Auto insurance cost
can vary
significantly from
driver to driver.
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There are many factors that influence the price you pay for auto insurance. The average American driver spends about $700 a year. In estimating your premium costs for auto insurance, ask yourself the following questions:
How good is my driving record?
One of the most common reasons for high rates is a history of speeding tickets or accidents. The number of tickets or accidents that you have had in the past 3-5 years will be documented in your driving record. Typically, convictions (such as failing to report an accident, speeding, seat belt infraction, illegal turn, failing to yield, and so on) will stay on your record for 3 years, and accidents (for which you are at fault) will stay for 5 years.
What kind of car do you have?
Different types and models of vehicles have differing risk characteristics. The more costly and popular your automobile, the more you'll pay for auto insurance. Why? Expensive cars cost more to repair or replace, and so collision and comprehensive insurance costs more. You can also lower your costs if your car is equipped with safety and anti-theft features. See our Discount section for more info.
The 10 cheapest cars to insure
What do you use your car for? How often do you drive it?
Different people use their cars for different purposes. Some people drive to work, while others drive only for pleasure. Obviously, the more often you use your car, the more you increase your chances of having an accident, so the more the auto insurance company will charge in premiums. In addition, if you use your car for business you will be charged extra.
Where do you live?
You will be charged a higher premium if you live in an urban area, such as Los Angeles, rather than in small rural town in west Texas. Through research, auto insurance companies have found that your car is at a higher risk of vandalism, theft and collision if you live in an urban area. Your costs may also rise if you park your car on a dark street rather than in a secure garage.
How much auto insurance do you have?
Different products are available in the insurance market at different prices. You must choose whether to buy the minimum or increase the limit, or whether to purchase any of the optional coverage. Both decisions will impact your premium. The deductibles you select are also reflected in your premium. The higher the deductibles, the more risk you bear, and the lower your insurance bills.
How old are you?
While companies are no longer allowed to rate a driver on sex or marital status, age or length of driving experience still affects the cost of auto insurance. Young drivers will pay more than those considered to be adults. Different companies set different ages at which drivers are considered adults.
Have you continuously held auto insurance, without any major gaps?
Insurance companies are wary of individuals with gaps in their automobile insurance coverage. Your insurer will generally accept a lapse in coverage if you inform them in advance.
There are many strategies you can use to lower your auto insurance premiums. We've listed below some things that you can do to lower your premiums significantly.
Keep it clean.
Be a safe driver and keep your driving record free of traffic violations and accidents. You will probably be eligible for the lower rates if remain accident and ticket-free for at least three years.
Increase your deductible.
By choosing to raise your deductible, you will lower your rates significantly. Sometimes you can reduce your annual premium by 10 percent or more if you increase your deductible from, say, $250 to $500. If you do this, however, make sure you have the financial resources to handle the larger deductible when the time comes.
Buy a low-risk car.
Cars are rated on a risk scale for auto insurance purposes. In general, sports cars and other high-performance, flashy vehicles are classified as higher risks because they are common targets for thieves and vandals, and because statistically, the people who own them tend to drive more recklessly. Sport-utility vehicles are also considered high-risk vehicles and are susceptible to a higher premium, than a low-risk car, such as standard family sedan.
Review and revise your policy regularly to meet your current needs.
Designate a regular time to review your policy. You may decide that you no longer need that special towing package or can lower your bodily injury coverage. You may also qualify for discounts you didn't know about. For a checklist of important discounts, see the following section.
Drop collision coverage on an older car.
If you have an older car, or one in poor condition, you may not want to pay the price for collision coverage. Call a bank or finance institution to find out the price you would get for your car on a straight sale. Take this price and subtract what you would have to pay (the deductible) if you had a loss. Then subtract the cost of insurance for one year. The amount you come up with is the total you would actually net if your car was totaled.
Drive less.
Take advantage of low mileage discounts that some insurance companies offer to drivers who keep their annual mileage at or below a certain level. In general, the less you drive, the more you can save. Likewise, if you currently use your car for business purposes, it may be in your best interest to reconsider this decision.
Make it safer.
Many insurance companies will offer significant discounts if you install safety or anti-theft devices in your car, since they significantly reduce the amount of bodily injury and car theft. For additional information on the types of safety devices recommended by insurers, visit our Discounts section.
Inquire about multifamily / multipolicy discounts.
Many insurers will give you a discount if you buy two or more types of insurance from them. Also you may get a reduction if you have more than one vehicle insured with the same company. Some insurers reduce premiums for long-time customers. But shop around; you may save money buying from different insurance companies despite the multi-policy discount.
Insurance companies have a variety of discount programs that may be available to you. Below is a list of discount programs some insurers offer. If you think you may qualify for any of the discounts, be sure to ask your agent or carrier when you complete an application.
Good Driver
The definition of a good driver varies, but it generally means having no accidents, moving violations or other citations on your record for a given period of time. Insurance companies are quite willing to reward such "good behavior."
Experienced Driver
Women 21+yrs. old and men 25-30+yrs. old may qualify for a reduction in rates. These drivers are less of a risk, as opposed to young adult and teenage drivers.
Mature Driver
Drivers between the ages of 50-55 are generally considered the lowest risk because they have a wealth of driving experience and seem to drive more defensively than their younger counterparts. Thus, "mature drivers" may be eligible for a significantly reduced rate.
Good Student
Good students are often as more responsible than the average teenage driver by insurance companies. Young drivers who maintain a B average in high school or college may be rewarded with a discounted rate.
Driver Education
Taking defensive driving/accident prevention courses may mean cheaper insurance. An informed driver is a safe driver (and less of a risk to the insurance companies). Call the National Safety Council at 1-800-621-6244 to see if a course is offered near you.
Multiple Car Household
Insurance companies will appreciate the added business when you insure all your cars with them. Keeping all of your eggs in one basket is a good idea for reducing rates.
For those who drive less than 7,500 miles annually, an insurance company may offer a restricted mileage discount.
Car Safety Features
Having anti-lock brakes, airbags and/or automatic seatbelts improves your car's overall safety and may reduce your rates.
Ignition "kill" switches, alarms, hood and wheel locks reduce the likelihood of theft or vandalism and may justify a discount in your rates.
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