So how can you save money on car insurance? Insurance companies ARE competitive and they will give you a little bit of a discount for loyalty or switching to them, but don’t forget that they’re in business to make a profit, not necessarily help you. Don’t worry – there are still ways to cut your insurance premiums!
Auto insurance falls into two categories: what you need to protect you financially and what’s required by your state. Many people believe that insurance rates are fixed by law. This is not true, except for Texas and Massachusetts. In other states, nothing’s stopping you from getting a better rate. Here’s how…
Know the cost of insurance BEFORE you buy a car.
Don’t spring for that luxury vehicle or sports car just because the cash is burning a hole in your pocket. Know how expensive the car is to replace/repair and shop accordingly. Insurance companies actually assign code numbers based on the damage rating of each car model. The higher this number, the more the car costs new and the more expensive your premiums will be. Check the damage-ability rating/code number while shopping around.
Can it all be so simple? Most people don’t even shop around to get a better deal. You just saved $3,000 on your brand new Nissan? Cool, what’s your premium though? Auto insurance rates can change dramatically from company to company because they set premiums based on the amount of claims paid in each area. Get numerous quotes. You’ll be shocked at the different prices. Beware – many agents will refuse to give a quote over the phone. Don’t let that faze you, go to their office and demand a better deal. If you don’t save money, it’s as if they’re taking food from your mouth. Don’t be intimidated!
Don’t file small claims.
You have a small claim (under $500 or so) and you figure, “I’m paying for insurance, I might as well use it.” Wrong move! Savvy policyholders won’t file small claims because insurance companies will raise premiums as much as 25% or cancel their policies. If the average insurance premium is around $1,500 (although in Michigan it’s around $2,500) per year, a 25% increase means you’re paying $375 extra per year. Plus, by not filing claims, you leave yourself open to negotiate better terms in the future.
Ask for discounts.
If you never ask, you’ll never get. You can bet that your insurance agent won’t spontaneously bring these up – after all, the more you pay, the better for him! Here are some of the potential discounts insurance companies offer:
- Multicar – more than one vehicle insured by the same company
- Senior citizen
- No claims against your policy (this is partly why I told you not to file small claims!)
- Annual mileage less than 10,000 – if you don’t drive too much, your risk is lessened
- Antitheft equipment – alarm or systems
- Good driving record – no tickets
Insurance is a must, and you’ll be glad you have it when you need it, but it doesn’t make sense to pay too much. It’s one of the biggest expenses in a person’s life and it’s one where the money could probably be better used elsewhere. It’s up to you to put the money back in your wallet!