Our Archive of Articles About Financial Literacy and Other Topics
Paying Less For Your Auto Insurance Premium
May 17, 2007, 3:33 pm
Automotive debt article on how to save on insurance premiums
One of the areas in which consumers often waste money is on their auto insurance premiums. It’s something that you are required by law to purchase on every car you own, and with good reason. But the result is that auto insurance companies have guaranteed sales, and their marketing departments have developed a lot of add-ons to boost premiums.
To be a good auto insurance consumer, you have to be particularly critical when deciding what kind of coverage you want. Specifically, this means not just accepting what the insurance agent tries to sell you and looking at each item before deciding whether to pay for it or not.
For example, almost any auto insurance policy can include coverage for towing your car to a mechanic should it break down or in the event of an accident. And a lot of people get it because the coverage is only a dollar or two per month. Well, if you are already a member of an auto club that offers free towing, it’s double coverage and a waste of money.
These are the types of questions you should ask about every optional coverage. If you already have comprehensive health insurance, why would you pay extra to cover your hospital bills in case of an auto accident? We’re not saying there is never a need for this coverage; it’s simply something you should question.
For the basic coverage, there are a number of factors that the insurance companies consider in setting rates that you should be aware of. The most important of these is your driving behavior. One of the best ways to save money on auto insurance is to avoid tickets for moving violations. Also, your age, gender and marital status play an important role. For example, young, single males under the age of 25 typically pay the highest price because, statistically, they have more accidents.
Another key factor is your car. Sports cars, for example, are more expensive to insure than station wagons because they travel faster and the people who drive them tend to drive more aggressively. Insurance companies also take into account how expensive the car is to fix if damaged and how well they protect the passengers during an accident.
Once the base rate is determined, you may be eligible for a discount if your car has an anti-theft device, airbags, or anti-lock brakes. Other discounts are usually available if the driver, especially teens, have passed defensive driving and drug/alcohol awareness courses. Also, if you have more than one family member with the same company, most companies will offer a discount. Same if you have another policy, such as your homeowner's insurance, from the same place.
As with any major purchase, a little comparison shopping will go a long way in saving you money. In addition to avoiding unnecessary optional coverage and getting all the discounts you deserve, ask several different companies for quotes on a rate. You may be amazed at the difference you’ll see from one company to the next.
