Orlando Harmon
Car insurance is a necessary expense for drivers, but it can be costly. The good news is that there are several ways to reduce your auto insurance premium. Firstly, it is important to shop around and compare rates from different insurance companies, as prices can vary significantly. You can also increase your deductible, which is the amount you pay out-of-pocket before your insurance policy kicks in. Improving your credit score, maintaining a good driving record, and taking advantage of discounts are other effective strategies. Additionally, consider the type of car you drive, as safer and more affordable vehicles tend to have lower insurance premiums. By implementing these strategies, you can keep your auto insurance costs down without compromising on the coverage you need.
What You'll Learn
Shop around for better rates
Shopping around for better auto insurance rates is one of the most effective ways to keep your auto insurance costs down. Prices vary from company to company, so it's worth putting in the time and effort to find a better deal. Here are some tips to help you shop around for better rates:
Get Multiple Quotes
It's important to get quotes from several companies to find the best rate. You can do this by contacting companies directly, accessing information online, or checking with your state insurance department, which may provide comparisons of prices charged by major insurers. Aim to get at least three price quotes to ensure you're making a well-informed decision.
Compare Different Types of Insurance Companies
There are different types of insurance companies, including those that sell through their own agents, those that use independent agents to offer policies from multiple companies, and those that sell directly to consumers over the phone or online. By comparing rates across these different types of companies, you can find the most competitive rates.
Consider More Than Just Price
While price is important, it's not the only factor to consider when shopping for auto insurance. It's crucial to choose a financially stable company that will be able to pay out claims. Check the financial health of insurance companies using rating companies like AM Best and Standard & Poor’s. Additionally, don't hesitate to ask friends and relatives for their recommendations and check consumer magazines for reviews.
Compare Quotes Annually or Bi-Annually
Auto insurance rates can change over time, and different companies may offer discounts or promotions to attract new customers. Therefore, it's a good idea to compare quotes from competing companies at least once a year or every two years. This ensures that you're staying up-to-date with the latest rates and taking advantage of any potential savings.
Understand What Affects Your Insurance Rates
Various factors influence your auto insurance rates, including your driving record, age, credit history, vehicle, and location. Understanding these factors can help you make more informed decisions when shopping around. For example, if you have a poor driving record or credit history, you may need to focus on finding companies that specialize in high-risk drivers.
Use a Trusted Insurance Comparison Site
To make the process of comparing rates easier, consider using a trusted insurance comparison site, such as The Zebra. These sites allow you to input your information once and receive quotes from multiple companies, saving you time and effort. However, be cautious of lead-generation sites that sell your information to insurance companies, as this may result in unwanted spam and solicitations.
Auto Insurers: Exclusion Policies Explained
You may want to see also
Improve your credit score
Improving your credit score can help you get cheaper auto insurance. Here are some ways to do that:
Pay your bills on time
Paying your bills on time is a fundamental step in improving your credit score. Late and missed payments are the biggest factors that affect your credit score. By making it a habit to settle your bills on or before their due dates, you can positively impact your credit and, consequently, your insurance scores.
Keep hard credit inquiries to a minimum
Credit inquiries come in two forms: hard checks and soft checks. Whenever you apply for a line of credit, the company pulls your credit report, which constitutes a hard inquiry and does affect your score. Too many hard inquiries can negatively impact your score. If you are trying to build your credit, consider waiting to apply for a loan or line of credit.
Monitor your score regularly
Keeping a close eye on your credit score can be advantageous for multiple reasons. Being aware of your score enables you to take proactive measures toward improvement. Furthermore, routine checks of your credit reports can help you uncover errors or signs of identity theft early on.
Maintain old lines of credit
Maintaining long-standing credit accounts can benefit your credit score, including the portion that influences your insurance rates. The duration of your credit history can contribute significantly to your score, accounting for 15 to 20 percent. Instead of closing an unused credit card, consider using it sparingly and keeping up with timely payments. This approach can help fortify your credit history and minimize your credit utilization ratio.
Be aware of your credit utilization ratio
In addition to the number of lines of credit you have, your credit utilization ratio will also impact your credit rating. Your credit utilization ratio measures how much credit you're using relative to your credit limit. While there's no set rule, many finance professionals recommend that you utilize no more than 30% of your total available credit at any given time. If you're using more, paying off some of your debt may help improve your credit score and, in turn, your credit-based insurance score.
Add Renters Insurance to Progressive Auto
You may want to see also
Increase your deductible
One of the most effective ways to keep your auto insurance costs down is to increase your deductible. A deductible is the amount you pay before your insurance policy kicks in. For example, if you have a $500 deductible and your vehicle incurs $1,500 of damage, you will pay $500 and your insurer will cover the remaining $1,000.
When you buy a car insurance policy, you can choose your deductible amount, which typically ranges from $250 to $2,000, with $500 being the most common choice. A lower deductible means higher auto insurance rates because the insurance company will need to pay out more if you make a claim. On the other hand, a higher deductible will generally result in lower premium costs. For example, increasing your deductible from $200 to $500 could reduce your collision and comprehensive coverage cost by 15 to 30%, and opting for a $1,000 deductible can save you 40% or more.
However, it is important to ensure you have enough money set aside to pay the higher deductible in case of a claim. You should also consider your driving habits and history before choosing a higher deductible. If you have a good driving record with no claims in recent years, increasing your deductible is a good way to save money on your insurance costs. However, if you have a history of accidents and frequently file claims, a higher deductible may not be the best option as it could end up costing you more.
