CC photo by: killrbeez

Rule #1 when trying to save money on auto insurance: Don’t try to take pictures from the driver seat of a passing Toyota Scion that’s styled in memory of the majestic A-Team van while driving on a four lane highway.

Can’t go without it

Auto insurance is one of those things that you hate to have to pay for, but you just need to have. Just about every state requires at least some level of auto insurance coverage. Carinsurance.com and Edmunds both have resources that will give you a rundown on how much coverage you must have for the state that you are licensed in. Most states want you to at least have some legal liability coverage. Smartmoney has an article on what your policy should cover. Additionally, most states have publications on purchasing auto insurance available, which many times will run comparisons on prices over a wide range of insurers. Check out the Michigan 2007 Buyer’s Guide to Auto Insurance. Your state probably has a publication printed, courtesy of your tax dollars as well.

Why should I focus on saving money on auto insurance?

When you are using a monthly budget, I highly recommend taking a look at all of the expenses that you must pay each month and then target ways that you can slice those expenditures down. Auto insurance is certainly one expense that you have to budget for where doing a little research and making some calls can pay huge dividends in both the short and long term. With little time invested, you can potentially save hundreds a year and tens of thousands over your lifetime.

There are a lot of choices when it comes to auto insurance and each insurer may offer you different discounts at varying levels. We’re going to cover some of the big ones. Once you know all of the discounts that you may be eligible for, you can shop around.

What single factor will allow you to pay as little as possible for insurance?

Before you take a look at all the discounts that may be available to you, let’s first discuss the one factor that will allow you to pay the least for auto insurance: your ego. Nobody other than your ego really cares what vehicle you drive and most vehicles end up being worthless over time, so why not get a safe, older, inexpensive vehicle that has depreciated enough to cost little to insure? Sorry, had to slide that one in. If you’d like to compare the relative costs to insure a specific make and model, MSN Money has a nice resource.

The Discounts

When it comes to corporate profitability, insurance is a game of numbers. If you’ve had five heart attacks, the odds of you finding a company to insure you and cover your medical expenses for the sixth are highly improbable. Similarly, auto insurers have run all kinds of mathematical models in which they have been able to discover indicators that point to certain characteristics or features that lead to more or less of a risk for them to insure you. Insurers want to attract and reward safe drivers who have a low probability of getting in an accident. They have no problem offering discounts for indicators that tell them that insuring you will be of less risk than the average driver. The following are 11 auto insurance discounts that you may be eligible for:

• College degree or alumni discounts: Many of the big insurers will give you a discount just for graduating or being an alumni of certain educational institutions. That makes the thousands in student loans you owe almost worth it, eh? Some insurers even offer discounts for high G.P.A’s.
• Employee discounts: Those in certain professions have proven to be better drivers than others (i.e. teachers, engineers, scientists) and as such, they can get discounts. Some companies may offer a discount based on profession, others will offer it based on employer.
• Good driving record: Most major insurers will look back at either your 3 or 5 year history in terms of accidents and traffic violations. This can come into play if you have had either circumstance happen between the period of 3 to 5 years ago. If this is the case, you may be able to get a better price from a company that only looks at the last 3 years time. Similarly, if you had violations when signing up with a company but they have since gone over that time threshold, you may now be eligible for a better rate. Don’t expect to get this automatically. It pays to ask.
• Short commute or low mileage: Some companies will give you a discount for living closer to work or for being an infrequent driver. Makes perfect sense, right? The less you drive, the less likely you are to get in an accident.
• Safe vehicles: If your car has a security alarm or theft deterrent system, it is less likely to be broken into. This could get you an added discount. Additionally, you may be able to find discounts for anti-lock brake systems, automatic seat belts, airbags, and other types of safety features.
• Age: You can usually get a good discount if you’re 55 and over or have an AARP membership. I realize that this isn’t the demographic for this site, so file it away in your back pocket for a few decades.
• Military: If you were one of the few and proud, you are probably also going to save some cash on auto insurance.
• Multiple vehicle discount: If you live in a two, three, or dare I say, four car household, having multiple vehicles on the same policy may warrant a discount.
• Multiple policy discounts: Just about all of the major insurers will give you discounts if you also are insured, or become insured through them for other types of policies, including life, home, and disability. It might be worth the time to see if you’d be paying less overall if you took the cheapest coverage for each type of insurance or went with the same company for all.
• Pay up front: Some companies may offer you a discount if you pay your yearly premium up front versus paying separately each month. If you can afford to do this it might be worth it. Don’t worry, if you find a better rate and want to switch, you are entitled a return for the remainder of the year.
• Your credit history: Yes, your credit score can come back to haunt or benefit you once again.

Why not see for yourself?

I have included the discount pages for many of the major auto insurers, below:

• Allstate
• Geico
• Nationwide
• Progressive
• State Farm
• E-Surance
• Liberty Mutual

Next Steps

Now that you know how much insurance you need and how you can save on it, you’ll basically need to get to work. I do not recommend using any of the comparison quote sites out there as they generally are lead generation based services that collect and sell your information. You’re better off spending an evening on the phone with all of the big-name insurers. Here’s what you can do:

1. Settle on exactly how much insurance you need. You need exact dollar amounts to get a fair comparison.
2. Call all of the major companies and probe for all eligible discounts. Have them tell you and then email or fax their quote.
3. Compare offers and save.

Reader comment questions

What kind of discounts have you been able to receive on your auto insurance? Also, if you know of an auto insurance comparison site that doesn’t collect any personal data and takes a look at a wide variety of discounts, I’d like to hear about it. Please add a comment to this post.

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