Are You Paying Too Much for Auto Insurance?

By Diane Tait

Image courtesy Flickr

You can’t watch TV these days without hearing an ad proclaiming, “Ten minutes can save you ten percent on your auto insurance.”  Whether the claim is true or just hype is a moot point.  Since Florida has the third highest rates for auto insurance in the country, just the possibility of paying less resonates with every driver in the Sunshine State.  With that in mind, I thought I’d take the time this week to talk about what causes individual insurance rates to go up, as well as what drivers can do to bring their auto insurance costs down.

What kind of driver are you?

To begin with, every insurance company determines the price of its policies based on risk.  The bigger the risk a driver presents, the higher the insurance rates.  That’s a given.  Below are a few vital statistics that you need to consider before you start freaking out about the cost of your auto insurance policy.

Image courtesy Pixabay

Age: They say that youth is wasted on the young, but in the insurance game no time is wasted to charge drivers who are 25 or younger a lot more than that of other drivers.  Why?  Because younger drivers have far less experience and like it or not, they are more prone to having accidents.  Add to it the current trend toward youthful drivers talking on their phone or even texting while driving, and the sad fact is if you are a young driver, there isn’t much any insurance agent can do to lower your rates until you reach your 26^th birthday. 

Driving Record: Here’s where the rubber meets the road for insurance carriers.  If you have any tickets on your record, you can expect to pay higher premiums than those who have a clean driving record.  That means if you get pulled over and cited by the police, not only can you expect to pay the ticket, you can also expect to pay higher auto insurance premiums.  Even worse, if you are ordered by the court to file an SR-22 because you were caught driving without insurance, had a DUI conviction or were pulled over while driving with a suspended license, you could find it nearly impossible to secure auto insurance.   If you do find a carrier willing to take you on with an SR-22, your premiums could make your car payments seem cheap by comparison.

Have you filed a claim? – Another thing that can cause your auto insurance rates to skyrocket is if you filed a claim after being designated an at-fault driver.  Even if you aren’t at fault, if you file more than three comprehensive claims in a 3-year period, expect your rates to rise.

Has your insurance lapsed? – Here’s one that catches many people by surprise.  If you neglect to pay your auto insurance premium on time, expect to pay more to have the policy reinstated.  The fine charged tends to aggravate most drivers, since most premier insurance carriers give policyholders little or no grace period for late payments. (One way to avoid this is to authorize auto payments on your credit card if you pay monthly.)  This means if you find yourself cash strapped by the end of the month, you’d better find some other payment to defer rather than default on your auto insurance premium.   Let the policy lapse for 30-days or more and you’ll really find yourself in a world of hurt, since carriers are permitted to charge these drivers the same rates they do for high-risk drivers.  Drivers who default more than once can find it not only more expensive to get reinstated, they can find it nearly impossible to secure auto insurance from any carrier.

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How’s your credit score? – Talk about when it rains it pours.  If you’re having difficulty making ends meet, this usually means your credit score is going to drop.  The problem is, credit ratings are another factor that the insurance industry uses to determine rates.  The higher your score, the lower your rate and vice versa. 

What kind of car do you own or lease? – While that shiny new sports car or monster truck may make your heart beat faster, it will no doubt cause your premiums to rise faster than the tachometer needle.  My advice before you move up in class to a more powerful vehicle is that you have a conversation with your friendly, local insurance agent to see how much more it will cost to insure a high-performance vehicle before you drive it off the lot.  It also costs more to insure a new vehicle as opposed to a used car, since new vehicles cost more to replace.  So too do certain models that are deemed to be at greater risk of being stolen.  (Your insurance agent can let you know which makes and models are more insurance-friendly and which ones are not.)

How many miles do you drive per year? – The more miles you put on a car in an average year, the more likely you are to wind up in an accident.  This also means if you’re in a profession that forces you to be a road warrior (like outside sales rep or pizza delivery driver), you can expect to pay higher insurance premiums.

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Where do you live? – Another thing that catches many drivers flatfooted is if they move from one zip code to another only to have their insurance rates go up.  Like it or not, certain zip codes and neighborhoods within the same zip code are deemed higher risk.

What Can You Do to Reduce your Premiums?

      1.      Increase your deductible – Increasing your deductible to $500 or $1,000 could save you 20-30%.

      2.      Pay your insurance every 6-months as opposed to monthly. – Any time you choose to pay monthly, a carrier is going to tack on a fee for this service.

      3.      Work to keep your credit score high.

      4.      Move closer to work so you’ll drive fewer miles per year.

      5.      Before you make any residential move, consult with your insurance agent to find out if your rates will increase.  

      6.      Buying multiple insurance policies from the same carrier can save you money, since many insurance companies provide a bonus for consumers who buy more than one policy from them.

      7.      Shop around for better rates – This is one way to lower your payments, particularly if your agent only offers insurance from one company.  However, any time you choose to shop rates, always make sure any lower rate reflects the same coverage.  For instance, while removing uninsured motorist coverage is one way to lower your rates, this isn’t something I would ever recommend, since if you are ever involved in an accident with an uninsured motorist, the costs to you could be devastating.  However, depending on the age of your car, you may wish to consider reducing or even eliminating the collision or comprehensive coverage.  (Your insurance agent is the best person to ask about this.)

Diane Tait owns and operates A&B Insurance.  To find out more about how you can save money on renter’s insurance, go to her site or fill out the form at right.