Car insurance premiums are on the rise, and many drivers are feeling the sting. According to Consumer Price Index data, the average increase is 19.5%, and the increase is far steeper in some cities than others. If you can relate and are tired of overpaying for coverage, read on for tips to help you curb costs and keep more of your hard-earned money in your pocket.
The Importance of Auto Insurance
Auto insurance is essential, as it helps shield you from substantial financial liability if you’re involved in an accident. It also protects you from astronomical out-of-pocket costs if your vehicle is lost, damaged or stolen.
Factors Affecting Auto Insurance Rates and Monthly Payments
Car insurance companies assess several factors when setting premiums, including:
- Driving record: The lowest premiums are generally reserved for drivers with stellar driving records. But if you have accidents, traffic violations or DUI convictions listed, you could pay much higher premiums.
- Age and experience: It’s not uncommon for younger and less experienced drivers to pay more for car insurance. They are at a greater risk of being involved in an auto accident and often receive higher rates than more mature drivers.
- Vehicle make and model: You’ll generally pay more to insure a luxury car or a sports car compared to a more modest vehicle with a solid safety record. The size of the vehicle can also impact premiums.
- Vehicle mileage: The more you drive, the more you’ll likely pay for car insurance. But if you don’t drive often, you could get discounted premiums if you’re eligible for usage-based car insurance.
- Current location: Your city of residence also impacts what you pay for coverage. Urban areas with lots of traffic and theft typically have higher rates. But suburban or rural areas with less traffic often get you more affordable coverage.
- Desired coverages: Higher coverage levels, including comprehensive and collision coverage, will increase your rates. Opting for higher deductibles can reduce your monthly payments but means you’ll pay more out-of-pocket if you file a claim.
- Eligibility for discounts: If you’re able to snag discounts on your policy, you could save a bundle in premiums. More on this shortly.
Some states permit the use of credit-based insurance scores when setting premiums. So, your credit history could play a role in the price you pay for auto insurance coverage.
Tips on How to Reduce Auto Insurance Monthly Payments
Below are some proven strategies to get you a better deal on car insurance.
Shop Around for the Best Rates
Even if you’ve fallen in love with your current provider, it doesn’t hurt to shop around for better deals elsewhere. You could find that other insurers offer the same level of coverage for less or discounts that your current provider doesn’t extend to policyholders.
If you’re crunched for time, shopping around may seem like a heavy lift. Fortunately, Experian features an Insurance Marketplace that lets you see quotes from several providers in one sitting. If you decide to move forward, Experian will handle the switch for you. Visit the website to learn more and start shopping around right away.
Increase Your Deductible
The lower your deductible, the more you’ll pay for coverage, as the insurance provider must assume more risk if you file a claim. Or you could raise your deductible and lower your premiums. Be sure to only increase the deductible to an amount you can afford to pay out of pocket to ensure you have the funds handy if you need to file a claim.
Take Advantage of Discounts
Again, many insurance providers offer discounts to help make coverage more affordable. Be sure to inquire about discounts that could be added to your policy to reduce your payments. These often include safe driving, being a good student, having multi-policy, autopay, and military discounts.
Maintain a Good Driving Record
Since your driving record is a major factor in determining your premiums, it’s worth keeping yours squeaky clean to qualify for the lowest premiums available. If you’ve had incidents in the past, you’re not completely out of luck. Be sure to drive responsibly and try your best to avoid violations and tickets moving forward.
Improve Your Credit Score
If credit-based insurance scores are allowed in your state, it’s worth improving your credit score if it’s on the lower end to potentially get a better deal on coverage. Check your credit report and dispute any inaccurate or outdated information. Also, pay your bills on time, reduce your revolving debt balances, only apply for credit as needed and bring any past due accounts current.
Bundle Your Policies
As previously mentioned, bundling coverages could qualify you for a multi-policy discount. If you have more than one type of policy with your current provider, be sure to inquire about this perk to maximize cost savings.
Choose the Right Coverage
Review your policy to confirm the coverages are adequate. You don’t want to skip out on important coverages, but it’s not a good idea to be overinsured. Only pay for coverage you need to keep costs in check.
Consider Usage-Based Insurance
Again, usage-based insurance could work if you are a safe driver and don’t drive often or have short commutes. These programs track your driving habits and provide discounts based on safe driving. Insurers install a telematics device in your car or use a mobile app to monitor factors like speed, braking, and mileage. Be sure to review the terms and data privacy policies before signing up to understand how they work fully.
Install Safety and Anti-Theft Devices
Adding safety and anti-theft devices to your vehicle can reduce the risk of theft and accidents, leading to lower insurance rates. Examples include anti-lock brakes, airbags, alarms, and tracking systems. Notify your insurer about these features to potentially qualify for discounts.
Long-Term Strategies to Lower Insurance Costs
Beyond the strategies already listed, here are more long-term suggestions to help reduce your auto insurance payments.
Regularly Review and Update Your Policy
Reviewing and updating your insurance policy can keep your rates competitive. As your circumstances change, your coverage needs may also change. It’s a good idea to get new car insurance quotes every year to ensure you’re not overpaying.
Drive a Car with Lower Insurance Rates
The type of vehicle you drive significantly impacts your insurance costs. Smaller, safer cars or those with advanced safety features typically have lower premiums compared to large, high-performance vehicles. Keep these factors in mind when purchasing your next vehicle.
Participate in Defensive Driving Programs
Completing a defensive driving course can earn you a discount on your auto insurance, particularly if you’re a young driver. These programs teach safe driving techniques, which reduce the risk of accidents.
Relocate to a Lower-risk Area
Some areas offer much more affordable premiums to drivers than others. This is especially true in cities with fewer incidents of crime or car theft, less traffic, and more favorable weather.
