In this post, you will learn:
* Why auto insurance costs have been rising so dramatically in recent times, even if you have a near-perfect driving record.
* The one (and only) thing that matters to insurance companies when deciding how much to charge you.
* A sort of "exemption" you can give to your insurer. In return, they'll chop a huge chunk off your premium costs.
* Why you can have "too much" insurance, and how this can cost you big time.
* A simple, but common, mistake many drivers' make that can instantly double the cost of their auto insurance.
* Why parking your car in the wrong place can increase the cost of your auto insurance.
* Something that can increase your insurance costs, even if you aren't driving your car.
* The number 1 way to dramatically lower your car insurance, by as much as 71%.
* An easy way to save $400.00 - $1,000.00 on your auto insurance in less than 5 minutes.
Introduction:
Auto insurance rates have been rising quite a bit over the past year or so. In fact, you might be forgiven for thinking they only ever go in one direction: Up! Much of the most recent hikes have been the result of bad investment decisions by insurance providers themselves, who are now seeking to re-coup that lost money from the insurance-paying public. At an individual level, you can't do much about that but, at the end of the day, the cost of your own auto insurance quotes always boil down to just ONE thing...
Risk.
The whole business of insurance (of any kind; not just auto insurance) is about risk. When you buy any kind of insurance policy, you are accepting a small GUARANTEED loss (called the "premium", which is the amount you pay your insurance company) to prevent a large POSSIBLE loss (the financial consequences of whatever you are being insured for). The cost of the premium is directly related by how likely it is that large possible loss will happen. If it is more likely, the risk (of having to pay for that loss) to the insurance company would be greater and, in turn they'll charge you a higher premium. If it is less likely, the risk to the insurer would be lower, and, in turn, they'll charge you a lower premium.
Therefore, anything you do to lower the risk that your insurance company will have to pay out on your insurance policy will always result in a lower premium (the amount they charge you).
Although factors like where you live, what age you are, your marriage status, what kind of car you have, and what your driving record is like are always going to matter to some degree, there are still a number of very easy (and hugely effective) ways to reduce the level of risk you represent:
1. Pay More Excess:
Also known as a "deductible", your "excess" is the amount you have to pay yourself towards any insurance claim you make. For example, if your excess is $200, and you make a claim to the tune of $1000, then your insurance company will only pay out $800. Some policies have no excess, but many insurance providers impose a minimum level (which depends on your personal details and driving record). Above this minimum, you can offer to pay a "voluntary excess". The more you volunteer to pay, the cheaper and less-risky things are for your insurer. For that reason, those who opt to pay a higher excess will be charged a (sometimes much) lower premium. (Of course, you should only do this if you can actually afford to actually pay the excess in the event of a claim.)
2. Reduce Your Cover:
The law in most States requires you to have a minimum level of auto insurance (called "liability coverage"). Usually, this minimum mandates that you be insured for any injury or damage you might cause to other people (or their property) in an accident, although most people (sensibly) opt to also include protection against theft and fire-damage their own vehicles as well.
Above this minimum, you can add lots of options right up to "fully comprehensive cover", where virtually any kind of damage to your own vehicle, barring perhaps war and Acts of God, can be insured against.
However, these types of auto insurance, while they eliminate most of the risk you will face as a driver, have 2 major drawbacks: First, they cost substantially more than the minimum requirement. But, perhaps more importantly, if your car is destroyed in an accident, your insurance company will only pay out for what THEY think the car is worth at the time. For this reason, if your car is very old and/or has a very-low value, comprehensive insurance cover might not actually be worth the extra cost. All that extra money it cost you will have been for nothing.
3. Get A Driving License:
This might seem obvious, but you'd be surprised by how many people don't really get it. Even though it is possible in most States for the holder of a Learner Permit to get auto insurance (usually via a joint-policy with a fully-licensed driver), the cost of doing so can be pretty high because, as an unproved driver, the potential risk to your insurer is much higher.
However, passing your driving test will prove (to the insurance company) that your driving ability is at least equal-to, or exceeds, the minimum standard required by law. In their eyes, that makes you a less-risky driver, and, therefore, they will charge you (substantially) less to provide you with cover.
4. Don't Park On The Street:
Some geographical areas will have a history of higher insurance claims and, as such, attract higher insurance premiums. That history of higher claims could be caused by a number of things, but is most often related to a higher crime-rate (increasing the chance your car could be stolen). For example, if you live in the middle of a large city, you can expect to pay significantly more for your auto insurance than if you lived in a small town or a rural area. However, if you park your car in a garage, or some other secure off-street location (instead of on the street), the chance of theft is diminished, which lowers the risk for your insurance company, which, in turn, will reduce the amount they charge you for your policy.
5. Beware of "Named" Drivers:
It is possible to have a number of people insured under the same insurance policy. If you add another person to yours, the cost of doing so will depend on their age, sex, driving history, and a number of other factors. If they are a low-risk driver, such as an older woman, it's unlikely your premium will increase by much. In fact, it might not increase at all. However, if they are a male driver, particularly a younger male (the most risky drivers of all), you should expect to pay significantly more.
And, most importantly, remember that, if a named driver causes an accident in your car, YOUR insurance record may be affected, even though you may not have even been in the car at the time!
6. Protect Your No-Claims Record:
Building up a history of "no-claims" (i.e. you have insurance, but have never made any claims, or had any made against you) is incredibly valuable. Once you establish of record of not posing added risk to your insurer, they will heavily discount your premium in return, often by as much as half, and sometimes by up to 71%! That's worth protecting!
For what is (usually) a very reasonable additional fee, most insurance companies will offer a sort of "accident forgiveness" addendum to your policy. This means that your no-claims history can actually be broken in certain circumstances, while still protecting your standing on the "star rating" system. For example, on the common 6-star rating, instead of dropping to zero stars after a claim, you may only drop to 5 stars, or won't drop at all, depending on whether you purchase partial or full protection of your no-claims record. (Remember: if you change insurer, make sure they will 'carry-over' your no-claims record from your previous company.)
7. Always Get Multiple Quotes:
You can save a small fortune by getting as many quotes as possible from as many insurance providers as possible (and they don't have to be local companies either). Even though the product they sell is basically the same no matter which company you get it from, all insurance companies use slightly different criteria when judging how much risk you represent, which can result in vastly different premiums as a result. In some cases, the difference can be in excess of $400.00! In more extreme cases, such as with young high-risk male drivers, the difference can even rise to as much as $1,000.00!
Also, some insurance companies may change their corporate strategy and decide that, for example, they want to move away from motor insurance and into, say, property insurance. For this reason, they may vastly increase the cost of your auto insurance (to encourage you to leave them as a customer, believe it or not), even if they have previously offered you a very low-cost policy.
In other cases, some insurance companies initially offer very low rates, to increase the number of customers they have, and then rapidly increase their premiums, hoping that, once you are with them as a customer, you'll think it's too much trouble to leave and go to another company. And that works in many cases, because people think they'll have to go to spend hours calling umpteen different companies and brokers, answering the same questions over and over again.
In the past, that was true. However, nowadays, it's pretty easy to get multiple quotes from many different companies at the same time over the Internet. You never even have to call them, and the quotes are provided instantly
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