Insurers Lowering Auto Rates: What, Why, And When?

There are many factors that can influence when insurance companies lower their auto rates. One of the most significant factors is age; insurance rates tend to decrease as drivers get older, with the most substantial reductions occurring when teen drivers hit 18 or 19 years old. Rates continue to decline as drivers age, particularly after passing the age of 25, and are typically lowest for drivers in their 50s.

Another factor that can lead to lower auto rates is a good driving record. Accidents, tickets, and claims can increase insurance rates, but these tend to fall off a driver's record after three to five years, resulting in lower rates. Additionally, maintaining a clean driving record for three years following an accident or infraction can lead to reduced rates.

Shopping around and switching insurance companies is also a common way to decrease auto rates. Prices can vary significantly between companies, so comparing rates from multiple providers can help identify lower-cost options.

Other factors that can contribute to lower auto rates include increasing deductibles, reducing coverage on older vehicles, bundling insurance policies, maintaining a good credit record, taking advantage of low-mileage discounts, and seeking out group insurance or other available discounts.

Improving your credit score

Make On-Time Payments

Paying your bills on time is one of the most important factors in improving your credit score. Your payment history accounts for 35% of your FICO score, which is the most widely used credit scoring model. Late or missed payments can lower your score, while a history of on-time payments can help to improve it. Set up autopay or calendar reminders to ensure you never miss a payment.

Pay Down Revolving Account Balances

The amount you owe accounts for 30% of your FICO score. Aim to keep your credit utilisation rate, or the percentage of available credit you're using, as low as possible. If you have high credit card balances, make paying them off a priority. Consider strategies such as debt consolidation loans, balance transfer credit cards, or debt management plans.

Don't Close Your Oldest Account

The length of your credit history makes up 15% of your FICO score and is influenced by the age of your oldest account. Closing an old credit card, especially one of your oldest trade lines, can hurt your credit score. Consider putting a small recurring bill on your oldest card to keep it active, or ask your card issuer if you can upgrade or downgrade to a card that better suits your needs.

Diversify the Types of Credit You Have

Your credit mix, or the different types of credit you have, accounts for 10% of your FICO score. In addition to credit cards, consider taking out other types of credit such as student loans, a car loan, or a mortgage to improve your score. However, avoid taking on more debt than necessary just for the sake of building credit.

Limit New Credit Applications

Each time you apply for credit, the lender will run a hard inquiry on your credit report, which can knock a few points off your score. Multiple inquiries in a short period, especially when applying for credit cards, can have a compounding negative effect. Only apply for credit when you need it, and check if the lender offers prequalification, which uses a soft credit check that won't impact your score.

Dispute Inaccurate Information on Your Credit Report

Inaccurate information on your credit report can have a significant negative impact on your score. Regularly review your credit report from the three major credit reporting agencies (Experian, Equifax, and TransUnion) and dispute any errors or fraudulent information you find. Credit disputes are typically resolved within 30 days, and negative information can be corrected or removed.

Become an Authorized User

If you're new to credit or rebuilding your score, consider asking a parent or loved one to add you as an authorised user on their credit card. This can have an immediate positive impact on your score, especially if the account has a positive payment history and a low credit utilisation rate.

Installing an anti-theft device

There are several types of anti-theft devices available, including manual, automatic, and remote disabling devices. Manual disabling devices, also known as active devices, must be physically turned on by the driver. Examples include steering wheel locks, brake locks, and kill switches. Automatic disabling devices, or passive devices, work without any input from the driver and are often built into newer cars. Transponder keys and audible alarms are common examples of passive devices. Remote disabling systems connect to your smartphone, allowing you to decelerate, downshift, or lock the brakes remotely.

In addition to these options, you can also consider vehicle tracking systems, such as GPS trackers or subscription services like OnStar, which can help locate and recover your vehicle in the event of theft. These systems typically come with a monthly fee but can provide valuable peace of mind and may even help prevent theft altogether.

It's worth noting that some insurance companies may have specific requirements for anti-theft devices to qualify for a discount. Be sure to check with your insurance provider to understand their criteria and confirm whether you can take advantage of this cost-saving opportunity.

