Like life itself, automobile insurance isn’t a constant. Well, a more accurate statement is that the way an insurance company looks at you isn’t a constant. As elements of your life change, they may also change the way auto insurance companies score you when calculating your premium.
As with managing your investments and credit rating, staying on top of your automobile insurance can pay off in a big way with lower premiums.
We are constantly bombarded with insurance-company television ads telling us that we are likely to save hundreds of dollars a year in premium costs if we switch to them. How can that be? Can everyone save big bucks by moving from one insurance company to another and then on to the next? Common sense tells us, no. But, some individuals can save money moving from their current insurance provider to another provider because no two insurance companies rate us in exactly the same way. And that’s not all. Your current insurer may rate you differently from one year to the next based on your life changes.
Although insurance providers set rates based on averages and probabilities, they don’t treat every insured driver equally. Getting a cheaper insurance rate often depends on an individual’s needs, driving history, credit health and so forth. Yes, you might get a lower premium by moving from your current insurer to another company, but that doesn’t mean your neighbor will. According to Experian’s director of public education Rod Griffin, “Factors that affect your car insurance cost include where you live, your driving record, the vehicle type, how much you drive, demographics (age, gender and marital status) and your credit score.”
As a savvy consumer, it’s up to you to do the research and take the steps necessary to get the absolute best coverage at the lowest rate possible.
Here are some tips for lowering your vehicle insurance costs:
Review Your Policy Annually
Because insurance companies do base their rates on averages and probabilities, how they assess you as a risk can change from year to year. That’s reason enough to go online and compare rates. Even if you did this a year ago and believe you found the best deal at the time, that doesn’t ensure that it is still the best deal out there.
Kim Lankford is the "Ask Kim" insurance adviser at Kiplinger’s. She said everyone should shop around from time to time just to stay abreast of what’s out there. "You can get some good ideas just by going to different insurances sites and checking prices," she added.
Review Your Policy With Any Life Change
Changing employers, relocating, getting married, adding a teenage driver, retiring, buying a new car and so forth should signal you to alert your insurance agent to the change, request an update to your current policy and compare costs with other insurance companies.
Changing employers and relocating can alter the number of miles in your daily commute. Obviously retirement would end that commute entirely. Each insurance company has its own mileage threshold at which your premium is affected.
If you are 25 years old or younger, getting married can reduce your premium with some insurers.
Adding a teenage driver to your policy is, perhaps, the single most important motivator for doing some price comparisons, according to Lankford. Some insurers treat teen drivers differently than others. "A teenage girl can increase premiums by 50%, in some cases, and adding a teenage boy can double the price," Lankford said.
Buying a new car presents the ideal time to shop around. Different insurance carriers evaluate the potential risk of various cars differently. Once you know what your current insurance company will charge for a car you are considering, check out the cost with some other carriers.
Review Your Insurance Company’s Available Discounts
Every insurance company offers a list of discounts. It’s up to you to stay current with the discounts offered and to request the ones you qualify for.
Most publish their list online. State Farm, for example, lists 13 different vehicle insurance discounts on its Web site www.statefarm.com. Although the discounts available vary from state to state, it gives price breaks for everything from safety features on your car, such as anti-lock brakes and daytime running lights, to a five-year clean driving history, defensive driving courses, and, in some cases, even just renewing your policy.
Bundle Your Various Insurance Policies With One Insurer
Keeping all of your insurance business with the same insurance company can earn you big savings. This is true whether it’s bundling multiple cars, or bundling policies for cars, homeowners, RVs and so on.
Here’s something else to consider: If you’re married with multiple vehicles, you and your spouse might not be insured to drive one another’s vehicles unless they’re covered under the same policy.
Increase Your Deductible
The deductible is the set amount you pay out of pocket when your insurance company pays a claim. A low deductible costs the insured more than a high deductible because the insurance company reasons that with a low deductible, the insured will file more damage claims. With a $250 deductible, the insured will be tempted to file a claim for any loss over $250. With a $1,000 deductible, the insured can’t file for a loss below that amount.
Lankford said that beyond significantly lowering premiums, raising the deductible to at least $1,000 can help maintain the claim-free discount that many insurance companies offer.
Drop Your Collision and Comprehensive Coverage
There’s little reason to insure a car that’s worth only slightly more than your policy’s deductible. If you have a car that’s paid for, go to NADA.com Opens a New Window. or KBB.com Opens a New Window. and research its market value. It’s possible you’re paying more in annual premiums than the insurance company will pay you in the event of a total loss. If so, save yourself a few bucks by dropping the collision and comprehensive coverage.
Review Your Credit Score
Yes, your credit can influence the amount of your annual premium. Some companies will give you as much as a 50 percent discount for good credit.
Two reasons, stated Griffin, “According to FICO (a California-based data analytics company), 95 percent of auto insurers use what’s called a credit-based insurance score to help determine your rate. That’s because studies have shown that people with lower credit scores tend to file more claims, and your credit score is also predictive of the likelihood you’ll pay premiums on time.”
In fact, your credit score is a key factor in determining your premium amount.
“Aside from shopping around to different insurance companies and bundling policies, which can help to reduce costs, consumers should make sure their credit score is in good shape before buying a policy,” advised Griffin. “If it’s not, there are important steps they can take. For example, if you’re behind on any payments, get caught up as quickly as possible and pay on time going forward. Also, if you have high credit card balances, work on paying them down. Finally, consider using Experian Boost™ to include your utility and phone payments in your credit score. If it helps, you’ll see the new-and-improved score immediately.”If your credit score has improved significantly since your insurance policy was issued, check with your carrier to determine if a good-credit discount is available. If not, it’s another reason to shop around.