Saving Money On Auto Insurance
April 28, 2008
One of the most often-lamented costs of owning and driving a card is paying for auto insurance. Insurance is required by law in most states, and typically costs drivers a few hundred dollars a year, or even more if they fall into demographic groups defined by insurance companies as “risky.” It’s often a good idea to get insurance even beyond the minimum liability coverage that most laws require, if you want to really protect yourself in case of an accident. But how to avoid paying so much?
The best time to save money on auto insurance is when you’re choosing a new auto insurance policy. Look around. Don’t settle for the first insurance policy you see or hear about. Look at different policies and compare them side-by-side. The different insurance companies usually offer free quotes - take advantage of this. Surprisingly, the prices are not all the same, even when states try to control the rates of auto insurance. Some auto insurance companies offer premiums that cost hundreds of dollars less than others - maybe because they aren’t spending as much money on advertising.
If you’re willing to take that step, increasing your deductible with an insurance company is another way to save money. If you increase your deductible, you may have to pay more at the time of an actual incident—in exchange for paying a lower annual premium to your insurance company. Increasing your deductible by, for example, $250 can reduce your premium by about 10%.
Your credit history also affects how much you have to pay for insurance. Insurance companies consider you a lower risk if your credit is good. So, build up your credit, and get lower rates on auto insurance years down the line.
If you own a car, but don’t drive it very much, see if your insurance company offers a discounted rate for low-mileage, as some companies do. If it does, you may be able to pay less simply by driving below a certain number of mile per year. If you are close to the number your insurance company requires for getting the low-mileage discount, see if you can cut down the number of miles you drive. Public transportation is your friend. Or, ride your bicycle when traveling around town.
One obvious way to save money is to drive conservatively. Many insurance companies will lower the cost of your policy if you have a spotless driving record. If you don’t have any accidents, and are not ticketed by the police for a certain number of years, your insurance company will notice, and reward you with lower rates. You have a much higher chance of achieving this goal if you just try to drive carefully and don’t take any unnecessary risks.
Finally, the kind of car you have also affects the insurance companies’ perception of how much of a risk you are. Showy cars, such as a Corvette, or a big new Hummer, tend to draw higher rates from insurers because they are statistically correlated with risky driving. Furthermore, they are more commonly subject to vandalism and theft. On the other hand, an unremarkable, medium-sized sedan, would be considered a low-risk car by the insurance companies.
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