Auto insurance is a crucial expense for any car owner. Apart from the legal requirement, it safeguards you from unforeseen expenses that may arise due to accidents, natural calamities, or other unexpected events.
The good news is, you can get the right coverage without having to pay exorbitant premiums.
By adopting some simple measures like increasing your deductible or availing discounts, you can make your auto insurance more affordable and save a considerable amount of money.
In this article, we’ll discuss how to determine your car insurance rate and what steps you can take to keep it low.
What Are the Factors That Can Affect Your Car Insurance Premium?
Auto insurance premiums vary from person to person. Your insurance provider determines your premium by assessing the risk of insuring your vehicle.
They evaluate your personal information, claims history, and other factors to determine this risk. Here are some of the factors that can affect your car insurance rate:
Make, Model, and Year of Your Vehicle
When calculating your insurance premium, the type and age of your vehicle are important factors that your insurance company will consider.
Generally, newer and more expensive vehicles with the latest technologies and features are more expensive to repair or replace.
As a result, you should expect to pay a higher insurance rate if you own such a vehicle. However, an older, entry-level model with high mileage is less expensive to insure.
Furthermore, your insurer will assess the likelihood of your vehicle being involved in an accident. For instance, a sports car is considered a high-risk vehicle, so it comes with a higher insurance premium than a station wagon or minivan. Conversely, a vehicle with advanced safety equipment may qualify you for discounts.
Zip Code
Where you live and where you park your car overnight can have a significant impact on your auto insurance rates. If you live and park your car in a big city, you will likely have to pay more for auto insurance than someone living in a rural area.
This is because big cities have heavy traffic, which increases the risk of accidents, and higher rates of car theft and vandalism.
Additionally, urban drivers often park their cars in uncovered and unprotected spaces, making them more susceptible to damage.
Your auto insurance premium can also be affected by the state where you live, as car insurance is regulated by individual states.
You will need to meet your state’s minimum coverage requirements, and if your state requires higher liability limits or additional coverage, you may end up paying more for auto insurance than people in other areas.
According to USA TODAY, Florida and Michigan drivers face the highest auto insurance premiums, while Wyoming and Iowa drivers enjoy the lowest rates.
Your Age
Auto insurance rates vary depending on the driver’s age. If you are under 25 or over 70, you will likely pay more to insure your vehicle.
This is because younger and inexperienced drivers are statistically more prone to making mistakes and taking unnecessary risks while driving, making them more susceptible to accidents.
Older drivers, on the other hand, may have poor eyesight or other health issues that can make their response times slower, increasing their risk of getting into an accident.
Driving Record
Keeping a clean driving record is one of the most effective ways to get affordable auto insurance. Auto insurance providers offer discounts or incentives to encourage safe driving, so it’s beneficial to try to avoid traffic violations and accidents.
However, even the most careful drivers can experience collisions. The impact of different types of accidents and traffic violations on your car insurance rate varies because they have different risk ratings.
Typically, accidents or citations remain on your driving record for three to five years. However, the duration may vary from state to state. Some violations, such as driving under the influence (DUI), tend to stay on your record for a longer time.
Gender
Auto insurance cost can be affected by various factors, including gender. Typically, male drivers pay higher premiums than female drivers because they are known to take more risks while driving and are involved in accidents more frequently.
However, some states prohibit insurance companies from considering gender when determining insurance rates. These states include Massachusetts, California, Hawaii, Michigan, and Pennsylvania.
Credit Score
In many states, your credit score can impact the amount you pay for car insurance. Insurance companies consider your credit history in a similar way to checking your driving record.
If you have a weak credit score, you may be seen as a higher-risk driver because you are more likely to make risky decisions while driving.
However, California, Massachusetts, Hawaii, and Michigan have prohibited the use of credit history as a factor in determining premiums.
Types and Levels of Coverage
The most inexpensive approach to getting car insurance is to purchase a policy that meets the minimum coverage required by your state.
However, opting for higher coverage limits or additional coverage options is advisable to ensure better protection against unexpected events.
From collision coverage to gap insurance, there are various types of coverage options available to customize your car insurance policy as per your unique needs and lifestyle.
These additional features will increase your premium, but they can come in handy when you need them the most.
How to Get the Lowest Car Insurance Rate
It can be overwhelming to find affordable auto insurance as there are several factors that can increase your premiums. But, with some research, you can easily find ways to save on your policy. Below are some useful tips to help you get the lowest possible car insurance rate:
Do Comparison Shopping
Auto insurance rates can vary significantly between insurance companies. Therefore, it is important to compare quotes from multiple providers to find the cheapest and most reliable option.
