Understand What an Auto Insurance Premium is
An auto insurance premium what you have to pay to maintain your car insurance policy. This auto insurance premium is based on what type of car you drive, your age, gender, and many other factors. It is important to understand that car insurance companies use a variety of factors to determine your premium amount, and the exact mix of those factors are company secrets.
Which means that getting a lower premium is all in the small details – details the insurance company will not always share with you. So you have to figure out how they think. Since insurance often cost more than general repair and maintenance, you should put some effort into it.
How They Think
Based on the policy options you pick and your history, an insurance company will quote you a base price. Qualifying for one or more discounts will reduce your car insurance premium. Make sure you ask for all possible discounts. Also, ask what you can do to lower the premium. Lower mileage, over-night parking alternatives, anti-theft devices, and auto safety features may not only affect your premiums, they may also have other advantages.
The insurance company will try to figure out how much of a risk you are to them. The more you can convince them that you are a safe driver and a low risk, the better.
When You Get a New Car
Be proactive. When you get a new car, consider how your choice of model will affect the premiums. Some cars are cheaper to insure than others. Look for safety features and good safety ratings. Your insurance company will not like a car that have a history of high damage or injury claims.
Protect your new car. Both newer cars and older cars are prone to theft. The older model years are often stolen for their parts, newer cars for their high value. Do what you can to eliminate theft. If you have a garage at home and/or at work, always park there. Be sure to tell your insurance company. Pick monitored, gated, or supervised parking when you can. Activate anti-theft devices.
Make a pledge to become a better and safer driver. There are usually several ways to convince your insurance company that you are a safe and responsible driver. Ask for programs you can join. For example, Progressive has the snapshot device and Allstate the Safe Driver Rewards Program. If a completed defensive driver course will lower your premium – take one! They do not cost much and can pay off quickly.
If you can lower your mileage by using other means of transport sometimes, it can also help lower your premiums.
Unfortunately, all insurance companies still think credit history is a powerful predictor of risk. Do what you can to have your credit history and credit score in good shape. Before getting a car insurance quote, you should always make sure that your credit history does not contain any unfavorable errors.
Insurance companies also give “good students” discounts, basically because they think “good student” means lower risk. So, if you are still at school – think ahead.
How Much Should You Pay?
Expect to pay lower insurance premiums if you live in Iowa, South Dakota, Wisconsin, North Dakota, or Idaho. In those states the average car insurance premium is between $630 and $664. You will pay the highest premiums if you live in Delaware, Florida, Rhode Island, New York, New Jersey, or Louisiana. Average premiums in those states range from $1,110 to $1,277.
The reason for those differences is higher rates of vandalism, theft, and accidents in urban areas compared to small towns or rural areas.
Which means you could also be proactive when you move. A neighborhood with low crime rates will usually mean lower car premiums. But, then again, picking your new home based on expected car insurance premiums is perhaps stretching this too far?
Illustration by: Liu Ming