Six Tips for Lowering Your Car Insurance Rate
Check out these hot tips for finding the best combination of coverage and price.Tweet
Think you're paying too much for your car insurance?
Understanding your car, your policy, and your insurance company can only help you - and your wallet - in the long run.
"In our research, we found that only about one in three consumers shop for insurance annually," says Jeremy Bowler, senior director of the insurance practice at J.D. Power and Associates.
"Many consumers don't realize there is such a wide range of prices on offer for their insurance needs or that prices can and indeed do change regularly," says Bowler.
When you request a quote or apply for car insurance, remember these six tips for finding lower rates.
Tip 1: Shop and Compare
When it comes to auto insurance, it could pay to be picky. By reviewing multiple local insurers, you're likely to find better deals than the first policy offered to you.
"Start by gathering at least three or more quotes from different insurance companies for their auto policy," says Bowler. "In most markets, insurance companies have been filing new rates and, in some cases, developing new 'products' that could represent significant savings for consumers."
Bowler adds that even if you find a great local policy, you should still shop around about every 12 months as market conditions and insurance needs change over time. Today's ideal policy may not be the best available for you next year.
Tip 2: Do Some Research
Pop quiz: Is everything on your policy necessary for your needs?
If you don't know, do your homework. Speak to licensed agents and research online to discover important information about policy options.
For example, Bowler says if you own a vehicle outright and its replacement cost is low, remove comprehensive coverage from your policy to possibly create substantial savings.
"This of course only makes sense if you can afford to pay out of pocket to repair or replace your vehicle in the event of an accident," says Bowler.
Tip 3: Provide Accurate and Complete Information
When you request a quote or complete an application, remember to be as thorough and forthcoming as possible.
The National Association of Insurance Commissioners (NAIC), a regulatory organization run by the chief insurance regulators of all 50 states, notes that it helps to be accurate because your insurance premium is influenced by your application information. A premium is the fee charged by insurance companies for your coverage.
According to the California Department of Insurance, it helps to know the following when applying for a quote:
- Your desired coverage and deductibles
- Your required limits of liability
- Basic information on all drivers you seek to cover, including names, age, marital status, and sex
- Driving records for all drivers that will be covered
- Your vehicle ID number
- The year and cost of your vehicle, along with any special equipment
Tip 4: Take Advantage of Discounts
Pay attention to special or ongoing discounts offered by your insurer. This may require asking what you qualify for, says the NAIC.
The NAIC notes that discounts may be offered for a variety of reasons, including multiple vehicles on a policy, completing suggested driver's education programs, having a strong driving record, or purchasing a home or life insurance policy with the same company.
"Rather than seeking an auto-only quote, consider shopping the entire portfolio of household insurance needs for the best total value," says Bowler.
Your age or your vehicle's anti-theft device could also qualify you for a reduced rate, according to the NAIC.
Tip 5: Improve Your Credit
Depending on what state you live in, if you handle your credit well, your auto insurance company may reward you with a better premium.
Insurance companies in most states often factor your insurance-based credit score - an indicator created from your credit history - when determining your car insurance rate.
"[An] insurance 'risk' score is one of the biggest determinants of premiums," says Bowler. "Managing one's credit record over the long haul can reward the consumer with significant savings on insurance, upwards of 40 percent in some cases."
Based on your credit score and history, a risk score is a measurement complied by insurance companies that essentially gauges how responsible you are with your money. The logic is the more responsible you are with your money, the more responsible (or "low risk") you'll likely be behind the wheel.
Here are some ways to improve your credit score, according to the Nail McKinney Professional Association, an organization for certified public accountants:
- Keep credit card balances low.
- Pay credit cards on time.
- Report mistakes to your credit card company immediately.
- Maintain a stable job and residence.
- Ask your credit card company for a lower interest rate.
Tip 6: Increase Your Deductible
According to Bowler, raising your deductible limits may be a wise option if your vehicle is expensive to replace. A deductible is the amount that you agree to pay in the event of an accident.
The Insurance Information Institute (III), an organization dedicated to the improvement of public knowledge of insurance, agrees. For example, the III explains that raising your deductible from $200 to $500 could result in significant savings. Although the costs you'll see in the event of an accident will be higher, your month-to-month insurance costs will likely be notably lower.
But the III cautions that you should make sure to have available funds to pay a higher deductible in the event of an accident.