Car owners already know how expensive auto insurance can be. If you are leasing or financing your car, your insurance may very well be costing you more per month than your actual car payment.
Insurance rates are determined by a variety of factors based on risk – how likely a person is to have an accident or have their car stolen or vandalized. It’s all based on statistics, age and gender are two primary factors that influence rates.
Statistically speaking, the younger you are, the higher the risk you will get into an accident since young people are less experienced drivers. As a group, men are also more likely to get into serious accidents than women. Therefore, young men – whether or not they have ever been in an accident – generally pay the highest rates when compared to other demographic groups. Geographic location will also affect your rates. People who live in cities will typically have higher auto insurance premiums since urban areas have greater rates of accidents, vandalism, and theft.
Fortunately, there are things you can do to help minimize the amount of money you are shelling out for car insurance.
Tips for Lowering Your Car Insurance
Look for military car insurance discounts
There are many auto insurance companies that reward America’s servicemembers with special savings. Geico, USAA, Arabella, Farmers, and State Farm offer discounts* to military personnel. Members of Veterans Advantage may also qualify for a military discount. Military-friendly insurance companies may also have money-saving policies and procedures in place to help you cancel your car insurance in the event of a deployment, and reinstate it upon your return.
Increase your deductible
A deductible is the out-of-pocket expense that you pay before the insurance policy will kick in. When you increase your deductible, you are agreeing to pay more up front in case of a claim. In return, the insurance company will lower your rate, often substantially. Just be sure you have some money saved up to cover the deductible in the event of an accident.
Take a defensive driving class
Completing a defensive driving class either in person or online can often lower your rate as much as 10%. Take the class and submit proof of completion to your insurance company to receive the discount. Visit dmv.org to find a class in your area.
If you have enough money in savings, consider paying your entire premium all at once instead of in installments. Most insurance companies tack on a fee every month for paying in installments.
Pay on time
Insurance companies will frequently stop your coverage if your premium payment is very overdue. They will reinstate your coverage once they receive your payment, but chances are your premium will be higher than before. The company may remove discounts that you are receiving, which will result in increased rates. To avoid this, make sure to always pay on time.
Using one company for both your auto insurance and your homeowners or renters insurance is called bundling–and in many cases, it can save you a bundle. See if it might make financial sense for you to have both policies under one company. It doesn’t always end up costing less, so be sure to do the math if you’re thinking of making a switch.
Inquire about other discounts
Insurance companies are known for offering a variety of discounts. Whether you already have an auto insurance company or are in the process of looking for one, it is in your best interest to ask what discounts a company offers and find out which ones you may qualify for. You may be eligible for a discount if you have…
- Low mileage
- Good grades (students)
- Anti-theft devices
- Daytime running lights
- Air bags
- A good driving record
- A hybrid or alternative-fuel vehicle
Reevaluate your coverage needs
Your car insurance needs can change over time. For example, if you have an older car, you may want to consider dropping collision coverage. Collision coverage will pay for your repairs if you get into an accident, regardless of who was at fault. It also covers vehicle damage caused by contact with another object such as a tree or fence. For a car that is not worth that much, it might not make sense to pay hundreds of dollars for a collision premium–plus you’ll still have to pay a deductible if you make a claim. If you do decide to drop collision insurance, keep in mind that you will be responsible for all repair expenses and for replacing the car if it is stolen or badly damaged. To check the value of your vehicle, visit Kelley Blue Book.
Aside from the age of your car there are other factors that may change your car insurance requirements:
- Moving from a city to a suburban or rural area
- Changing jobs and having a shorter commute
- Going away to college and leaving car at home
If you believe your car insurance needs have changed, contact your insurance carrier.
Increase your credit score
Ah, the good old credit score. It plays a role in your ability to borrow money, your interest rates, and yes, the cost of your car insurance. Insurers are examining your FICO score to anticipate your odds of filing of a claim. The lower the score, the higher the premium.
A Consumer Reports Special Report explains that the increase can be significant. “Our single drivers who had merely good scores paid $68 to $526 more per year, on average, than similar drivers with the best scores, depending on the state they called home.”
While some states, such as California, Hawaii, and Massachusetts, have policies that prohibit insurers from using credit scores when pricing car insurance, many other states allow it. If your score is less than perfect, take steps to try to improve it. In time, your credit score will increase, and hopefully, your premium will decrease.
And last but not least – shop around
Car insurance rates can vary widely. Get quotes from multiple insurance companies and compare rates. Educate yourself beforehand about what type of coverage you may need and ask about available discounts. Contact individual providers for quotes or use an online comparison tool such as this one from nerdwallet.
*Discounts may vary by state and may not be available to everyone. Visit the individual websites for details.