How To

10 Things That You Can Do To Lower your Car Insurance Premium

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When it comes to auto insurance premiums, there are a number of factors that you have absolutely zero control over. Most of us like to think that we’re the best drivers to ever hit the road, but we’ve all felt the pain of being 18 years old and having to pay considerably more for the same vehicle than the crazy guy who lives down the street. The injustice!

The good news is that there are a number of factors that you have considerable control over when it comes to your auto insurance premium. In the first of a two part series, we’ll cover the 10 prime factors that you have control over that most auto insurance companies consider in the formulas used to determine how much to charge you.

1. Switch Vehicles

Each vehicle is assessed a different risk variable depending on a number of factors, including category classification, crash test rating, price, cost of replacement parts, and even horsepower-to-weight ratio and how often the model is stolen. If you want a lower premium you should avoid sports cars, expensive vehicles, newer vehicles, and those that are not considered to be top of class in safety (smaller vehicles). Each year, the National Highway Traffic Safety Administration (NHTSA) reports an insurance make and model comparison. Each insurance company should share similar information, should you ask for it.

2. Pay Up Front

Some insurers offer a discount if you pay for the year ahead up front all at once versus a monthly payment plan. If you have the cash on hand to pay up-front, don’t worry about losing it if you switch insurers. Your insurance company is required to pro-rate your total bill and refund you for the days that you won’t be covered under them.

3. Drive Like an Angel

Believe it or not, your driving record is still considered to be one of the top factors that insurance companies look at. Whether you’ve been in an accident or received a major traffic violation within the last few years can have a huge impact on your premium. Some auto insurance companies look back three years, while others look back 5 or more.

4. Cut your Miles

A number of auto insurance companies will offer you a lower premium if you drive less miles. Makes sense for them and for you, right? Moving closer to work might not only save you on fuel and commute time, but it may also decrease your auto insurance premium as well. If you make a move closer to work or end up drastically cutting your mileage driven, call your insurance company to see if it can earn you a discount. A number of insurance companies are offering pay-by-the-mile programs, which may end up costing you less than traditional plans if you rarely drive at all.

5. Improve Your Credit Score

Credit history is becoming a much more highly valued variable that is being looked at by insurance companies (however, this is not allowed in the State of California). We’d recommend that you move to California if your credit history is terrible, however, the cost of living would more than cannibalize any savings in auto insurance.

6. Reduce your Insurance Levels

Whether or not you have collision and comprehensive coverage certainly dictates how much your premium will be, but your decision to carry it really should come down to how much your vehicle is presently worth. Each state has a liability coverage minimum that you should be aware of when determining how much you want to carry. We do not suggest lowering your coverage to the minimum to save money, as that may end up being a big mistake should you get into an accident. However, it might be to your benefit to keep an eye on your liability coverage if it is high and you are in need of cutting your premium.

7. Buy a Vehicle with a Theft Device or have one Installed

Purchasing a vehicle with a theft deterrent system or having one installed will most often get you a discount.

8. Same Insurer, Multiple Policies

Having multiple insurance policies with the same company typically gets you a hefty discount. As if comparing apples to apples wasn’t already hard enough, most auto insurance companies will give you varying levels of discounts for also having a home, life, or other insurance policy with them. You may find that even though one car insurance company would charge you more than another, your ‘total’ insurance cost to go with them is less.

9. Be a Loyal Customer

Loyalty can be rewarded when it comes to sticking with your auto insurance company. As witnessed by the massive amounts of advertising insurance companies partake in, the cost and value to acquiring a new customer is very high. That’s why a good number of insurance companies will give you a percentage off on your total premium each year just for sticking around. It’s also for this reason, especially if you’ve been a cheap customer for them in the past, that they may be a little more willing to work with you in lowering your cost than a Comcast might be. Stick around long enough, and it may be difficult to find a cheaper policy elsewhere.

10. Increase your Deductible

How high of a deductible you set has a significant impact on your premiums. For example, increasing my deductible from $250 to $500 reduced my overall premium by 25%. If you have an older vehicle with a relatively low value it makes a lot of sense to have a high deductible. It makes even more sense if you don’t have collision or comprehensive coverage to begin with – because there is not much else that would make the cost/benefit of having a low premium worth it.

What About All the Factors you can’t Control?

We’ll discuss those and what to do about them in the second part of our series on how to lower your auto insurance premiums.

For more of G.E. Miller’s writings, visit the personal finance blog MicroFrugality.com.

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