Saving money is on everyone’s mind on these days. Lowering auto insurance costs are no exception. Indeed, trying to stay afloat during a recession can be most challenging. However, there are many things we can do to control (and in some cases, dramatically reduce) our car insurance premiums. Let’s take a look at the ways:
Being a Good Driver
Seems pretty straight forward doesn’t it? Well, that all depends which point of view we’re referring to. The one that matters unfortunately is the insurance company’s. Some insurer’s look back at your motor vehicle report for a period of five years, as they are searching for infractions such as speeding tickets, cell phone convictions, running red lights, and other incidents. The more of a “record” you have, the higher the risk you are in getting into an accident, which leads to higher premiums. This also includes the driving records of all licensed drivers living in your household. Since they are potential drivers of your vehicle, insurers want to know about them as well.
Having a loss history is also a cost factor. The more at-fault losses you have on record, the higher the cost your coverage will be. In fact, some company’s won’t even consider insuring you if you have an extensive loss history.
Maintaining Good Credit
For several years now, insurer’s have been performing basic credit report inquiries for all new car insurance applicants, as well as when they rate existing insured’s renewal policies. Insurer’s want to make sure their policyholders have the ability to pay their bills on time (meaning before the grace period starts), as well as reduce the administrative overhead that’s involved when policies must be reinstated after being placed into cancellation status for non-payment of premiums. This credit information gathering process is disclosed in your auto insurance policy declarations, and all insurance companies are involved in this relatively new underwriting procedure. Thus, the better the credit you have, the better your rate for coverage will be.
It’s About What You Drive…
Another underwriting factor is the type of vehicle you have, or that you are thinking about buying. Not all cars are created equally. If you are attempting to cut costs on your auto insurance, below are some factors to consider when purchasing a new or used car:
–Avoid “High Profile” Vehicles: Cars that have high theft rates, or that are expensive to repair will cost more to insure
–Safety Discounts: Cars that have safety features such as automatic retractable seat belts, air bags, daytime running lights, and anti-lock brakes will drive down your premium costs
–Avoid the Red Car “Myth”: Insurer’s do not charge higher premiums, and you will not get pulled over more often if you have a red car. Being a responsible driver should be your top concern
–Engine Size: The faster your car can go, the more likely you will drive it that fast. Since insurers know this, premiums can/will be higher if you drive a sports car
It’s About Where You Live…
Premiums are always higher in bigger cities than in rural areas. This is due to higher chances of insured’s reporting a loss due to increased congestion on highways (accidents), and also increased incidents of vandalism. Equally important is where you park your car at night. Cars that are garaged will yield lower premium rates for policyholders than cars that are parked on public streets or in driveways. Falling debris (e.g. tree branches, hail storms, etc.) will typically not affect your parked car if it’s kept in a garage.
Consider Mass Transit over Driving
The more you drive, the more risk of a loss you are to an insurer. Thus, if you live in an urban area and commute to work with your car on a daily basis, you may want to ask your insurance company what the cost would be if you were to drive less than 5000 miles per year as opposed to driving over say 15,000 miles per year. After crunching all the numbers (e.g. fuel costs, premium costs, mass transit costs, vehicle wear and tear costs), you may find that commuting to work via mass transit may be the better economical option for you over the long term.
“Bundling” Is Not Always Best
Most insurance companies will offer multi-policy and multi-car discounts. Every TV commercial you see involving an insurance company boasts about how you can save money by “bundling” your policies with one company (most commonly, they are referring to homeowners, auto, and umbrella policies). The fact is every insurance company offers different pricing for their policies. Meaning, if you have a good insurance broker at your side, you may find that you will ultimately pay less if you break up your policies with different companies as opposed to keeping them with one company. This doesn’t always wind up being the case, but the only way you will know is by working with an insurance broker to find out.
Choice Is Key
Since bundling is not always best, you will need access to as many insurance companies as possible to get a good sampling of rates. When you consider New York State has over 100 companies writing auto insurance, calling each one of them for a quote would not be very cost effective. That’s where insurance brokers come in…
Insurance brokers are very different from insurance agents. Agents work for (and only one) insurance company, whereas a broker represents an insured by working with scores of insurance companies to find their clients the best rate for coverage. In fact, a good broker can handle all of your policy needs including auto insurance, homeowners, umbrella, life, and even employee benefits in some cases.
Lastly, your auto insurance policy should be reviewed every two years or less. Depending on your situation, you may want to carefully consider changing your coverage options after reviewing them with your insurance professional. Here’s how:
–Deductibles: The higher your deductible, the lower the premium. Thus if you are looking to save money, choose the highest deductible amount you can afford to pay if you were to report a claim
–Consider Dropping Comprehensive & Collision Coverage: As your car gets older, the book value of your car reduces. Eventually, it will get to a point where the amount of premium you will pay to cover physical damage to YOUR car will be higher than an insurer would pay you if you were to suffer a total loss. After your car reaches five years of age, you should start to routinely check what the book value of your car is to see if it’s worth dropping comprehensive and collision coverage from your policy. Talk to your insurance professional about this before making your decision
As you can see, there are many ways we can approach cutting costs with respect to auto insurance. With a little help from a professional insurance broker, you can easily maximize your premium dollars and in most cases, lower costs.