How To

12 Ways to Lower Your Car Insurance Premiums

photo: alancleaver_2000

There is no silver bullet when it comes to shopping for auto insurance. Each auto insurance company calculates their rates differently based on their risk calculations and profit margins. Which insurer ultimately offers you the best policy price will depend on dozens of different variables. You’re going to have to do your homework, make some calls, and periodically make even more calls.

The good news is there are a lot of great options out there to fit the different life stages and situations in which you may find yourself. Whenever you find yourself facing a big life change or at a certain milestone, calling your insurer — and shopping around with at least three or four more companies — is a good idea. You might find that the insurer who offered you the best rates a month ago is trumped by another company’s offer.

So when should you go shopping and what discounts should you seek? You’ll find that auto insurance premium discounts are very closely correlated to 12 typical milestones.

 (Note that these are not universal situations that lead to a premium discount with every insurer. That is why it pays to shop around.)

1. You buy a new car: One of the main factors determining your auto insurance premium is the vehicle itself — and its risk and safety ratings. State Farm publishes vehicle safety ratings and the corresponding vehicle safety discounts (VSD’s). The Insurance Institute for Highway Safety (IIHS) and MSN MoneyCentral have risk and safety ratings as well. Take them into consideration if you want to keep your insurance costs low.

2. Your credit has improved: Believe it or not, many insurers now look at your credit score when determining your rates. “Overall, the credit score has become a critical factor,” says Jonathon Tudor, a spokesman for InsWeb, which offers auto insurance quotes. “Simply put, the better your credit, the lower your rate will be.” Some states place restrictions on how insurance companies can use credit data to determine rates — most restrictive, not surprisingly, is California.

3. You have been a good driver over an extended period: Three or five years (depending on the insurer) after you are in a traffic accident or receive a traffic violation, it may fall off of your records with the insurer, lowering your premium.

4. You get older: Those turning 21 and then 25 will see discounts.

5. You get married: Many insurers factor your marriage status into their risk equations. Those who are married are viewed by some insurers as less risky, and worthy of a discount.

6. You graduate: You’ll find that many insurers offer discounts to alumni of certain universities. If you check with your universities alumni association, you should be able to find a list of these companies. Some insurers will offer a discount to anyone with a degree (less risky than those without one).

7. You move: Naturally, an auto insurance policy in Paris (Indiana) is going to be lower than one for the same person and car in New York City. With location comes more or less risk to insure.

8. Your miles driven decrease significantly: The more you are on the road, the higher risk you are. Some insurers, such as MileMeter.com are taking this a step further and piloting programs that track your actual mileage. You can find pay-per-mile auto insurance programs at GMAC and Progressive as well. “Generally these programs will make the most sense for drivers who have a very short commute or who have a second vehicle that they rarely drive,” Tudor says.

9. You get another policy: Insurers that cover other industries, including life, health, and home, often will offer a ‘multiple policy discount’ when you sign on for another policy with them.

10. You change jobs or industries: Insurers offer discounts to employees of certain companies and sometimes of entire industries. Makes sense, right? An engineer will likely be a lower risk than a taxi driver.

11. You add another vehicle to your policy: Most auto insurance companies offer discounts for multiple-vehicle policies, however, that discount amount varies by company, so it’s best to shop around.

12. You install a theft deterrent device: Vehicles with a theft deterrent device often get discounts, so if you add one, it pays to ask. Some examples of theft deterrent devices include visible wheel locks, an alarm system, VIN chemical etching, wheel locks, and electronic keys.

Now, Get the Quotes
Each time you encounter one of the changes listed above, it makes sense to start shopping around. Choose three to five different insurers, let them know exactly what you are looking for so that you can compare apples to apples, and get your quotes. May the most competitive insurer win!

GE Miller offers more personal finance tips for young professionals at 20somethingfinance.com.