August 16, 2008

Lowering your car insurance costs.



Previously I discussed consumer expenditures and where our money goes. The second largest expense for most typical Americans is transportation. I've since talked about how buying a reasonably priced, efficient used car can help cut those costs considerably by tackling both the outright cost of car purchases and keeping down gasoline expenses. Another large expense for transportation is car insurance.

I dug a little further into the consumer expenditure data over at the BLS website. They have a sub category for transportation insurance expenditures. The average family in the middle quintile spent $894 on insurance in 2006. The Insurance Information Institute says that the average expenditure for insurance in 2005 was $829. They also report a very large range of costs nationally depending on location. The highest was in New Jersey where the average expense was $1,184 but the lowest was only $554 in North Dakota.

There are a variety of things that will impact your insurance costs including; age, gender, marital status, geography, driving violations, vehicle type, accident claims, amount you drive, distance to work, business use of vehicle and your credit rating. Some of these are within your control to change and some really aren't.

Ways to save on your car insurance...

Shop around for rates. This one would seem almost obvious to most of us. You can save quite a lot of money too. According to Edmunds they did a check on one policy request and found that the range of quotes for two cars was $1,006 to $1,807 so if someone didn't shop around well then they could spend up to 80% more a year. Its also good to remind ourselves to shop around every year or so. If you get with an insurance company for a few years you might find that the rates are gradually creeping upwards. If you don't pay attention to it you may end up paying more than you ought to. So it can make sense to shop around periodically to make sure your current provider is still competitive.


Be a careful and safe driver and obey traffic laws. You will pay higher rates for driving violations and accident claims. A single speeding ticket could increase your insurance rates 27%. For a typical driver thats hundreds of dollars a year and the ticket will remain on your record for a few years so a single speeding ticket could easily cost you a thousand dollars in increased insurance costs..

Avoid comprehensive insurance for lower value cars that you own. If you own your car outright then you are not required to carry full comprehensive insurance. For a car with minimum value it is probably not worth the extra cost to have full coverage. Think about it, is it really worth it to pay an extra $200 or $300 a year to cover the value of your 1980's beater? No it isn't. If the accident isn't your fault then you're covered. Bank that money instead. If you do have an accident that is your fault then you can just replace the cheap car with cash.

Watch your credit rating. The insurance companies usually check your credit rating. A poor credit rating will end up giving you worse insurance rates as well. Insurance companies have decided that a poor credit record indicates a higher likelihood you'll have poor driving habits. This gives you just one more reason to try and keep your credit score up.

Go for higher deductible. A higher deductible could save you money on your premiums. If your deductible is too low then your rates will be higher. You really want to avoid making any claims and the purpose of insurance is to cover expensive costs you couldn't afford anyway. Going with a deductible of $500 or $1000 could save 15 to 40% on your total premium costs.

Safe car equipment. Airbags, anti lock brakes and anti theft devices can all give you discounts on your insurance. Keep this in mind when shopping for a car. In addition to making your vehicle safer you can get lower rates.

If you add all of these together they could make a huge difference in premiums. A driver with a poor credit rating, penchant for speeding, who gets a low deductible policy that they don't bother to shop around for will easily pay significantly more than someone with good credit, good record who spends the time to look for a good rate.


Further sources of information:


Photo courtesy of FreeFoto.com

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