Additionally, it is worth noting that the savings from a higher deductible may not be significant if you have to pay a substantial amount in repairs or claims within the first few years. For instance, if you increase your deductible from $500 to $1,500, you will need to go without a claim for approximately 3.5 years for the savings to outweigh the higher deductible. Therefore, it is crucial to weigh the potential savings against the increased financial risk before deciding to increase your deductible.
Gap Insurance: Auto Loan Essential?
You may want to see also
Take a defensive driving course
Taking a defensive driving course is a great way to lower your auto insurance costs. Here's everything you need to know about how it works and what to expect:
Defensive driving courses are designed to improve your driving skills and help you become a safer, more cautious driver. These courses go beyond the basic rules of the road and focus on teaching you specific strategies to anticipate and react to unexpected situations, keeping yourself and others safe. They cover various topics, including the risks and causes of accidents, statistics on common safety concerns, and techniques to quickly identify and react to potential dangers.
Insurance providers care about your driving history and driving ability because it directly impacts their risk of having to pay out for claims. The safer your driving, the less likely you are to get into an accident and make a claim. So, by taking a defensive driving course, you're proving to your insurer that you're committed to being a safe driver, which can result in lower insurance premiums.
The amount you save depends on several factors, including your insurer, age, state, and the original cost of your insurance. Discounts typically range from 2% to 20%, with an average of around 10%. For example, if you pay $1,810 a year for insurance, a 10% discount saves you $181 annually. Even with a smaller discount of 2%, you'd still save $36 a year.
The discount usually lasts for several years, often three to five years. So, over time, the savings can be significant. For example, with a 10% discount over three years, you could save over $500.
Yes, defensive driving courses can also help you get a ticket dismissed, remove points from your license, and improve your overall driving skills, making you a safer driver.
Before signing up for a course, check with your insurer to confirm they offer a defensive driving discount and understand their specific requirements. Some insurers have age limits or only offer the discount to certain age groups. Additionally, ensure you choose a course that is approved by your state and insurer.
Defensive driving courses are generally affordable, ranging from $15 to $100, with most online courses costing between $20 and $40. So, even with the course fee, you're likely to still come out ahead with the insurance savings.
Auto Insurance Claims: Strategies to Prove Your Innocence
You may want to see also
Buy an insurance-friendly car
When it comes to buying a car, it's important to consider not just the upfront cost but also the ongoing expenses associated with ownership, including insurance. The car you drive can have a big impact on your auto insurance premiums. Here are some tips to help you choose an insurance-friendly car:
Avoid Expensive or Sporty Cars
The cost of collision coverage, at a minimum, will rise with the value of the vehicle. Vehicles that could be interpreted as sports cars, for example, will typically cost more to insure. This is because insurance companies believe that drivers of these cars are more likely to speed or drive recklessly, leading to a higher risk of collisions. So, if you're looking for an insurance-friendly car, it's best to steer clear of expensive or sporty options.
Opt for Safety Features
Safety features in a car can result in lower insurance premiums. Before purchasing a vehicle, get a list of safety equipment from your auto insurance company that will help lower your premium. Look for cars that incorporate as many of these features as possible. Some examples include a security system, passenger and rear seat airbags, and anti-lock brakes. By choosing a car with ample safety features, you can not only drive more confidently but also enjoy the benefit of reduced insurance costs.
Choose a Reliable and Safe Vehicle
Insurance providers consider the type of vehicle you drive when calculating your insurance rate. To get the best rate, opt for a car that is considered safe and reliable by your insurance company. Check the Insurance Institute for Highway Safety (IIHS) website for information on vehicles with good safety scores. The IIHS identifies the safest cars based on various testing criteria, and choosing one of these vehicles can lead to significant savings on your insurance premiums.
Consider a Family-Friendly Vehicle
Family-friendly vehicles tend to be cheaper to insure because insurance companies associate them with cautious drivers who have a more low-key lifestyle. Even if you're not a family-oriented driver, you can benefit from the insurance company's analysis of past claims and experience with a particular vehicle. So, if you're looking for an insurance-friendly option, consider choosing a car that is typically driven by families.
Go for a Base or Lower-Priced Model
When buying a new car, consider choosing the base trim or a lower-priced model. Cars with high-end features such as navigation systems, premium sound systems, or power moonroofs are more expensive to insure. This is because these additional features are usually more costly to repair or replace if damaged. By opting for a more basic model, you can save money on your insurance premiums while still getting a reliable and functional vehicle.
Research Affordable Insurance Rates
Before purchasing a car, do your research on insurance rates for different makes and models. Contact insurance providers to get quotes and compare the costs of insuring your desired vehicle. This will help you make an informed decision and choose a car that fits not only your lifestyle but also your budget for insurance. Remember that insurance rates can vary significantly between vehicles, so this step is crucial in keeping your overall ownership costs down.
Son in Military: Auto Insurance Options
You may want to see also
Frequently asked questions
If you're looking to buy a new car, consider the insurance costs of different models. Safe, moderately priced vehicles such as small SUVs tend to be cheaper to insure than expensive or sporty cars. You can also save by choosing a car with plenty of safety features.
If your car is older, consider dropping collision and comprehensive coverage. These types of insurance are designed to protect your vehicle, but if your car isn't worth much, you might be paying for coverage you don't need.
You can reduce costs by increasing your deductible, which is the amount you pay before your insurance policy kicks in. For example, increasing your deductible from $500 to $1000 could save you up to $500 a year.
Improving your credit score can lead to lower insurance premiums. Insurance companies in most states can check your credit-based insurance score when setting insurance premiums, so focus on making all your loan and credit card payments on time, keeping your credit card balances low, and only opening new credit accounts when necessary.
