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How to save money by keeping car insurance costs low

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(Read caption) A policeman directs traffic on a busy street in downtown Shanghai. Most auto insurance policies offer reductions in rate for customers who conform to certain behaviors, Hamm writes.

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There’s already a ton of great information from Jeff in The Simple Dollar’s guide about shopping around for auto insurance – how to choose it and how to optimize it.

Rather than just rehashing my own experiences with auto insurance, I wanted to look at it from a different angle. Obviously, my choices helped define what kind of auto insurance I chose, but how does auto insurance actually alter my choices once I already have it?

What do I mean by that? Most auto insurance policies offer reductions in rate for customers who conform to certain behaviors. In other words, if you do certain things, your insurance rate will go down.

 

For the auto insurance company, this makes sense. Insurance companies profile you. They look for aspects of people that are found in good drivers because good drivers are the ones who make money for the insurance company. If people are very rarely making claims, then the insurance company is going to clean up on you as a customer. 

So, what do good drivers do? They don’t get in accidents, obviously, but there are other factors to consider.

Improve your credit score. Most insurance companies use your credit score as a component in figuring out your rate quote. The better your score, the lower the rate they’ll offer you. Why? As a whole, people with good credit tend to get into fewer accidents.

I’ve witnessed this in my own life. After improving my score in 2006 and 2007 (it wasn’t bad to begin with, but it wasn’t great), I started shopping around for insurance rates again (after my first shopping around in 2004). I was stunned as to how much lower the rates on offer were.

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Don’t get pulled over. The impact of a traffic ticket can be painful enough. You can get dinged $100 for even the slightest traffic infraction.

That’s just the first cost, though. Often, the real cost comes with the increase in insurance rates that comes with the traffic ticket. The next time your policy is renewed, brace for a rate increase. It won’t always happen, but it often does.

A similar logic applies when it comes to traffic accidents. Get in an accident and you’re likely facing a rate increase.

Buy a low-profile and reliable car. If you choose a car that’s associated with speed and flashiness, your insurance company will take that into account. So will thieves.

Avoid flashy cars. Avoid cars known for speed. Look for cars that are reliable and won’t attract undue attention.

Drive less. One of the things you’ll always be asked when applying for auto insurance is how much you drive. The less you drive, the lower your quote will be.

If you can, use mass transit to get into and out of the city for work instead of driving your car. Stop for groceries and other items off of mass transit as well.

 

The fewer miles you put on that car, the lower your insurance for that car will be. You’ll also save money on fuel and maintenance.

Have a good credit score. Drive safely and within the speed limit. Buy a reliable car. Drive less by using mass transit and your bicycle more.

These aren’t just good pieces of insurance advice. They’re good pieces of personal finance advice. Each of these tactics will save you money even without considering auto insurance.

These aren’t just good pieces of insurance advice. They’re good pieces of personal finance advice.

If you take steps to improve your auto insurance rate, you’re likely taking steps that will save you in other aspects of your financial life. You’ll get fewer traffic tickets. You’ll see lower interest rates. You’ll have fewer repair bills. You’ll have lower auto maintenance and fuel bills.

These steps become a “double win.”

The post Car Insurance: Value Beyond Merely “Insuring” You appeared first on The Simple Dollar.

 

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