Getting the Cheapest Auto Insurance Rate - 10 things you didn't know.
Why does my premium seem higher than everyone else's?
When it comes to auto insurance, you may feel like you're being singled out for a rate that doesn't compare to your friends and neighbors. In fact - you are! That's how most insurance carriers rate a policy - by factors unique to just you. And if you have a preferential history, this is exactly how you achieve a lower rate. If you are reading this article however, chances are you are not getting the best rate possible and you may need to visit one or more of the topics below with your insurance carrier to find out just exactly how they are rating your own policy.
Things you should already know that affect your insurance rate
Below are common sense things that you would expect to affect your rates whether your agree with them or not. They do seem to logically correlate to you as a driver and the type of vehicle you drive.:
- Driving History - Incidences in the last 3 and sometimes 5 years are fair game to a lot of insurance carriers. Once you get with a carrier, however, it's not always general practice to re-assess driving history. Therefore, if you've had a few incidences, you may want to just wait it out before deciding to shop rates with another carrier.
- Claims History - Don't have any claims - great! Look for a claim free discount. However, at fault or even NO fault accidents again in the last 3 to 5 years are one of the most negatively impactive factors to you rate. Some carriers offer accident forgiveness and will over look the claim rate surcharge for an at-fault accident but will still remove any claim free discounts.
- Driving Experience / Risk - In other words, age of driver, typically males between ages 25 and 55 and females age 23 and 55 are most preferred. If you are under 25/23 or over 55, look for safe driving course discounts offered by your insurance carrier and also good student discounts if you're a student. If you're over 55, look for retiree discounts.
- Value of Vehicle - is it a grocery go getter or is it a high performance speed machine. Cost to insure a vehicle isn't always exactly in line with value however, as some vehicles are usually a total loss even in a low impact accident. These are typically sub-compact vehicles that are designed to protect passengers and absorb impact at the cost of damage to the vehicle. It's always wise to get a rate quote before you buy a vehicle.
- Age of Vehicle - Important in the depreciated cost of repairing or replacing your vehicle. If your car is new, some carriers offer a new car discount to lessen the impact of a high vehicle value rate
- Amount of time spent driving - are you driving long distances every day or around the block. You can demonstrate this by submitting documentation such as odometer readings between last oil changes or, with some carriers, you can agree to installing a monitoring chip in the data port of your vehicle. This will monitor not just miles but other driving habits as well such as safe stops, speeds and times of the day that you drive. (see video below for an example of one nationwide carrier that does this).
Monitoring Device with One Nationwide Carrier
10 things you probably don't know that affect your insurance rate
Now for some things that you may not understand or perhaps agree with but are as equally important if not MORE important to you getting the best rate possible. Insurance companies are looking for the more affluent and conservative and statistics show they are less likely to file claims or put themselves at risk, or so they would tell you. Therefore, there are things that all carriers do to find these individuals. Here are some of those ways that make you go "Say What?"
- Credit scoring - Yes, that's right. Your credit history plays a large role in your rate. Yet another reason to not overextend yourself and closely monitor your credit history. The carriers will refer to this as an insurance score and some other factors are involved besides credit score but, make no mistake, it's all about how well you pay your debts and, in turn, your likely-hood filing a claim. Some States have prohibited such rating factors but most states still credit score. While you can't do much about this immediately, shop the carriers that use this criteria less heavily or not at all in some cases.
- Continuous prior insurance - have you let your old policy lapse? Big mistake. This can force you into paying high risk rates with most carriers. Even a one week lapse for some carriers is too much. If you're in-between vehicles, consider suspending coverage on your old vehicle for a time while you still have it and before you let it go. You'll pay just a little bit for comprehensive coverage and it will keep your policy in force. Ask if you can provide proof or prior insurance via a commercial or motorcycle policy if you have one or are rated on one through an employer if you find yourself in this situation.
- Prior insurance history - the longer you keep a policy in force with one carrier, the more discounts you can receive when shopping for new insurance. Not only that, the higher liability limits you carry can also result in savings.
- Preferred versus High Risk prior insurance. Quality of prior insurance is what we're talking about here. If you have a high risk policy and try to shop for better rates, chances are you won't get the best offer available from other carriers and they will offer only their high risk product as well. If you are in a high risk policy, see if you qualify to be re-written into a preferred line with your current carrier or go find another carrier that will. Some carriers have only one preferred product line with different rating tiers. After spending time on one of these policies (six months to a year) you can then shop around for a more preferential rate.
- Profession Discounts - Not surprisingly, some of the more conservative natured professions offer bigger discounts such as Accountants, Physicians and Attorneys. But many carriers try to capture all sorts of professionals including military and fire fighters.
- Where you live - Believe it or not, even a 10 mile difference in your location, and therefore your insurance rating territory can impact your rates greatly. Although you can't do much about this sometimes, you can see how different carriers treat different zip codes and even neighborhoods.
- Marital status - According the the insurance industry, if you're married, you are a better driver. Again, not much you can do about this one if you are single. If you're unmarried but engaged or otherwise planning to get married, you may be able to consider yourself as married under common law in community property states and that can impact your rates. If you live at home, you would want to consider being added to a parent's policy.
- Multi-policy discount with one carrier. Insurance companies will reward you for placing all your insurance with them. But even just owning a home can sometimes get you a better rate. If you're renting, most the time, you will pay LESS for two policies than you would for one (a renters and an auto policy). Strange but true.
- Payment method discounts - Most carriers will reward you for paying all of your premium up front or at least letting them deduct it from your account. Look too for discounts for getting your bills and documents electronically. Many carriers are promoting a "green" initiative as its saves on printing and postage. Of course, always pay on time as this can affect your rate greatly as well.
- Loyalty (longevity) and New Customer Bonus Discounts - Finally, insurance carriers try to discourage customers from shopping but at the same time want to bring in new customers. This is after all, a business that lives and dies by selling a product - an intangible product. If you stick it out with a carrier for a long period of time, you start seeing some the the more preferential treatment in, not just rate, but other things as well as claims handling and insuring other assets you may own. They also incentivise new customers with a signing discount that may go away after time or remain permanent. You'll have to ask at the time of shopping which is the case. No one likes their rate slowly creeping up over time and this is one sure way to make sure it does.
Conclusion? Vote with your Dollars!
It's important to start with what you have currently and work outward. Most carriers don't want to see you leave and will work with you to achieve the best rate for you or explain what you need to do to repair a bad rate. You can unknowingly or unnecessarily make your situation worse if you don't start by getting an assessment of where you are at currently. Ask for declarations pages for your current policy so you can see for yourself what discounts and surcharges you are receiving. Have an open and honest conversation about what you can do to optimize your rate. I also recommend obtaining a local agent. Having someone you know and trust versus a toll free number is the best way to make sure you're getting the attention you deserve. If all else fails, as we all see by the daily barrage of ads, the insurance industry is competitive - go shopping and vote with your dollars or at least your telephone, computer or smartphone and get the rate you deserve!