Avoiding fees and add-ons can help lower your car insurance rates.
The cost of car insurance has significantly increased, with drivers paying an average of $212 per month for full coverage in February 2024, which represents a 26% increase from the previous year.
Eliminating unnecessary fees and options can help you save money on your insurance premiums, in addition to comparing rates, bundling home and auto insurance, and maintaining a good credit score.
You might be paying a surcharge and not even realize it.
Installment payment fee
Some car insurance companies charge a fee for paying premiums in monthly installments instead of annually, which can be higher than the cost of processing payments. These fees are not regulated by states.
Up to 15% off your yearly premium is available with Progressive's paid-in-full discount, which is one of the best in the market. Additionally, Progressive offers over a dozen other discounts, including those for homeowners and safe drivers. On average, policyholders who qualify for the multiple-car discount save 12% off their premiums.
If you pay for your Auto-Owners insurance in full upfront, you will receive a discount on your rate. Auto-Owners is a Michigan-based insurer that offers affordable rates, particularly for minimum coverage policies and for specialty vehicles, including classic cars and vehicles modified for accessibility.
If you cannot afford to pay your annual premium in full, a high-yield savings account (HYSA) could assist you in earning the funds more quickly. Marcus by Goldman Sachs offers a HYSA with an APY of 4.40% and no monthly fees or minimum balance requirements.
Credit card fee
Using a credit card to pay for car insurance may result in rewards such as cashback or travel points. However, some companies charge a convenience fee of up to 4% for processing premium payments. Assuming an average monthly premium of $85 in February 2023, this would amount to $102 annually.
Earning 2% cash back on some of the best rewards cards won't be enough to get you out of the red.
If you're paying in full, some companies may waive the fee. However, if you're paying month-by-month, linking your checking account and setting up an automatic electronic funds transfer can be a more convenient option than using a credit card.
Roadside assistance
Geico provides roadside assistance for as low as $14 per year, but if you already receive it elsewhere, it may not be worth the additional cost.
The Chase Sapphire Reserve® offers roadside protection, which covers $50 service calls four times a year through a partnership with Cross Country Motor Club. This service is available 24 hours a day and includes towing, jumpstarts, lockouts, and fuel delivery. The card's annual fee of $550 is offset by an annual $300 travel credit and unlimited 5X points on flights and 10X points on hotels and car rentals made through Chase Travel.
According to Edmunds, most car manufacturers provide some form of assistance in case of locking yourself out, running out of gas, or getting a flat. However, coverage is typically limited to a specific number of miles or years, and each manufacturer's offerings vary. Therefore, it is recommended to refer to your owner's manual or contact the dealer for more information.
Broker fee
You can choose to work with an insurance broker to find an auto policy and pay them a commission, or you can gather quotes on your own or with no-cost aggregate sites like Insurify and The Zebra.
Gap insurance
If a car depreciates rapidly in its first few years, the loan amount may exceed the car's value. Gap insurance can cover the difference if the vehicle is stolen or totaled.
If you lease a new car, you may be required to have gap insurance, which may be included in your lease. If it is, you won't need to buy gap coverage twice.
Bottom line
To lower your auto insurance premiums, review your statement and eliminate any unnecessary fees or services. This can help you save money without having to compare prices with other providers.
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