When insurance companies consider your application for auto insurance or a request to lower your premiums, they look at a variety of factors, including your driving record, your credit score, and whether you’ve purchased several insurance policies from the same company.
Here are some things you can do to increase your chance of saving money on your auto insurance premiums.
1. Review your policy.
How long have you had the same insurance carrier without requesting a policy review?
The insurance world has been experiencing a soft market for several years, which means pricing has been extremely competitive – that’s good news if you’re in the market to buy a policy. A carrier may occasionally review its guidelines and revamp its pricing to compete for customers.
Carriers are also constantly checking their statistics to see where most claims occur. Your insurance carrier may expand its tier structure to allow more flexibility and forgiveness for incidents and accidents. It’s possible your policy can be re-tiered depending on your motor vehicle record (or MVR—see below).
Your insurance company may have softened its credit score requirements after the Great Recession, so if you haven’t requested a policy review in the past year, call your insurance carrier and do it now.
2. Keep your MVR clean.
Have you had an accident (or more than one)? A ticket (or more than one)?
The “more than one” represents a potential frequency issue that could make your carrier increase your rates or even decide not to renew your account. (If your policy isn’t renewed, remember: it isn’t personal—it’s just the business.) If the agent can’t negotiate with the underwriter to reconsider its decision, you’ll have to move on to a different carrier who may be more forgiving.
How can you avoid this? Treat your MVR with respect—period. Remember that it’s a part of your financial profile that has expensive consequences. If you have a handful of speeding tickets, it will definitely affect the price of your auto insurance policy.
Not-at-fault accidents do occur, but frequent not-at-fault accidents can also cause your auto insurance premiums to skyrocket. Sometimes an agent can help explain what happened with a particular accident and negotiate with the underwriter. But ultimately, underwriters will use actuarial data on file to profile drivers based on trends of at-fault and not-at-fault accidents.
So keep your driving record clean, and you’ll pay a lot less for your auto insurance coverage.
3. Take a defensive driving course.
If your insurance carrier decides to raise your insurance premium or not to renew your policy, you’ve got to shop for a new insurance company.
To help keep the costs down, enroll in a defensive driving course. It takes time and could cost around $50 (unless you can get a group rate), but you could receive a 10 percent discount on the physical damage premium of your policy for three years. That’s worth a lot more than $50.
4. See if you can get a multi-car discount.
If your family has multiple cars on multiple policies, you may be missing out on a multi-car discount. Review your policies with your agent to see if you can combine plans and reduce your premium.
5. Improve your credit score.
Every insurance carrier will pull a copy of your credit score and use it to determine an insurance score, which will in turn help determine how much you have to pay for your policy.
It costs an insurance company money to collect what’s known as “earned premium” (the premium due while a policy is in force), so the better the credit score, the lower the insurance premium. The lower your credit score, the harder it is for a company to collect the earned premium and the more it costs them to have that policy on the books.
In short, every insurance company wants customers who have a perfect record of paying their bills. In practice, a credit score is used to figure out how much risk you represent for the insurance carrier.
6. Package your auto insurance policy with homeowner’s and umbrella policies.
Got a great deal on your auto insurance policy? Test it. Insurance carriers are offering terrific deals if you combine your auto insurance, homeowner’s, and umbrella liability policies. When you call your carrier for your policy review, discuss what kind of account discounts the company offers.
7. Raise your deductible.
Can you afford a higher deductible? Raising it can save you a considerable amount on your auto insurance premium. Carriers’ rates may be more favorable if you have $250,000 per person/$500,000 per accident versus $100,000 per person/$300,000 per accident. You should consider higher limits regardless if your net worth warrants it.
We see our customers save money every day on their policies just by following the good practices on this list. Have you checked in with your insurance carrier lately? Let me know if you’re able to secure a discount on your auto insurance policy by following some of the suggestions on this list.
Linda Rey is a licensed insurance agent at Rey Insurance with a broad spectrum of expertise in life, accident, health, property, and casualty insurance, as well as retirement planning and college funding strategies. Follow her on Twitter: @ReyInsurance