Buying auto insurance can be costly, so is it possible to reduce your premium? In short, yes, it is possible! Most drivers know the basic things that can be done to lower the cost of monthly insurance premiums. However, there are many more ways other than responsible driving or bundling insurance coverage that result in a lower insurance premium.
How to Obtain Car Insurance
How do you obtain insurance? There are three ways to purchase car insurance. It can be bought from an insurance company, a broker working with several insurance companies, or an agent who works specifically for one company. If unsure about which way to purchase your coverage, check with family and friends for a recommendation.
The cost of insurance is determined by several factors besides deductible and coverage limits, such as:
- Age
- Address
- Credit score
- Driving history
- Make and model of car
How to Reduce Auto Insurance Premiums
Here are some additional ways to reduce auto insurance premiums.
Increase Your Deductible
A higher deductible will result in a lower monthly premium. You will assume more responsibility for the cost of any damage to your vehicle. On the flip side, the lower your deductible, the more you will pay for insurance coverage.
Compare Quotes
Compare auto insurance quotes from several carriers. Before choosing a carrier, research it to understand the company’s financial strength and reputation.
Ease of Conducting Business
It helps to understand up front how you will interact with the insurance company. For example, do they offer online bill pay, do they have online claim reporting, is there 24/7 customer service available, are there social media platforms, how are customers notified of policy changes, or how do customers get answers to billing questions?
Discounts Available
Many insurance carriers offer discounts in certain situations. Things such as customer financial stability, good student reduction, multi-car families, vehicles with anti-lock brakes, and vehicles with protective and safety devices are often eligible for discounts.
Talk with Family and Friends
There is power in referrals. Discuss with friends, family members, and co-workers their choice of insurance carriers and their experience with them. Also, read the reviews on company websites of carriers to review comments by current customers and check their star ratings.
Explore Various Payment Options
Some companies offer a lower premium if you pay your insurance bill in full every six months or yearly rather than monthly.
Improve Your Credit Score
A lower credit score will have a significant impact on the amount of your insurance premium. A bad credit score can increase the amount you pay by as much as 59%. While purchasing auto insurance and the details of your coverage should not affect your credit score, missing payments could be reported to credit agencies.
Bundling Coverages for Discounts
A 5-25% discount on each policy can be offered if coverage is bundled. For example, homeowners, auto, boat, life, or health coverage can be bundled to receive significantly lower premiums. The more products that are bundled, the more significant the discount.
Price
Price should not be the only consideration when deciding on an insurance company.
Pricing differs between insurance companies for many reasons.
A lower price could mean you have less coverage. Therefore, more money out of your pocket will need to be paid when a loss occurs.
A lower price could mean that the company is new to the market and does not have the knowledge and experience another carrier would.
Safety Equipment
Forbes states that it has been proven that technology can prevent accidents.
Safety features can help reduce auto accidents and thereby reduce auto insurance premiums. Automatic emergency braking, blind spot warning, city automatic emergency braking, forward collision warning, high-speed automatic emergency braking, lane departure warning, lane keeping assistance, pedestrian detection, and rear cross-traffic warning are examples of safety features that can lower your monthly premium.
Take a Safe Driving Course
Taking a voluntary safe driving course can lower your auto insurance premiums. Discounts can range from 2% to 10% depending on your insurance carrier. Some state laws offer a 10%, three-year discount for seniors aged 55 and older who complete a defensive driving course!
Most defensive driving classes will cover the basics such as crash prevention techniques, such as appropriate following distance, distracted driving, protective and safety equipment in your car and its correct use, safely sharing the road, and special skills needed for driving challenges, such as inclement weather, things that can affect your ability to drive safely such as anger, alcohol, or stress.
Concessions for Older Vehicles
As older vehicles do not need liability coverage, only collision and comprehensive, they are less expensive to insure.
Because vehicles lose value as they age, potential insurance payments after an accident are less, especially in the case of a total loss.
However, if you have a vehicle 15 or 20 years old or older, it could be considered a classic car. A classic car is defined based on how it is kept and used. It needs to be driven less than 5,000 miles per year and be in mint condition and be used as a second car only. Classic car insurance is cheaper than standard car insurance.
Older vehicles are separated into three classifications. Classic cars are vehicles over 20 years old, antique cars are over 45 years old, and vintage cars were built between 1919 and 1930.
Maintain a Clean Driving Record
A clean driving record indicates that you are a safe driver, therefore a lower risk to insure.
Conversely, driving convictions, accidents, and moving violations can raise rates significantly. To reduce auto insurance premiums, drive carefully and make sure your driving record remains clean.
Vehicle Ownership
Make sure you can prove vehicle ownership to show you have an insurance interest. If you cannot, most insurance companies will probably refuse to provide you with insurance coverage.
How Insurance Companies Determine Rates
To get the best rates possible, it is necessary to understand what factors insurance companies use to determine the price of car insurance. Here are some additional factors that affect your premium costs.
The Driver’s Demographics
Insurance companies have determined that certain characteristics pose less risk than others. Your marital status, gender, age, employment, and home ownership can affect what price you are charged for car insurance premiums.
Where You Live
Insurance premiums will vary from state to state. Even within states, companies will consider your zip code, as some areas have a greater chance of car theft, accidents, or other risks. While there isn’t much that can be done about where you live, these factors will determine how much you will pay for car insurance.
The Type of Vehicle You Drive
Your vehicle is a major factor in determining your premium costs. The more expensive cars will cost more to insure because they cost more to repair or replace.
Also, some makes are more popular than others with car thieves, or more prone to damage. Repairs are more costly if hard-to-find parts or exotic construction materials are required.
If you are considering a new vehicle, first compare rates on the models you are interested in. You can save money by choosing a car that costs less to insure.
The Amount of Coverage You’ll Need Affects the Cost
The more coverage you purchase, the more it will cost. A basic insurance package includes liability, comprehensive, and collision. When purchasing the minimum vehicle coverage that is required by your state and lender, you can choose the type and amount of insurance you want, allowing you to lower costs.
If you have an older car, you can reduce auto insurance premiums by eliminating or reducing comprehensive and collision coverage. In the event an older car is totaled in an accident, this coverage may not pay out enough to justify the cost.
You can also save money by eliminating extras such as reimbursement for rental cars which you may not need, or roadside assistance.
Vehicle Usage
Drivers who put more miles on their cars are more likely to become involved in an accident. So, the amount you drive can affect your auto insurance rates. It’s possible that if you drive fewer than 12,000 yearly, you may qualify for a reduced rate.
Your Driving History
Insurers will check your driving record before calculating your insurance premiums. If you have a record of moving violations, speeding in particular, driving under the influence of alcohol, reckless driving, or other unsafe driving will result in higher premiums. More recent offenses will have more of an effect on your insurance costs.
If you have been in an accident while under the influence of alcohol or drugs, expect your premiums to be much higher. To reduce auto insurance premiums, always drive safely to avoid citations and accidents.
Past Insurance Coverage and Claims History
If you have gone without auto insurance coverage for some time, you will more than likely be charged more for your car insurance premium. Also, if you have filed a lot of insurance claims in the past, an insurer will assume you will continue to do so. Therefore, to protect themselves, they will charge you more for your premiums.
Continuity in coverage with no gaps can reduce your premiums. A claim should always be filed if another party is involved, but for smaller incidents like backing into a fence or tree resulting in damage to your bumper, would be better to take care of yourself rather than filing a claim which could increase your insurance rate.
