You can't control all of the factors that are used to determine what you'll pay for car insurance, but there are a variety of things you can do to get the lowest rates possible.
Insurers use many factors to calculate your premium, including ones that you can't control -- such as your gender, age, and where you live. People who live in communities that are considered to be at high risk for claim filings or insurance fraud typically are charged more. Even so, there's plenty of room to maneuver as you shop for the reduced rates. Here are six tips for getting your insurer to slash your premiums.
1. Raise your car insurance deductible
If you’re comfortable with having a higher deductible, you typically can save a great deal on car insurance, says Michael Barry, a spokesman for the nonprofit Insurance Information Institute (III).
"If you raise the deductible to $1,000 from $500, you will see a substantial drop in premiums, because of your willingness to take on more of the risk," he says.
Whenever you have an auto accident that requires your insurer to pay a claim, you'll be asked to pay your deductible, so make sure you choose an amount you can afford. Pete Moraga, a spokesman for the Insurance Information Network of California, recommends that consumers take any money they save by having a higher deductible and place it in a bank account. Then if they get into an accident that requires them to pay a high deductible, they will have the money they need.
2. Seek multiple car insurance quotes
The insurance industry is very competitive. J. Robert Hunter, director of insurance for the Consumer Federation of America, says you never should buy a policy without first seeking quotes from competing companies.
"There is a huge difference between companies," Hunter says. "You easily can pay twice as much from one company to another."
Cheryl Estep, a State Farm agent in Whittier, Calif., says you can save time by doing your insurance shopping online. "Nowadays you can get online and get multiple quotes," she says. "Carriers make it easy for people to compare."
Barry recommends getting no less than three quotes before buying an auto policy. Because each insurer has its own formula for calculating premiums, they may give different weight to factors such as the number of miles you drive each year and the type of vehicle you own.
3. Maintain a good credit score
All states except California, Hawaii and Massachusetts allow car insurance companies to use your credit history as a factor in setting your rates. If you pay all of your bills on time, you may pay lower rates for your auto insurance.
If you can improve a low credit score through better spending habits, "your credit-based insurance score will improve as well, and that will have a positive impact on the rate you pay for auto insurance," Barry says. Insurance companies use consumer credit information to decide if they will offer you an auto policy and how much they will charge. A credit-based insurance score is based on consumer credit records, which are compiled by credit reporting companies.
Federal law allows you to obtain a free copy of your credit report every year from credit reporting companies. Reviewing these reports is important to verify their accuracy. The largest credit bureaus are Equifax, Experian and TransUnion and you can request credit reports from them through their shared website, AnnualCreditReport.com. Also, Credit Karma is a free credit monitoring website that can help you track your credit score.
4. Weigh the cost of insurance before you buy a car
Before you buy a car, you should factor in how it will affect your auto insurance costs.. The age, make and model of your car influence your premium. Typically, older and inexpensive cars are cheaper to insure because they cost less to repair or replace.
Sporty models cost more to insure than sedans and minivans because they typically are involved in more accidents. If you want to drive a flashy car with a powerful engine that will impress your friends, you should be prepared to pay higher insurance rates, Moraga says.
Your insurance agent can tell you how various vehicles will impact your auto insurance bill.
5. Consider dropping collision and comprehensive
If you carry collision and comprehensive coverage for an older car, you may be paying too much for insurance.
Collision coverage pays to repair your vehicle in the event of an accident. Comprehensive pays for damage that isn't caused by car accidents, including fire, theft, vandalism, natural disasters and collisions with animals. No matter how much damage occurs to your car, your insurer won't pay you more than its market value, minus any required deductible.
If you decide to drop collision or comprehensive coverage, make sure you have enough cash on hand to repair or replace your vehicle if you get into an accident. The III recommends that drivers consider dropping collision and comprehensive when their car is worth less than $1,000.
"It's a judgment call," Barry says.
6. Consider getting pay-as-you-drive insurance
New technology has enabled insurers to lower costs for some people who agree to have devices installed in their vehicles that monitor their driving habits. This allows insurance companies to reward drivers who are at low risk for having accidents.
Before you buy such a policy, ask how your discount will be calculated. Telematics typically tracks such things as the time of day you drive, how hard you brake and the number of miles you drive, Moraga says. For most insurers, miles driven is the most important factor when calculating a pay-as-you-drive premium.