Tips to lower your auto insurance rates

The price you pay for auto insurance can vary by hundreds of dollars depending on the type of vehicle, place of residence and amount of coverage.

There are many ways to save on insurance, but make sure you don't cut too many corners. The appropriate policy can potentially save you plenty of money should you face liability for an accident. "In most states, having auto insurance is the law, but, from a practical standpoint, you have insurance to limit the financial damage when something bad happens," says JJ Montanaro, a certified financial planner with USAA.

The minimum liability requirements mandated by each state may not cover personal injury claims or claims resulting from damage done to other's vehicles or property. Don't get such a bare-bones policy that you put your financial assets at risk. You're basically spending money to prevent a financial catastrophe, so don't skimp.

That said, check out these money-saving tips from the Insurance Information Institute.

1. Before buy inga car, compare insurance costs. Whether considering new or used cars, check into insurance costs. Your premium is based in part on these factors:

  • Make and model of the vehicle.

  • The cost to repair it.

  • Its overall safety record.

  • The likelihood of theft.

Insurers generally offer discounts for features that reduce the risk of injuries or theft. USAA provides savings and discounts for air bags, anti-lock brakes, daytime running lights and anti-theft devices.

When shopping for a vehicle, compare prices and features on new or used cars with the USAA Car Buying Service.

2. Ask for higher deductibles. Deductibles represent the amount of money you pay before your insurance policy kicks in. By requesting higher deductibles, you can lower your costs substantially. For example, increasing your deductible from $200 to $500 could reduce your collision and comprehensive coverage cost by 15 to 30 percent. Savings can be even higher for selecting a $1,000 deductible.

"Increasing deductibles can be a prudent way to reduce your auto insurance premiums, but only if it's not going to put you at financial risk," Montanaro says. "That's where your emergency fund comes into play. At an absolute minimum, you've got to have enough set aside to cover your deductibles."

3. Reduce coverage on older cars. It may not make sense to keep collision coverage on low-value cars because the insurance costs could exceed anything you get back on a claim. To get an approximate value of their vehicles, USAA members can access USAA My Car online tools. In addition, the Estimate Trade-In feature can help anyone determine the value of a used vehicle.

4. Take advantage of other discounts. USAA, along with many other insurers, offer savings if you have more than one policy. You may also be able to find additional discounts for accident-free drivers and some defensive-driving courses.

5. Maintain good credit. In some states, your credit score could impact your auto insurance rates. While good driving habits are the best way to keep your insurance costs low, repairing a damaged credit rating through consistent bill paying and responsible use of credit can help you on and off the road. Examine your credit report for any mistakes and fight to fix them.