Full Coverage Auto Insurance: Orman's Guide To Switching

Financial expert Suze Orman has some surprising advice for those looking to save money on their auto insurance. While auto insurance is a competitive business, with many companies vying for your business, it is important to be aware of the factors that influence your premium rates. One of the most important factors is your credit score, which is used by auto insurance companies in most states when calculating premium rates. A higher credit score can lead to a more competitive rate, while a poor credit score can make auto insurance more expensive. Therefore, it is beneficial to work on improving your credit score by paying your bills on time, removing errors from your credit report, and paying off credit card debt. Additionally, it is recommended to shop around for the best auto insurance deal and consider raising your deductible to at least $1000, as a higher deductible can result in savings of 5-10% on your premium cost. Furthermore, if you have a short commute or drive less than 10,000 miles annually, you may be eligible for a low mileage discount. By following these tips, you can save hundreds of dollars on your auto insurance premium.

Shop around for the best deal

Shopping around for the best auto insurance deal is a must if you want to save money. Many drivers don't do this, but it's a competitive market and you can cut your costs by 10% or more. Even if you have bundled your homeowners and auto coverage, it's still worth shopping around. You may find that the savings from switching your auto insurance outweigh the discount you get for bundling.

When looking for a new auto insurance policy, it's important to consider your credit score. In most states, a version of your credit score can be used to determine your premium. A higher credit score can make you seem more trustworthy as a consumer, and you may be rewarded with a more competitive rate. On the other hand, if your credit is poor, your auto insurance could get more expensive. So, if you pay your bills on time, remove errors from your credit report, and pay down some debt, you'll likely see an improvement in your credit score over time, which could lead to cheaper car insurance.

Another way to save money on auto insurance is to increase your deductible. Suze Orman recommends having a deductible of at least $1,000. This will deter you from making claims for minor issues, which can cause your premium to increase or result in denied coverage. A higher deductible can also save you 5% to 10% on your premium cost. Just make sure you have enough money in your emergency savings fund to cover repairs.

You can also grab a low-mileage discount if you don't have long commutes or if your family has one car that's mostly used for carpools and local trips. Insurers may offer a discount for annual mileage below 10,000 miles.

Raise your deductible

Keeping a low deductible on your auto insurance policy can be a costly mistake. Financial expert Suze Orman recommends raising your deductible to at least $1,000, and here's why.

Firstly, a low deductible of $250 or $500 might tempt you to make claims for minor issues. However, making frequent claims can backfire as your insurer may increase your premium at the next renewal or even deny coverage altogether. On the other hand, a higher deductible discourages you from making small claims and can help you save 5% to 10% or even more on your premium cost.

Secondly, by increasing your deductible, you can save a significant amount of money on your auto insurance premium. Raising your deductible to $1,000 can lead to savings of up to 25% on your premium. This means you could be paying hundreds of dollars less each year for the same coverage.

However, it is important to ensure that you have sufficient funds in your emergency savings account to cover repairs and other expenses in the event of an accident or claim. Without an adequate emergency fund, a higher deductible could put you in a difficult financial situation if you need to pay for repairs or other costs out of pocket.

In addition to raising your deductible, there are other strategies to reduce your auto insurance costs. Shopping around and comparing rates from different insurers is crucial, as rates can vary significantly. Even if you have bundled your homeowners and auto coverage, it is worth checking if the savings from switching your auto insurance outweigh the discount received for bundling. Maintaining a good credit score is also beneficial, as it can positively impact your premium in most states. Finally, if you have a short commute or drive less than 10,000 miles annually, you may be eligible for a low-mileage discount from your insurer.

By implementing these strategies, you can effectively reduce your auto insurance costs without compromising your coverage.

Grab a low mileage discount

If you don't have long commutes, or your family has one car that is mostly used for carpools and local runs, you may be able to get a low-mileage discount on your auto insurance. Insurers such as Metromile, Nationwide, and Allstate offer low-mileage discounts, with savings of at least 8% at the top companies.

Most auto insurance companies require drivers to travel fewer than a set number of miles per year to qualify for a low-mileage discount. This number varies by company, with some requiring drivers to drive fewer than 7,500 miles per year, and others setting the threshold at under 10,000 miles per year. Drivers may also need to use a mileage-tracking device or app to verify their mileage.

State Farm, for example, offers a low-mileage discount through its Drive Safe & Save program. Policyholders who drive less than 7,500 miles per year and enrol in the program can receive a discount of up to 30% off their premium. The discount is adjusted every six months based on actual driving behaviour.

To qualify for a low-mileage discount, contact your insurance company to see if it offers such a discount and what the requirements are. You may need to provide proof of your annual mileage, such as pictures of odometer readings or verification from a third party.

In addition to low-mileage discounts, there are other ways to save on your auto insurance. Shopping around for the best rates, raising your deductible (if you have enough emergency savings), and taking advantage of other discounts offered by your insurance company can all help lower your premiums.

Keep your credit score high

Keeping your credit score high is important if you want to be approved for loans or credit cards. A good credit score will also mean lower interest rates, which means more cash in your bank account. Here are some tips to keep your credit score high:

• Pay your bills on time. Payment history accounts for 35% of your credit score.
• Keep your credit card balances low. The higher your credit card balance in relation to your credit limit, the worse your credit score will be. Aim for a credit utilisation ratio of 30% or lower.
• Don't close old credit cards. When you close a credit card, your credit card issuer no longer sends updates to the three major credit bureaus—Experian, Equifax, and TransUnion—which hurts your score.
• Limit your applications for new credit. Too many credit inquiries, especially from credit card issuers, can negatively impact your score.
• Routinely check your credit report for errors. Errors on your credit report are common, and you can take advantage of the free yearly credit reports you're entitled to from TransUnion, Experian, and Equifax.

Pay bills on time

Paying your bills on time is a key factor in keeping your auto insurance premiums low. This is because your auto insurance premium is influenced by your ability to pay your bills on time, as well as other indicators of your financial health.

In addition to paying your bills on time, there are several other steps you can take to ensure you are not overpaying for your auto insurance. Firstly, it is important to shop around. Auto insurance is a highly competitive business, and you may be able to save a significant amount of money by switching providers. Even if you have bundled your homeowners and auto coverage with the same insurer, it is worth investigating whether the savings from switching your auto insurance outweigh the discount you receive for bundling.

Secondly, consider raising your deductible. A deductible of $250 or $500 is generally considered too low and can tempt you to make claims for minor issues, which can lead to increased premiums or even denial of coverage. By increasing your deductible to $1,000, you may be able to save 5% to 10% on your premium cost. However, it is important to ensure you have enough money in your emergency savings fund to cover repairs.

Another way to save on auto insurance is to take advantage of low mileage discounts. If you have a short commute or a car that is primarily used for local trips, your insurer may offer you a discount for annual mileage below 10,000 miles.

Finally, maintaining a high credit score can also help lower your auto insurance premiums. In most states, a version of your credit score is used to determine your premium. By taking steps to improve your credit score, such as paying your bills on time, removing errors from your credit report, and paying off credit card debt, you can positively impact your auto insurance rates.

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