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Lots of people take an in-depth look at their budget at the beginning of the new year. The holiday season may have in more spending than usual. But with the new year, it’s an opportunity to rein in those expenses a bit.
Cutting things like dining out and wardrobe upgrades are obvious ways to spend less each month. But you may be looking for even more substantial savings. With fixed expenses, like rent or your car payment, there isn’t 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?
To help explore the do’s and don’ts of adjusting your auto insurance policy, we talked to Cate Deventer, an insurance writer and editor at Bankrate.com. Here’s what you should know.
Don’t scale back your coverage to save money. “If your monthly budget is really stretched, it might seem like a good idea to lower your car insurance coverage or limits to save money. This is not something insurance professionals recommend doing,” Deventer says. “While it may lower your monthly bill, you’ll actually be at a greater financial risk if you get into an accident.”
Don’t change providers frequently. “You probably don’t want to switch insurance providers too often because you might be missing out on things like loyalty discounts. If you’re changing providers every year, you’re never really building up that track record with one providerDeventer explains.
Scale back endorsements to save money. Rather than change 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. Trim back optional things like roadside assistance or car rental if you absolutely have to lower your car insurance bill. If you’re going to change anything, that’s what you should focus on, not your liability, collision or comprehensive coverage.”
Review your coverage at major life stages. “Generally, if you’ve had some kind of 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 any time your finances change, that could be an opportunity to check out new providers because your life is different, and there might be another company that better fits your needs,” Deventer says.
So the good news is, yes, there are ways to save on your auto insurance. But switching plans often or reducing your coverage or liability isn’t the way to do it. Instead, decide what endorsements you can live without and cut those to save some extra dough each month.
If you liked this story, check out how to get back on track if you’re buried in debt.
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