Even the best car insurance premiums often increase from year to year, which can be an unwelcome burden on your finances, particularly during hard economic times. The reasons behind these higher costs could be due to a number of factors, including the type of car you drive, not updating your policy and changes to your driving records.
In fact, drivers often make many mistakes when shopping for car insurance that could result in higher car insurance premiums. Thankfully, these mistakes can easily be avoided, leading to lower costs. To help you do just that, we look at the five biggest mistakes people make on car insurance.
Not shopping around
Far too many consumers check with just one or two companies to price their car insurance policy. On the other hand, car insurance companies look at a number of personalized factors – think age, gender, where you live, driving history, credit score and type of vehicle – to determine the risk to cover you as a driver. In addition, how they evaluate these factors varies from company to company, so prices for car insurance vary from company to company.
Therefore, it’s important to shop around for car insurance before you decide on a policy. “Get at least three quotes from different insurance companies and different types of insurance companies: those that sell through their own agents, those that sell through independent agents and those that sell directly to consumers through an app or the Internet,” says Scott Holeman, director of media relations at the Insurance Information Institute.
Not updating your policy
If you’ve been with the same car insurance company for more than a year, it’s not uncommon to pay your car insurance policy renewal without checking to see if your car insurance coverage is still what you need. For instance, if you are carrying full coverage – liability, collision and comprehensive – on your car, it may no longer be necessary.
“If you drive an older car, you may want to reduce optional insurance like collision and/or comprehensive coverage,” Holeman says. “Check the value of your car to see if this is a viable option.”
In addition, if there are drivers listed on your car insurance policy – a former spouse or grown child – that you no longer provide their car insurance, you should remove them from your policy. When renewing your car insurance policy, take a look at the deductible. “You may be able to significantly lower your premium costs by choosing a higher deductible on your car insurance,” Holeman says. “But keep in mind you’ll have to pay more money in the event of a claim.”
Failing to maintain a good driving record
Accumulating speeding tickets or car accidents on your driving record are not just bad for your wallet when it comes to paying for fines or repairs. These moving violations also negatively impact your driving record, which will increase your car insurance rates. Plus, car insurance companies evaluate these infractions differently, so they may be held against you longer with certain car insurance companies.
By maintaining a driving history free of speeding tickets, car accidents, DUIs or other moving violations, you likely will receive more favorable car insurance rates. Taking defensive driving courses also could help reduce your car insurance costs.
Not asking for discounts
Car insurance companies today offer a number of discounts that could go a long way in helping reduce your car insurance costs. “Ask your insurer about discounts you may be eligible for, including good credit, low mileage and good grades if you have a student driver,” Holeman says. “Also, many insurers will give you a discount if you bundle your insurance by purchasing two or more types of insurance from them.”
Car insurance companies also provide discounts based on the type of vehicle you drive. “Many insurers offer discounts for features that reduce the risk of car theft or personal injuries, or for cars that are known to be safe,” Holeman says. Remember this when you go shopping for a new car.
In addition, some car insurance companies offer discounts when you set up an automatic payment for paying your premium or sign up for paperless statements. Be sure to request a full list of all available discounts so you don’t miss out on extra savings for your car insurance premium.
Having a low credit score
When evaluating the risk to insure a driver, many car insurance companies look at your credit score. Generally speaking, drivers with low credit scores are seen as a higher risk for filing a claim. As a result, the lower your credit score, the higher your car insurance premiums.
To help improve your credit report, review your credit report with all three credit reporting agencies – Equifax, TransUnion and Experian – to make sure your information is accurate. Mistakes are often found on credit reports, and these can negatively impact your credit score. You can check your reports for free through AnnualCreditReport.com.
Other ways to boost your credit score include making payments to creditors on time, never missing payments, reducing the amount of debt you have in relation to your total available credit amount, and not opening new accounts.
The bottom line
Finding affordable car insurance isn’t impossible, but it does take some time and research. Shop around for car insurance quotes from at least three different companies, and make sure your coverage is updated to match your current needs. Remember to ask for discounts, and take steps to improve your driving record and your credit score. These efforts could soon be reflected in lower car insurance premiums.