In addition to well-known national insurers like Geico, Allstate, and Progressive, it is also worth considering smaller regional providers such as Erie Insurance and Auto-Owners Insurance. These companies are often associated with higher levels of customer satisfaction and may also offer lower rates.
One of the easiest ways to compare car insurance quotes is to use an online comparison tool, which can be found on many insurance and financial websites. Alternatively, you may also want to explore your options by speaking with a car insurance agent.
Claim Your Discounts
If your driving record is clean or you have good grades in school, you may be eligible for a discount on your auto insurance.
Many insurance companies provide discounts based on several factors, such as policy ownership, driving history, academic performance, vehicle security, group membership, and more. Below is a list of car insurance discounts you may be eligible for:
- Discount for military members and veterans
- Discount for federal employees
- Good student discount
- Good driver discount
- Defensive driver discount
- Discount for installing safety and security features
- Multi-vehicle discount
- Multi-policy discount
- Pay-in-full discount
- Auto-billing discount
Consider Dropping Collision and Comprehensive Coverage
Collision coverage is a type of car insurance that protects against damage caused by a collision, whether it involves one or multiple cars.
Comprehensive coverage, on the other hand, covers losses caused by non-collision events such as theft, damage from natural disasters, or contact with animals.
These two types of coverage are optional unless you are financing or leasing your vehicle. In that case, your lender may require you to purchase them.
If you own an older car with a low value and have paid off your loan, it may be more financially beneficial to opt-out of collision and comprehensive coverage to lower your insurance premium.
Increase Your Deductible
An auto insurance deductible is the amount of money you have to pay out of your pocket before your insurance policy kicks in to cover the remaining costs of a claim.
The higher your deductible, the lower your monthly premium. However, while opting for a higher deductible may reduce your monthly payments, you should consider your financial situation before making a decision.
In case of an accident, an overly high deductible may lead to financial difficulties if you need to make a claim in the future.
Consider Usage-Based Car Insurance
If you don’t use your car frequently, you can save money on car insurance by selecting the usage-based program. This type of insurance allows the company to track your driving behavior to determine your premium.
You can install a plug-in device or a smartphone app, which enables the company to collect information on how much, how well, and when you drive, through telematics.
Major insurance companies such as Allstate and State Farm offer usage-based insurance that can lower your premium if you’re a safe driver.
You can also choose to switch to a pay-per-mile program, which allows you to pay for coverage based on the miles you drive.
Improve Your Credit Score
If you live in a state where insurance companies are allowed to use your credit history to determine your premium, it’s important to make an effort to improve your credit score.
You can do this by ensuring that you make all your loan and credit card payments on time, as well as by reducing your overall debt.
Additionally, it’s a good idea to keep a close eye on your credit score, so that you can track your progress and identify any areas where you need to improve.
Check Insurance Costs before Buying a Car
When you are in the market to buy a vehicle, there are several factors you need to consider such as fuel efficiency, maintenance costs, and monthly payments.
It is also equally important that you take into account the cost of car insurance. You should conduct research before making a purchase because some makes and models are less expensive to insure than others.
Frequently Asked Questions about Car Insurance Premiums
What Is a Policy Liability Limit, and How Does It Affect My Auto Insurance Rate?
The liability limit of your car insurance policy is the maximum amount your insurance company will pay to the victim if you are responsible for an accident. This limit is often made up of three separate dollar amounts, such as $100,000/$300,000/$100,000.
In this scenario, the per-person bodily injury liability limit is $100,000, while the total payable bodily injury limit for the entire accident is $300,000. The third limit, $100,000, is the total liability limit for any property damage you may cause.
You have the option to choose a lower liability limit to reduce your car insurance rate. However, selecting a higher limit will provide you with more protection in an accident, but it will also increase your premium. It is important to choose liability insurance coverage that matches your budget and driving habits.
How Can I Lower My Car Insurance Premium after a DUI Violation?
If you have committed a DUI violation, your insurance company will consider you a high-risk driver, which will increase your auto insurance cost.
There are a few ways to reduce your insurance rate after a DUI, such as taking a defensive driving course, switching to a usage-based program, or removing unnecessary coverages. Additionally, it’s important to avoid any additional infractions that could further increase your premium.
How Do I Know If I’m Eligible for Any Car Insurance Discounts?
To qualify for car insurance discounts, it’s recommended to speak with a representative of your insurance company or a local independent agent. They will assist you in claiming all the discounts you’re eligible for to obtain the best rates.
When purchasing car insurance, it is crucial to choose a policy that provides adequate protection for your assets in the event of an accident or disaster.
Determine the types and limits of coverage you require and compare rates from various insurance providers to determine which one offers the lowest rates for your desired plan.
Finding the best car insurance deal may take some time and effort, but it is worthwhile as it can result in significant long-term savings.
