How to save on auto insurance and lower your rate

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Car insurance is an essential monthly expense that you can’t just cut out to save money like a Netflix subscription.

Most states require drivers to maintain at least automobile liability coverage. And opting for a full coverage policy offers more protection but costs a bit more.

According to the National Association of Insurance Commissioners (NAIC), the average U.S. liability insurance policy costs $650.35 per year, compared to the average $1,204 per year for liability, collision, and comprehensive coverage.

Although it may seem like insurance companies choose rates out of thin air, insurers consider your level of risk when giving you a quote. Factors such as your age, gender, driving record and where you live contribute to your rates.

However, there are steps you can take to get lower rates when shopping. Here are eight ways to strike a deal.

1. Work on your credit

In most states, credit scores can be taken into account when calculating credit-based insurance scores that insurers use to determine the rates you’ll pay.

The higher your credit score, the better your chances of getting a competitive insurance rate. These five factors affect your FICO score:

  • Payment history (35%): You are on time payment history on credit accounts.
  • Amounts due (30%): The total amount of debt you owe and your use of credit on revolving lines of credit, i.e. credit cards.
  • Length of credit history (15%): How long have you been using the credit.
  • Composition of credit (10%): The different types of credit accounts you have.
  • New credit (10%): The number of new credit accounts and difficult inquiries you have.

The best way to develop and maintain a strong credit rating is to make on-time payments on all loans and credit cards.

If you’ve missed payments on your credit reports that are incorrect, disputing the records with the credit bureaus and having them removed could improve your score.

Another way to improve your score is to keep your revolving credit usage low, and you can do this by paying off some of your credit card debt.

Applying for new credit sparingly can also prevent tough requests from pecking your score.

2. Ask about low mileage offers

Using your car less frequently means you’re less likely to have an accident, which can lower your insurance premiums and help you save on gas. For example, Nationwide offers a SmartMiles program (opens in a new tab) where your costs fluctuate depending on your commute.

A flexible plan like this might make sense if you carpool, use public transit, or work from home.

With hybrid work schedules becoming more common, it’s worth checking the odometer to see how many miles you’ve been driving and asking your insurer if you’re eligible for low-mileage offers.

3. Pay your premium in advance

Generally, you have the option of paying insurance premiums in monthly installments, but paying for the insured term all at once could help you get a “pay in full” discount.

Allstate (opens in a new tab)Amfam (opens in a new tab)and Progressive (opens in a new tab) are examples of insurance companies that may offer discounts for paying up front.

4. Lower your coverage and lower your deductible

An insurance deductible is an amount you pay out of pocket for a covered event before your insurance kicks in to help cover damages up to the coverage limit. The lower your deductible, the higher your insurance premiums will be.

Raising your deductible by several hundred dollars could lower your rate, and raising your deductible to $1,000 or more could allow you to keep even more money in your pocket.

Reducing your coverage amounts — the limit your policy will pay for a covered event — is another potential way to lower your premiums. Just make sure you have the financial wherewithal to fill in the gaps in accident coverage.

5. Drive carefully to minimize complaints

There’s no getting around it – safe drivers get better insurance rates. Having a history of car insurance claims and traffic violations can raise your rate because insurers consider you a high-risk driver.

Also find out if you can add accident waiver to your policy, as it could help you avoid a rate hike if you are involved in an at-fault accident.

Since insurance companies look at your past claims and driving history when deciding whether to approve you for insurance and setting your rate, it might be a good idea to check your own history.

You have the right to request a CLUE claim report (opens in a new tab) from LexisNexis, and you can also request your driving record from your state.

6. Block Student Discounts

If you are a student driver or want to purchase insurance for a student dependent, purchasing an insurance policy from a company that offers student driver discounts could save you money.

For example, Progressive offers student discounts (opens in a new tab) under 23 who maintain a B average or higher, and the average discount is 10%. Geico also offers high school and college students discounts that could save (opens in a new tab) you $100 to $200 (opens in a new tab).

7. Remove children from your policy

Student discounts can help lower your rate when children are on the policy, but premiums for policies with young drivers can still cost significantly more than policies without them.

When it makes sense to remove children from your policy depends on your situation and whether they have the funds to make their own insurance payments.

But if your kids have left the nest and bought a car, now might be the right time, and cutting the cord could significantly lower your rate.

8. Bundle Multiple Fonts

Getting home insurance and auto insurance from the same company could help you get insurance discounts. Allstate (opens in a new tab)Geico (opens in a new tab)At national scale (opens in a new tab)progressive (opens in a new tab)and state farm (opens in a new tab) are examples of insurers where bundling policies could save you money.

These discounts can vary by insurance company, and shopping around could help you negotiate the best deal.

Don’t stick to one insurance provider – shop around

To conclude, don’t forget that the insurer that offered you the best rate three years ago may not be the one with the most competitive rate today. If you can find a better deal elsewhere, show it to your current insurer to see if they can match or beat it.

If the first person you talk to at your insurance company doesn’t budge on the price, asking to speak to a manager and letting them know you could take your business elsewhere could lead to them making you a better deal.

Comparing rates and negotiating in this way every year can help ensure that your insurance rates are always competitive.

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