Retiring in 2024? It Pays to Let Your Auto Insurer Know

When you own a vehicle, auto insurance is an expense you have to account for. Recent Ascent research finds that drivers in the U.S. pay an average of $3,017 per year for car insurance. And while that's a lot of money to pay in general, it might be an almost unaffordable sum once you're retired.

Retirees often have to be more budget-conscious than workers because they're limited to more of a fixed income. But if you're retiring this year, here's some good news: You may be eligible for a discount on your car insurance. You'll need to contact your auto insurance company, though, to find out.

Why retiring might lead to lower car insurance costs

There are a number of different factors auto insurers use to calculate premium rates. These include:

• Your location: You might pay more to insure a car you keep parked on a city street than on a suburban block.
• Your driving record: A history of speeding tickets could lead to higher premiums than a history of no moving violations.
• The type of car you have: A new $50,000 vehicle is likely to cost more to insure than a $15,000 used car, as repair and replacement costs are higher.

Another factor that goes into determining your auto insurance costs is how much you actually use your car. And if the answer is "not a lot," that could result in a reduced premium rate.

Once you retire, you may find that you're not driving very often in the absence of a commute. And that's something you'll want to talk to your auto insurance company about. You never know what sort of low-usage discount you'll be eligible for once you're not driving your car daily. So it's worth making a call to your insurer and talking things through.

A pay-per-mile policy might even make sense

Some auto insurers offer policies that allow drivers to pay a base premium rate and then a per-mile rate on top of that. These policies have the potential to be more cost-effective than standard ones for people who rarely drive. So if you're retiring and expect to do very little driving, it could pay to see if a pay-per-mile policy might end up saving you money.

And if your current insurance company doesn't offer this type of policy, you may want to find one that does and get a rate quote. Once you're retired, you may find that every dollar you have counts even more, since you're no longer earning a paycheck. So if you're able to shave a bit of money off of your auto insurance costs, it's bound to help.

Of course, if you're retiring and are no longer driving to work, you might also ask yourself whether it really pays to own a car at all. If you live within walking distance of stores and entertainment, you may decide to ditch your vehicle altogether and save the money you'd otherwise spend on it.

AAA found that the average yearly cost of owning a vehicle in 2023 was $12,182, which is over $1,000 a month. If that's an expense you can shed in retirement altogether, it may just be worth doing.