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Though car insurance is often seen as somewhat of a necessary evil – it can save you from a whole lot of trouble should something happen. This, however, does not mean you should spend all of your hard-earned money on your car insurance policy!
With many different ways to save, investing a little bit of your time can help you save a lot of cash in the long run. In this article, we will be looking at what could be driving the cost of your insurance up as well as practical and easy ways to keep those premiums under control.
What Factors Affect How Much You Will Pay For Car Insurance?
More than a few factors can influence how much you’ll pay for car insurance. While each policy will have different coverage levels and protections, there are several different factors that ultimately determine the cost of your policy.
I’ve listed the most important ones below.
The Company You Insure With
Each insurance company is going to set its own prices for its policies which will largely depend on what it thinks it can get away with. This means that the company you’re insuring with could be charging you much more than a competitor.
If you’re insuring through an agent, commission fees might also be at play; they’re offering a service and as such need to make a living out of it.
Not sure which car insurance provider to choose? Check out my list of the best car insurance companies in 2020.
Allstate Car Insurance Allstate offers a Smart Student Discount to drivers under the age of 25 if you meet their requirements. You can also get a multiple policy discount if you bundle in your renters insurance with Allstate.
Insurance policies come with different coverage and protection plans; some of which are mandated by the state of residence whilst others are not. Your policy might hold coverages that are unwarranted in certain situations or perhaps include excessive coverage limits.
Deductibles are also part of your policy with the lower deductibles demanding higher insurance premiums.
The Car You Drive
Regardless of the company you insure with and the policy you hold, the value of your car plays a big factor in how much you pay for insurance. If you drive a fancy sports car, or a car that is susceptible to theft, chances are your premium is going to reflect this.
How You Drive
If you drive fast and carelessly, not only are you endangering your own life and that of others, but you could also be increasing your premium. Tickets and accidents are notorious for jacking up insurance costs and can also lead to problems with the law should the worst happen.
Opening a claim will also require paying deductibles, and you might lose your no-claims discount. Those 5 minutes you save on your commute by going over the limit or taking unnecessary risks could be costing you more than what you might lose by arriving late.
Your Credit Score
While some states have made it illegal to consider someone’s credit score when deciding their insurance premiums, many insurance companies still consider it when determining your car insurance cost. If you want to get a lower premium, you may want to focus on improving your credit score.
How Do I Lower My Car Insurance?
Lowering your car insurance is easier than most people think. With a bit of homework and foresight, you can save hundreds of dollars off your insurance bill. As with all money-saving tips, you will need to look at what is necessary and what is optional whilst considering the value you are getting for what you are paying.
Do keep in mind that some optional extras can give you peace of mind, more so if your emergency fund is running low and as such might be worth keeping. Always understand your risks then how you can mitigate them.
As companies offer different rates for the same policies, shopping around can shave hundreds of dollars off your insurance bill. Use comparison sites to get a feel of what insurance companies are offering and do get in touch with a few of them directly to see if you’re better off ditching your insurance agent.
Many insurance companies will also appreciate getting a new customer, so do double-check if they would be willing to match a better quote you got from a competitor or if they’re offering sign-up bonuses for new policies.
- Compare prices between different insurance companies
- Ask companies if they would be willing to price-match or offer better pricing
Take a Hard Look at Your Policy
When you insure your car, remember that there are different kinds of policies available. Whilst some states do mandate minimums that must be met, it is equally important to understand which type of coverage and protection you need. Also, consider having a look at the coverage limits and whether these are enough or in excess.
Do keep in mind however that saving money is a long term game; it might not always be wise to leave yourself open to liability by lowering your limits, so do think carefully about which areas you can do without and which are an absolute necessity.
- Check whether you need Basic, Extended, or Premium coverage
- Check whether you need coverages such as Personal Injury Protection or Rental Reimbursement Coverage
- Check whether the liability limits are more than what you need
Consider Changing your Car
If you’re looking at saving money on your car insurance, a more modest car might be the way to go. Sports cars, for example, are notorious for being expensive vehicles as well as prone to accidents and as such insurance premiums tend to reflect this.
When it comes to saving money, no man does it better than the Oracle of Omaha himself, Warren Buffet who in 2014 purchased a $45,000 Cadillac when his net worth was $64,200,000,000. You might also want to consider adding security devices with some insurance companies offering discounts for alarms and immobilizers.
- Expensive and fast cars demand higher premiums
- Security devices such as alarms and immobilizers might entitle you to a discount
Better Driving Habits
With many insurance companies realizing the costs of dangerous driving, incentives such as trackers can help you pay less. By installing a GPS device or in some cases a smartphone app, you agree to share location data with your insurance company who then monitors your driving speeds and rewards you for good behavior.
This not only helps you keep your driving safe, but it will also help pay for that latte you drove to have with your friends. Attending courses such as Defensive Driving can also entitle you to discounts as well as no-claim bonuses which are offered to drivers who are not involved in any accidents.
- Tracking devices lower your insurance premium when you practice safe driving
- Courses such as Defensive Driving can also lower your car insurance costs
Raise your credit score
Raising your credit score can not only lower your car insurance but help you in your general financial situation. Make sure that you pay all of your bills on time and avoid applying for credit cards unless it is absolutely necessary. Also, try to not default on any loans as this can have a major impact on how much you end up paying for your car insurance.
- Raising your credit score can lower your car insurance payments
- Make sure bills are paid on time, and credit card applications kept to a necessary minimum
What Are Some Ways You Can Save Money on Insurance?
Saving money on your car insurance can be very easy; in most cases, all you need to do is ask! Here are some tips that can save you money without breaking a sweat.
Ask for Discounts
Insurance companies will offer a number of different discounts, whether it is for good driving behavior, new sign-up, security devices, and so on. Always ask which discounts you might be eligible for to see which discounts are available from a given insurance company.
If you have other policies such as property insurance or health insurance, it might pay to bundle them up. With most companies looking to maximize customer value, bundling your insurance policies can not only help you save money off your car insurance but your other insurance policies as well.
The deductible is the amount you need to pay should you need to open a claim. The lower the deductible you’re liable to pay, the higher your premium will be. If your emergency fund allows for it, you might want to consider increasing the deductible, thus lowering your premium.
If you do so, remember to drive on the safer side to avoid having an accident as now it will be that much more expensive to claim.
If you don’t drive that much, taking out a usage based-insurance policy can help you save you money while lowering your risks. Consider insurance providers like Metromile – they offer a solid pay per mile insurance option.
Come renewal time, do take the time to check out what the competition is offering, whether any promotions are ongoing or if there are any new ways to save money.
How Can You Save on Your Car Insurance?
Lowering your car insurance costs is not impossible; in fact, there are many different ways to save money.
Always make sure that you know what you are paying for and if there is something you do not quite understand, be sure to ask.
At the end of the day, car insurance can save you a whole lot of trouble should the worst happen – but some things you might be able to live without.
Want to know which providers to turn to for affordable car insurance? Check out my list of 7 best cheap car insurance companies.