Lowering Your Car Insurance Rates: Part I

1. My mama told me, you better shop around

While this seems like the most common sense tip of all, some people don’t do it. Either they think it’s too much trouble or they think companies are all the same. Rates for the same car, same driver, and same coverage can vary by hundreds of dollars from one company to the next. If you don’t check with a few companies first, you could be flushing hundreds of dollars down the toilet.

2. Membership has its privileges

Think of every group you could possibly belong to… Are you a veteran? Do you work at a really large company? Do you belong to your college alumni association? Are you a member of a large church? Are you a member of a labor union? Are you a member of an ethnic group that has a formalized association (i.e. an Italian American association, a Japanese American association)? Large groups often negotiate large discounts for their members with select insurers. You can check with each group to see if they have any group discounts set up, or when you’re shopping around, have a list of all the groups to rattle off so the agent helping you can check if you can get a discount.

3. Location, Location, Location

Where you live can have a huge impact on your insurance rates. According to the Insurance Information Institute, drivers in Detroit, Michigan paid an average of $5,072 a year for auto insurance, but drivers in Eau Claire, Wisconsin paid an average of $869. It’s probably not reasonable to up and move to lower your insurance rates, but if you’re in a position to choose between two or more places to settle down, checking “cost of living” elements like insurance is a good idea.

4. Are you overinsuring an older car?

Sure, you need to make sure you’ve got liability and you’re covered for any injuries you might sustain, but what about damage to your car? Look at your rates for collision and theft and tally up how much you’re paying. Each year there’s around a 1 in 9 or so chance you’re going to be in an accident or have your car stolen, possibly less if you’re a good driver and it’s a beater. So look at how much you’re paying for theft and collision and how much your car’s worth. Insurance is basically like a bet, and if you’re paying more than 1/9th the car’s value, you’re getting bad odds. You may want to consider cancelling those parts of your insurance and self-insuring for theft and collision.

The other side of that coin is this… The way you self insure is that you put that same money away in the bank every so often and save it against an accident or theft. If nothing happens, you get to keep the money. If something happens, you’ve got some money in the bank to cover it. If you don’t save the money and something happens, you’re broke and out of luck. So, only consider self-insuring if you have the discipline to save the money.

5. Watch out for insurance guzzlers

When you’re thinking about buying a new car, call your insurer and ask about some of the different models that interest you. Some cars that seem pretty much the same can have big differences in their rates due to accident safety ratings, theft statistics, and other qualities. Of course, sports cars are a given for higher rates. But even then, you could see pretty big differences based on statistics you weren’t aware of but the insurers watch closely. Doing some research on the kind of insurance rates you’ll pay is a great way to avoid sticker shock once you get the car home.