How to Avoid Paying Too Much for Car Insurance
To save as much as possible on your auto insurance, start your homework as soon as you've signed the paperwork for the purchase of your vehicle.
Auto and home insurance are similar in the ways they tend to reward their members with certain discounts, coverage benefits and other perks. But the average driver might be surprised to learn the many factors that providers use to determine premiums for an individual. In that same vein, it may also be hard to know how to cut down on that amount if you're looking to save some money on auto insurance.
As a new car owner
To save as much as possible on your auto insurance, start your homework as soon as you've signed the paperwork for the purchase of your vehicle. If you've bought a car outright or have paid off the loan in full, let your insurance company know to avoid any potential trouble with the title. Owning the car completely won't change your premium instantly, as Credit.com explained, but it will allow you more flexibility in coverage options . Also, make a note to check up on your car insurance at least once per year, or even every six months, to make sure you aren't spending more than necessary. That includes checking to see if you are getting all the discounts that apply.
How premiums are determined
There are a litany of factors insurers use to assess how much of a risk you pose as an insured driver. The more risky you are, the higher your premium is likely to be. The tricky part here is that every insurance company uses different models and formulas to assess risk, so you may not always know everything that's at play. A few of the most surprising, and most common, factors that companies use include:
Marital status: As strange as it may seem, unmarried drivers can expect to pay more on insurance premiums than someone with a spouse. The Consumer Federation of America reported in a study of insurance rates in 10 different U.S. cities that there was a strong correlation between marital status and premium amount . Some policies might even charge more to a widowed driver. The reasoning behind the practice is debated, but insurance companies generally assume married drivers are more responsible and thus less accident-prone.
"Homeowners may see lower car insurance premiums than renters."
Home ownership and location: Another study by the CFA found that homeowners tended to get lower auto insurance quotes than renters . The study estimated renters could expect to pay 6 percent more per year on their auto insurance. In addition to what kind of residence you live in, insurance rates may differ depending on your specific location. Drivers living in high-crime neighborhoods will probably see their premiums climb due to the higher rates of accidents, theft and vandalism. But that doesn't mean your neighborhood has to be unsafe - any densely-populated area tends to have a higher crime rate than more rural locales.
Education level and occupation: Studies from the CFA as well as state insurance commissioners have found links between a driver's education level and the rates they pay for auto insurance premiums. In many cases, car owners with a college education will pay less than a driver with a similar background but only a high school diploma. In some areas, the difference can be as high as 45 percent. Insured drivers with higher status jobs also tended to pay less on premiums, although this is typically related to education level. Once again, the reasoning behind this surcharge has to do with risk. Studies have shown a correlation between education levels and accident rates, although there is no evidence of a causal link. In any case, this gives insurers enough reason to charge more.
What to do about higher rates
It's helpful to know what factors are used by your insurance provider to determine your premium payments. However, it's not usually advisable to make a drastic or expensive life change - like moving out of a high-crime area or getting married - just for the sake of saving some money on insurance. In most cases, the cost of these changes will far outweigh insurance savings.
There may still be a few ways to take advantage of this information. For example, a married couple could apply for a single auto insurance policy, with the more more credentialed spouse as the primary policyholder. This may prevent a surcharge on lower education status.
In general, one of the best ways to get a more favorable premium rate is to continue to shop around for insurance. Do a checkup on your auto coverage at least once per year, and seek out a quote from at least three new providers, to learn about how you might be able to save on this considerable expense.
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