This could be a big driver of savings.
A Reddit thread posted this week entitled “One email saved me $500/year” is an excellent reminder of a simple but effective piece of personal finance advice that often gets overlooked: Switching your car insurance can yield hundreds of dollars a year in savings, studies show. (We give easy strategies for finding new car insurance below.)
The Redditor wrote this: “I was going through my bank statements and realized that my insurance is one of my largest expenses. I am a 22 year old male with one speeding ticket from 2 years ago. I decided that I would send an email to my insurance broker asking him to look @ other companies in hopes of a cheaper policy. Well this morning he wrote back to me that he had found a new policy and I will be saving $500/year! The 5 minutes spent emailing with him is probably the most profitable time I will have all year.”
He has a point: Numerous studies show that switching your car insurance can yield major savings. Research released this year by Gabi, which has data on numerous car insurance policies, found that you could save $865 a year by switching car insurance providers, while still maintaining the same coverage. Others find the savings to be lower, but still significant: A survey of people who’d actually switched car insurance by J.D. Power put the savings at $388 per year; and Nerdwallet data shows that switching to a different company, but keeping the same levels of coverage, yields you an average of $400 in savings. And Wallethub analyst Jill Gonzalez notes that some people can actually save $1,000 or more by switching car insurance.
And yet, people often don’t look around for a better-priced car insurance policy: A survey of 1,300 auto insurance consumers by Reviews.com found that 40% said they “rarely” shop around for car insurance. “It’s amazing how many people don’t bother doing that,” says Nerdwallet’s personal finance expert Kimberly Palmer. “If you don’t shop around, you are losing out on a lot of potential savings.”
And as the Redditor pointed out, shopping around for a cheaper policy that still offers the right coverage can be (almost) as easy as an email — if you have a trusted independent insurance agent (versus a captive agent, who just works for one insurance company). These agents can find you multiple quotes from different insurance companies; they are typically paid a commission from the company whose policy you choose.
The advantage of using an agent is they can do the legwork of getting different quotes for you, saving you a ton of time; the disadvantage is that you might still be able to save even more if you do the homework on your own. Plus, adds Rory Joyce, the director of product development at personal finance site Credit Karma, some large auto insurance brands won’t work with independent agents so you might not be getting quotes from them; however, he adds, that doesn’t necessarily mean you won’t get a great-priced policy from a solid company. And Gonzalez notes that because these agents are commission based, “they may try to sell you a certain policy that could earn them a higher commission.” However, she adds: “The best way to avoid this is by staying focused on getting a policy that best suits your needs.”
There are also a bunch of online tools now that can help you easily shop around for car insurance (experts say you want to get three different quotes). TheZebra.com, (Consumer Reports recommends using them) and Nerdwallet.com are some.
It’s also important to ensure that when you switch policies, you have the right amount of coverage for your needs; this tool from Insurance.com can help, as can this guide from The Wall Street Journal. Make sure the company you go with gets a good rating from consumers (this J.D. Power data can help you there). Here are more tips for getting the right car insurance for you.
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