Moving to a new address

The location of your new address is a significant factor in determining your insurance rates. If you are moving to another state, you will likely need to purchase a new insurance policy that complies with the regulations of that state. Each state has different minimum insurance requirements, and your rates may increase or decrease depending on these requirements. For example, some states require additional coverage such as personal injury protection or uninsured/underinsured motorist protection. Additionally, states with higher population densities and more traffic, like large metropolitan areas, tend to have higher insurance rates due to the increased risk of accidents and vehicle theft.

Other factors that can influence your insurance rates when moving to a new address include the crime rate in the area, the cost of medical bills and car repairs, and the frequency of natural disasters. If your new address has lower crime rates, better driving conditions, or a safer parking situation, you may see a decrease in your insurance rates. On the other hand, moving to an area prone to severe weather or with higher medical and repair costs can lead to an increase in your rates.

To ensure you get the best rates at your new address, it is recommended to compare quotes from multiple insurance providers. You may also want to consider bundling your home and auto insurance policies, taking advantage of discounts, and adjusting your coverage deductibles to optimize your insurance costs.

Taking a defensive driving course

Defensive driving courses are a great way to brush up on your driving skills and learn new strategies to avoid accidents. These courses cover various topics, including the effects of stress, anger, and alcohol on driving ability, crash prevention techniques, safety equipment, and skills for driving in challenging weather conditions. They can be taken online or in person and typically cost between $20 and $60.

Completing a defensive driving course can help you save on your auto insurance, but the availability and amount of the discount will depend on your state and insurance provider. Some states require insurers to offer these discounts, while others do not. The discount usually lasts for several years, and you can retake the course to maintain the savings if you still qualify after that period.

The actual discount amount can range from 2% to 10% or more, depending on your insurer, age, state, and other factors. For example, in Texas, where the average annual auto insurance cost is $1,810, a 2% discount would save you $36 per year. A 10% discount would result in annual savings of $181, even after considering the cost of the course.

Before enrolling in a defensive driving course, check with your state and insurance provider to see if they offer discounts and what specific requirements or approved courses they have. Some insurance companies may offer larger discounts for younger or older drivers, who typically have higher insurance premiums.

In summary, taking a defensive driving course can not only make you a safer driver but also help you save money on your auto insurance. By improving your driving skills and reducing the risk of accidents, you can benefit from both increased confidence behind the wheel and potential insurance savings.

Buying a new, cheaper car

One of the most effective ways to lower your insurance costs is to buy a new, cheaper car. Before you buy a new or used car, check the insurance costs. Car insurance premiums are based on the car's price, the cost to repair it, its overall safety record, and the likelihood of theft.

Compare insurance costs

Insurance premiums for newer cars are usually more expensive because they cost more to repair and have higher values than used cars. Insurance companies offer the same types of coverage for new and used cars, but you may have different coverage needs depending on the age of the vehicle.

Insurance costs for new vs. used cars

Insurance costs for new vs. used cars depend on several factors, including the age, make, and model of the car. On average, full-coverage car insurance costs a bit less each year as cars get older. However, other factors such as your age, location, and type of coverage can affect the cost of insurance more than whether the car is new or used.

Ways to save on car insurance

• Switch providers: You can shop around for a new provider at any time, and there is usually no penalty for switching companies frequently.
• Change coverage amounts: Lowering your coverage limits or eliminating coverage you don't need can help reduce your insurance costs.
• Raise your deductible: Increasing your deductible will lower your premium, but make sure you can still afford to pay the deductible if needed.
• Consider usage-based insurance: Programs like Progressive's Snapshot® offer discounts for safe driving by tracking your driving in real time.
• Compare different models: Car insurance costs vary significantly depending on the model, so consider shopping around for different models and comparing insurance prices.

Tips for repricing your car insurance

• Review your current coverage: Understand what you are paying for and the types and limits of your current coverage.
• Get quotes from several insurers: Gather the necessary information, such as your driver's license and vehicle information, and get quotes from multiple insurers to find the best rates.
• Buy new coverage and cancel the old policy: Ensure that your new coverage is in effect before canceling your old policy to avoid a lapse in coverage, which could make future insurance more expensive.

By following these steps and considering the various factors that affect insurance costs, you can effectively lower your insurance rates when buying a new, cheaper car.

Frequently asked questions