How to Save on Car Insurance During a Recession Americans are tempted to reduce their insurance coverage in order to save money, but doing so can create bigger problems down the road. These tips will significantly cut down your monthly payments without sacrificing adequate coverage.
By Paul Moss Edited by Chelsea Brown
Opinions expressed by Entrepreneur contributors are their own.
In the face of a recession, it can be hard to keep up with the rising costs of vehicle ownership. The average American is spending 17% more on car insurance coverage in 2022 than they were in 2020, and that expense is driving Americans to extreme extents in order to save money. It may be tempting to save money by cutting coverage with your current insurance company. However, I recommend keeping adequate coverage and using alternative methods to save money so you don't make your problems worse in the event of an accident.
While 16% of drivers are considering moving to a location with better public transportation and walkability, you do not have to relocate or surrender your car to save during a recession. By implementing these simple tips, you can significantly cut down on your monthly payments without sacrificing much convenience or comfort.
Related: 8 Tricks for Solopreneurs to Cut the Cost of Auto Insurance
1. Shop for car insurance every 6 months
While some insurers would suggest drivers shop for car insurance on an annual basis, a recession can cause your finances to change on a whim. Shopping for car insurance every six months ensures that you're getting the best deal for your financial situation. Car insurance comparison platforms will automatically shop for you every six months and before your policy renewal, so you can stay updated on the best policy options.
If you prefer to conduct your own shopping research, you should start by assessing your own coverage. As you shop, you should compare the rates of other policies that offer coverage that mirrors yours. Make sure you include any applicable discounts (e.g., homeownership, education, safety devices, etc.) in your comparison shopping.
2. Consider usage-based insurance
Usage-based insurance (UBI) lets insurers charge lower premiums for people who drive less often or in safer ways. There are two main types of UBI: driving-based programs and mileage-based programs.
Driving-based programs involve a device being installed in your car that monitors how and when you drive, with the goal of lowering your rates according to how safe you are behind the wheel. Your rates will be determined by factors like how hard you brake, how quickly you accelerate and the time of day that you drive. If your insurer offers a driving-based program, you should avoid driving after midnight, drive less often, and don't multitask while driving — otherwise, you risk your rates increasing.
Alternatively, there are mileage-based programs that consider the total miles driven each year. Your insurer will calculate your premium based only on how many miles you drive. Even though not all insurers offer this type of plan, if you work remotely or are retired, it might be a good option for you.
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3. Opt for a higher deductible
Your insurance deductible is the amount you have to cover out of pocket before your insurance company will chip in. This can mean that if you get into an accident and need repairs, you would be responsible for paying them out of pocket — unless the damage falls below your deductible level.
Many people avoid having a high deductible because they worry that they would not be able to cover it if something happened. They fear they will end up being stuck with the bill and unable to afford their car repairs or medical treatment without going into debt or taking out a loan.
But here's the thing: There are many benefits to having a higher deductible. Generally, you will see lower premiums for higher deductibles; and having more money in your pocket each month could help offset any unexpected costs from accidents or emergencies. Keep in mind, savings vary by company, so before you choose an insurance provider, compare quotes with different deductibles to maximize savings.
4. Take a defensive driving course
Taking a defensive driving course can result in a discount of 5-10%. This can also help you remove DMV points from your record, which will further reduce your insurance costs. If you have taken a defensive driving course due to a court mandate, you won't be eligible for the discount. Taking an approved course voluntarily is worthwhile, however.
Not all insurance companies honor this discount, so you should check with your provider beforehand. Allstate, GEICO and State Farm are among the national auto insurance agencies that do offer this discount for drivers, so long as you take an approved program.
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These simple tips will prove useful both now and in the years to come, allowing you to make smart, informed decisions about insurance coverage regardless of your financial situation. It is hard to know for certain what economic conditions will look like in 2023 and beyond, but it is important to be prepared nonetheless. By implementing these four, easy practices, you can save money and reduce your risk of being overcharged by an insurance company that doesn't understand your personal finances.
