Automotive insurance is costly and getting more expensive each year. The sad truth is that millions of Americans spend far more on their car insurance than they need to or even ought to. With that in mind, let’s consider a series of ways that you can ensure the lowest auto insurance rates possible.
1. Car Selection
The make and model of the insured car matters a lot. If you’re still in the car selection process, then you can save yourself a significant amount of money by considering these factors. The most important characteristics are related to safety, such as the collision damage index (CDI), the damage and theft index (DTI), vehicle safety discount (VSD) and liability rating index (LRI). Such information is publically available, and if you target an A rating across those indexes, you’ll save big.
2. Improve Your Credit
Bad and even middling credit can have a profound effect on your insurance rate. To the insurance company, poor credit is a result of deficient decision-making and thus an indication of risk. What many people don’t realize is that they can make a substantial difference just by starting the credit healing process. Making small payments and entering into repayment agreements can have a big effect.
3. Improve Your Driving Record
Points and other blemishes on a driving record will increase your insurance rate. Most states do offer opportunities, such as defensive driving school, that let drivers avoid all or some of the insurance hike. A lawyer can also be a big help and can often have the marks on a license be hidden from the insurance companies.
4. Consider the Minimum Coverage
Identify the minimum coverage as required by law in your state. This will serve as a basis for comparison. The minimum coverage can make sense in some situations, such as when driving an old car that you could replace out of pocket if necessary. Default coverage alone is not the right option for most, however, and you must carefully consider potential liability alongside policy limitations.
5. Choose Additional Coverage with Purpose
If you’re financing or leasing a vehicle, then the bank requires a certain level of full coverage. As you expand beyond that level, do so with care. Consider, for example, that many Americans add medical coverage that is redundant to their health insurance policy. On the other hand, a common addition that does make sense is uninsured motorist protection.
6. Comparison Shopping
The rule of thumb is that you should get quotes from at least three different insurance providers. Online tools are available that simplify that process, and having three or more quotes provides you with context. You can even use those quotes to negotiate with your preferred provider. Be sure to vet an insurance company or individual insurance agent before signing any agreements.
7. Increase the Deductible
If you defined your ideal auto insurance policy and find the monthly or biannual rate to be too high, then one recourse is to raise the deductible. Maxing out the deductible is actually a wise financial decision when insuring an automobile that is expensive to replace, and the decision can make a difference as much as $500 a year. The downside to a high deductible, however, is that you’re less likely to be able to take full and frequent advantage of all the benefits that the policy provides you.
8. Combine Insurance Policies
Most adults will require multiple insurance policies, including homeowner insurance, life insurance and coverage for recreational vehicles. Most insurance companies will provide significant rate reductions for clients who have two or more policies with them. In this case, it’s best to shop for a company and agent based on the rate of your most expensive insurance and the multi-policy discount that they provide.
9. Claim All Available Discounts
Don’t assume that your insurance agent will identify all of the insurance discounts available to you. Be proactive and perform the legwork yourself. Consider, for example, that even perfect drivers can often take a defensive driving course that will earn them a discount for the year. Other common discounts include low mileage, environment friendliness, anti-theft equipment, full payment, loyalty and so forth.
10. Upgrade Your Policy
Don’t make the mistake of simply renewing your policy. Consider the various factors that affect your rate and how they’ve changed. Although a hassle, it’s usually worthwhile to go through this entire process at the end of each insurance term. If drastic change occurs, it may be worthwhile to change the policy mid-term, but any savings will need to offset the likely early termination fee.