How to Compare Auto Insurance Rates
Trying to figure out how to compare auto insurance rates, but having a tough time figuring it out?
Getting a new car can be an exciting adventure. But it’s also an expensive one. When buyers consider what they can afford, they often forget the cost of car insurance.
This is a big mistake. Whether you’re buying or leasing a new car, insurance is a significant monthly expense. For some drivers, their insurance payment is more than their car payment! That said, there are strategies that can help you save big on car insurance.
Factors that affect the cost of car insurance
Before we discuss how to compare auto insurance rates, let’s first take a look at what factors determine the cost of car insurance.
The purpose of car insurance is that you pay into a “pool” with other drivers. In the event that you have an accident and your car needs repairs, that pool will pay out to cover your damages.
The insurance company makes money when drivers pay more than they receive in claims.
For this reason, insurance companies determine rates based on how much of a risk that driver is.
In other words, the more likely a driver is to make a claim, the higher the monthly premiums will be.
One of the factors that determine risk is the vehicle you are paying to insure.
For instance, the age of your vehicle can impact your insurance. Often, newer vehicles cos more to insure, because they are more expensive to replace.
Yet, newer vehicles can be less expensive to insure, because they make them safer.
Vehicles with better safety ratings can lead to lower insurance rates.
The cost of insurance also depends on the identity of the primary driver of the vehicle.
For instance, drivers under the age of 25 are a higher risk than older drivers. Also, drivers who have had at-fault accidents are a higher risk for an accident in the future.
Insurance companies will also access risk based on the location where you drive your car.
For example, let’s say you drive in a rural area with few cars. You will may be at a lower risk of getting in an accident than someone who drives in an urban area with a lot of cars.
Additionally, your risk increases based on the activity of other drivers in your area. If drivers in your area tend to make a lot of claims, your insurance will cost more.
Know what coverage you need
Car insurance costs can vary depending on the risk for a particular driver. Costs can also vary, but based on what the policy covers.
On the one hand, while you can save money by getting a more bare-bones policy, you want the right coverage. So, it doesn’t make sense to pay top dollar for the most comprehensive coverage available.
Comprehensive coverage vs. Liability Coverage
One way some drivers overpay for insurance is by opting for comprehensive coverage.
Comprehensive coverage, includes a collision with another vehicle or not involving a vehicle. Say, for instance, you crash into a lamp post.
Liability coverage, only covers if you if you are in an at-fault accident with another vehicle. If another vehicle hits you, coverage is under that driver’s insurance.
If you have an older car, it might be a good idea to opt for liability coverage, rather than comprehensive.
This is because, if you have an older car, you’ll pay for the repairs out of pocket, or junk the car if you crash it into a tree.
There’s no reason to pay for coverage you won’t even use.
Choosing a higher deductible
There are two main costs associated with your insurance. A premium, and your deductible.
The premium is the cost you pay every month to maintain your insurance policy. Your deductible, is the amount you’ll pay out of pocket for any repairs covered by insurance.
So, let’s say you have a $500 deductible, and you get into an accident that causes $7000 of damage on the car. If your insurance agrees to cover the damage, you‘ll pay $500 out of pocket, and the insurance will cover $6500.
The lower your deductible is, the higher your monthly premiums will be. So, a good way to save on your monthly premiums can be by taking a higher deductible.
Keep in mind, that you should not choose a deductible that is too high. If your deductible is too high, then there’s little purpose to having insurance in the first place.
For a lot of drivers, car insurance isn’t the only insurance policy that they have.
For example, homeowners usually have insurance for their house. Additionally, many landlords now need tenants to buy renter’s insurance.
What you may not have realized is many insurance companies offer bundled packages.
By taking out many insurance policies with the same company, you can end up saving on both policies.
Learn how to compare auto insurance rates
With online quotes, it’s easy to get rates from many insurance companies.
As a good rule of thumb, you should get quotes from at least three companies before making a choice. This will give you a good idea of what options are available.
Also, when looking at companies, don’t only consider national chains. Smaller, local insurance companies can often offer great rates.
What strategies have you used to save on car insurance? What did you do to learn how to compare auto insurance rates? Let us know in the comments!
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