This week at Fiscal Fizzle will focus on transportation, which often tends to be a very large part of our household budgets, and almost a requirement for efficient daily living in many parts of the country without widely available public transportation.
Mondays are Personal Finance Basics days at Fiscal Fizzle, and today’s post will focus on strategies for lowering your car insurance premiums. Maybe I’m wrong, but I’m assuming that it’s something you’d be interested in.
Circle of Control
The problem with a lot of car insurance advice is that it goes something like this – “You just have to get older.” or “You’re at the mercy of insurance companies.”
I know that age and a lot of other factors beyond my control play a part in determining my insurance rate. But I’m not interested in any of those things – after all, I can’t change them.
I’m looking for what I can change – making my look-good factors look better to my insurance company. Here are the basics:
Car Insurance Factors You Can Control
You may not have the immediate power to change some of these (they are history-based and require time to work their way off your record) but don’t give up yet. Ensuring that you don’t make the same mistakes twice is half the battle.
1. Demographics – You can’t change who you are – or can you? I’m not advocating getting married or having kids to lower your premiums, but it is something you have control over. Make sure to notify your company when you do.
2. Vehicle – One of the most overlooked factors, but maybe one of the most important, is the vehicle parked in your garage. Insurance companies know which vehicles are safer than others, and which are stolen more frequently. New and luxurious vehicles are also more expensive to replace. Think before you buy your next car!
3. Home Situation – Where you live and park your car can affect what you pay as well. Just as homeowner’s insurance companies have access to crime stats based on zip code, car insurance companies are surely looking up the same information. Owning vs. renting will also gain you discounts because it shows more stability (not to mention a potential two-policy discount).
4. Loyalty is Dead – Car insurance is basically car insurance. Various companies will have different levels of customer service, but you can get the same level of protection wherever you go. And while it’s true that companies will reward loyalty with lower rates, is the discount worth passing up a huge rate deduction? Do your homework every year or two and make sure you’re still getting the best value.
5. Credit Score – Another overlooked factor is your credit score, probably because you think it has nothing to do with insurance. But companies have correlated lower scores to a higher level of claims, and will hold that against you. Be sure you know what your credit score consists of, and where to get a free one.
6. Deductibles – This is a factor you control inside the insurance world, but it’s also an important one. Decide on how much you’d be able to comfortably cover in case of an accident and save, save, save until you can get your deductibles to the highest reasonable level. (After a certain point, lowering your premium by $5 may not be worth raising your deductible by $1,000. You decide the cost-benefit point).
7. Car Age – Older cars not worth much more than the deductible don’t need collision and comprehensive coverage. Consider the payout and your monthly premium and decide if it’s worth to continue coverage. Often, the chance that you’ll total your car is not great enough to warrant paying out a lot of premium money.
8. Driving Habits – The number of miles you drive, and where you drive, can affect your premiums more than you know. After all, the more you drive, the likelier you are to be involved in an accident. Ask for reductions in your premium if you’re an infrequent user of your vehicle, or you only use it for pleasure.
9. Discounts, discounts, discounts – Most discounts have the unfortunate characteristic of remaining un-used. There are so many available that it often paralizes us from taking any action at all when it comes to claiming them. Ask for or find a list of potential discounts and organization affiliations that will chop your price and go through it carefully!
10. A Good Driving Record – If you already have a bad record, there’s not much you can do about it except wait (usually, 5 years is what insurance companies care about). But take it as a lesson in cause & effect – everything you do today will have consequences for many years to come.
11. Cash is King. Insurance companies love to get paid, especially if you pay in full and up front for your 6-month premium. Ask for and expect a discount if you plan to pay down the entire balance immediately.
These are the major factors you can control when it comes to car insurance premiums. Taking care to mind each of them will go a long way to ensuring that you’re getting the best price possible on your protection!
Fiscal Fizzle 
Great overview, I would emphasize point #9. You have to ask for every available discount. Do not expect them to just start offering them to you, or for them to know what you qualify for.