it is totaled in an accident that wasn't caused by someone else.

Also, consider dropping all but the minimum personal injury insurance required by your state if you already have excellent health, disability and life insurance plans. Double medical coverage may not be necessary.

4. Ask about discounts

A surprising number of discounts exist, so it pays to ask. You may be eligible for lower premiums if you:

  • Drive fewer miles than the average motorist
  • Have more than one car insured through the company
  • Possess a clean driving record
  • Pass a defensive driving class
  • Have good grades as a student
  • Work in a low-risk occupation
  • Are older than 50
  • Are a longtime customer of the insurance company

Discounts for auto safety features can also save you a bundle. Let the insurer know if you have anti-lock brakes, a car alarm, a theft tracking device, automatic seat-belts and airbags.

5. Consider a low-risk car

All cars are not created equal when it comes to car insurance premiums. Some autos are more likely to be stolen and for this reason command a higher insurance price. How much you pay every month also depends on the cost to repair your type of car and its safety record.

6. Maintain good credit

Like it or not, your credit report affects your car insurance costs. Most insurers check credit because statistics show a connection between bad credit and the likelihood a person will get a ticket or be involved in an accident. Individuals who manage their money well and maintain good credit tend to be better drivers and make fewer car insurance claims. Keeping your credit in pristine condition by paying your bills on time and not overextending yourself can mean paying less when your auto insurance bill arrives.

7. Consider where you live

The location where you reside affects your car insurance costs. Rates are lowest in rural communities and highest in cities. While you probably wouldn't want to move because of this, it is something to keep in mind if a change of address is on the horizon.

8. Bundle your insurance

Most insurance carriers will lower your auto insurance premiums and insurance costs overall if you buy two or more types of insurance from them. So it may save you big to have your homeowners/renters, life, long-term care and auto insurance with the same company. Combining all of your insurance under one umbrella also makes record-keeping and claim-filing easier.

And once you've employed these cost-slashing tips, consider using your lower monthly premiums as a springboard to a more robust savings account.