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Many people take a hard look at their budget at the start of the new year. The holiday season may have brought more spending than usual. But with the new year, it’s an opportunity to limit these expenses a little.
Cutting things like dining out and wardrobe upgrades are obvious ways to spend less each month. But you may be looking for even bigger savings. With fixed expenses, like rent or paying for your car, there’s not much you can do. But what about your auto insurance? Of course, having insurance is mandatory if you have a car – but could changing your policy add a few extra dollars to your bank account each month?
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To help you explore the do’s and don’ts of adjusting your auto insurance policy, we spoke to Cate Deventer, Editor and Managing Editor at Bankrate.com. Here’s what you need to know.
Not to do
- Don’t reduce your coverage to save money. “If your monthly budget is really stretched, it might seem like a good idea to reduce your car insurance coverage or limits to save money. This is not something that insurance professionals recommend doing,” says Deventer “While this may reduce your monthly bill, you will actually be at greater financial risk if you have an accident.”
- Do not change providers frequently. “You probably don’t want to switch insurance providers too often, because you might miss out on benefits like loyalty discounts. If you change vendors every year, you never really accumulate that experience with one vendor,” says Deventer.
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- Reduce endorsements to save money. Rather than changing your standard auto insurance coverage, Deventer recommends removing endorsements like new-vehicle replacement, accident forgiveness, and roadside assistance to save money each month. Deventer says, “Look at your endorsements first. Reduce optional extras such as roadside assistance or car rental if you absolutely must lower your car insurance bill. If you need to change anything, that’s what you should focus on, not your liability, collision or comprehensive coverage.
- Review your coverage at key life stages. “Generally, if you’ve had a life event like you got married, had a baby, or moved to a new city or state, those are events that change your finances. So whenever your finances change, it could be an opportunity to check out new providers because your life is different, and there might be another company that better suits your needs,” says Deventer.
Learn more about how to lower your car insurance bill here.
So the good news is that yes, there are ways to save on your car insurance. But changing plans often or reducing your coverage or liability isn’t the solution. Instead, decide which riders you can do without and cut them to save extra money each month.
If you liked this story, find out how to get back on track if you’re buried in debt.
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