We’re (hopefully) in the final stretch for purchasing a new house, and part of the paperwork for this was setting up homeowner’s insurance for the new house.

We called the same company that sold us our current house’s homeowner’s policy, as well as our current auto insurance policy.  The agent was able to get us quite a good deal on the homeowner’s policy, and almost as an afterthought, she offered to check around for us on our auto insurance policy.

For several years we didn’t have the best driving record.  Right before I was married (2001), I had a speeding ticket and a fairly serious at-fault accident on my record.  I called my (then) auto insurance carrier about a week before my policy was set to expire and asked why I hadn’t received the renewal notice.  Well, they weren’t going to renew my policy.  (Gee, thanks for letting me know, turds!)  So I scrambled with only a week left before my insurance lapsed, and found a (higher-risk) carrier to sell me a policy.

I haven’t had any more driving mishaps.  In the meantime, though, my wife has had a couple of (not nearly as serious) accidents.  One of them was a 2 MPH collision with a parked car.  But my marks, and her marks, kept points on our policy until last year.

Back to this past week … The insurance agent looked at our current policy and made the comment that “we’ve probably done our time with X” and can get into a better auto insurance policy.  (I’m not saying who “X” is because we were otherwise quite happy with them, and I don’t want to appear ungrateful.  I may have said who “X” is before in another post, so if you want to look, you’re welcome to.)  She ended up finding us an insurance policy that gave us the same coverage for about 15% less than the other carrier.

So if you’ve gotten yourself into second-tier (or lower) auto insurance because of your driving record, and have since gotten better, make it a point to shop around a bit. My wife and I were so happy to see that all of the points were off of our policy, we just saw the relative decrease in our premiums, and didn’t look any further.  We didn’t think of looking outside of our current policy.  But just like I had a good policy before I screwed up, I can get a good one again, and so can my wife.  The good policies are likely better deals than the second-tier ones, even with a clean driving record.

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And the fifth person is really thinking hard about it.  He’ll come around eventually.

No, seriously: Who doesn’t want to save money on their car insurance? I don’t know of any good reason why you wouldn’t, so here are some tips for knocking that expense down as much as possible.  Hopefully at least a couple of them are new to you:

• Buy a car that doesn’t cost that much to insure. If you’re in the market for another car, considering the total cost of ownership of the car is a wise thing to do.  Buying used is a good start.  But is the car likely to be driven fast?  Is it likely to be stolen?  Or is it likely to be driven carefully?  This will factor into the insurance cost.  Take it into account as you’re looking.
• As with anything else, shop around for insurance. Some companies give you more insurance (or better policies) for your money.  Look around.
• Don’t be stupid with your driving. Tickets and accidents classify you as more of an insurance risk.  The insurance company may forgive you once, or even twice, but after that, it will cost you for a few years if they have to pay out on your behalf, and it’s your fault.
• Look into car options that reduce insurance costs. This is part of the tip I just mentioned, but things like automatic seatbelts, passenger-side airbags, etc. — things that tend to make vehicles safer — make them less costly to insure.
• Kick the deductible higher. A higher deductible means that the insurance company has less at risk should you file a claim.  They pay whatever they pay, and deduct the deductible.  A higher deductible means a lower payment.  So if you’re a careful driver and can self-insure some part of an accident, this is a good strategy.
• Drop collision on low-value cars. If your car’s value is $1,000, the company pays 75% of that in a total, and you have a $500 deductible, you get a whopping … $250 for your car.  Is it worth paying collision for that?  Probably not.  Now, if your car is worth $15,000, it’s probably worth it to have collision.
• Watch for glass claims. A friend was surprised when the cracked windshield glass claims counted against larger big-ticket claims he wanted to make later.  This is something to consider before taking this extra coverage.
• Ask about other discounts. Good grades?  Multiple policies?  Other types of policies with the same company?  Defensive driving?  Be shameless in getting everything that’s offered to you.
• Pay by automatic electronic funds transfer. Our car insurance company offers a small discount ($20 over six months) just for agreeing to have the payments transferred directly out of our checking account.  They can do this because it saves processing costs.  If I pay by credit card, the insurance company has to pay merchant fees; with EFT, the bank pays the fees.
• Pay all at once. The really big discount, though, comes for us if we pay for six months at a time.  The discount is the equivalent of a full month of insurance.  If you have the cash, this can be a big money-saver right there.
• Pay for small accidents out of pocket? I looked around for the answer to this one, and it’s unlikely that this is proper, so I wouldn’t try it.  I was a little miffed that we had to pay something like $1,500 in increased premiums because of an almost imperceptible “tap” that we made to a parked car.  I thought at the time it might be a win-win if we could pay for their repairs directly, plus a bit for their “trouble,” but it’s likely that it’s either against our policy, against the law, or both.
• Skimp on liability insurance? Though there are minimum levels of liability insurance that need to be purchased in many states, skimping on liability insurance isn’t a good idea. The example that Brian T. Jones uses in his book Getting Started: The Financial Guide for a Younger Generation (read my review here) is hitting a school bus.  Even if you have $500,000 in liability coverage, and the jury awards $1,000,000 to the families of the kids you hit, you’re on the hook for the other $500,000.  Kiss your financial life goodbye.  Not a good idea to skimp on liability.

(Thanks to Taking Charge for including this post in the Carnival of Personal Finance!)

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