How to Qualify for Cheap Auto Insurance and Save Money
A Driver's Guide to Lower Premiums By Dan Wright
What Is Meant By "Cheap Auto Insurance"? As is good practice in any discussion, let's define terms here. By "cheap auto insurance
", let's be clear that we're not talking about unbelievably low-cost coverage provided an obscure "will they be there when I need them?" company.
We strongly recommend you run, not walk, from such fly-by-night insurance companies. When it comes to low cost insurance coverage, you'll want to stick with the names you know. You know them because they have built a solid reputation for themselves. Choosing a policy is no time for gambling on an unknown insurer. To buy your policy from a one-room office with a shingle out front reading "El Cheapo Insurance" only adds to your financial risk. The purpose of insurance is to lower this risk which is why we only provide you with auto insurance quotes from the top carriers in the industry. You can rest assured they'll be there when you need them.
So we can define the cheap auto insurance which we all want is that which provides us the greatest coverage at the lowest premiums offered by one of the reputable carriers with a solid track record. And just how does one qualify for such a policy? Can they really obtain cheap auto insurance quotes? Read onů
Does Cheaper Auto Insurance Provide Adequate Coverage?
You can choose among several coverage levels, but the rates you will pay for that coverage will depend on your personal data and driving history. Insurance quotes are a reflection of the perceived risk the insurance carrier takes on when it insures you. If the insurer perceives you as being a higher risk, your rate will be higher. If the company considers you a lower risk, then you will likely qualify for their cheaper rates.
Naturally, if you have a history of traffic violations and/or accidents - especially recent ones - then you should expect that your rates would be higher as the insurance company factors in the additional risk. Inexpensive auto insurance is a priviledge extended to those who have kept their driving record clean by practicing safe driving on the roads.
Many people choose to carry Comprehensive coverage in addition to Liability and Collision. Comprehensive coverage covers the car against any damages caused to the car due to natural calamities like fire, flood, tornadoes, earthquakes, volcanoes etc. Some insurance companies also cover losses caused due to theft of the car or car parts. If you want any extra coverage, you should include those with your quote request when possible.
What Factors Qualify Me For The Lowest Rates?
There are a number of criteria used by insurance underwriters to calculate your auto insurance quote. Let's take a closer look at the major ones.
Policy type and coverage amounts are major factors.
Of primary consideration when shopping for a policy is to first determine the type of policy and amount of coverage you want. This could range from a bare-bones "state minimums" policy to a full "Comprehensive" policy with generous coverage for Liability, Collision & Comprehensive.
Policies with just the state minimums as coverage usually offer the cheapest auto insurance rates. Of course, if you cause major damage to someone else's property or to another person, your costs will likely far exceed the coverage limits provided by such policies resulting in financial ruin if you don't have other reserve funds to make up for the short fall. More information about state minimums can be found here: State Auto Insurance Requirements.
According to the Insurance Information Institute, the insurance industry and consumer groups generally recommend a minimum of $100,000 of bodily injury protection per person and $300,000 per accident.
Be sure you aren't paying for coverage that just doesn't make financial sense. You may want to consider dropping collision and/or comprehensive coverage on older cars worth less than $1,000. Often, the same money you'd pay in premiums for such coverage could be set aside to "self insure" for the same amount. Remember, the maximum your insurance company is going to reimburse you for is the actual value of the vehicle. So when your vehicle's blue book value drops into this range, consider whether it's in your best interest to continue collision coverage.
For cars you've financed, you may not have a choice. Usually, the finance company requires you to carry both Collision and Comprehensive (in addition to the Liability coverage mandated by the state). Check with the vehicle's finance company to learn their specific requirements.
Deductibles are key.
The deductibles you choose will have an impact on your rates. The "deductible" is the amount you, the policyholder, are going to pay toward a loss before your policy kicks in. The lower the deductible you choose, the higher you're premiums will be and vice-versa. In order to get lower rates, consider opting for a higher deductible if you can afford it.
A good practice in general when doing your financial planning is to have an emergency fund set aside so that when unexpected costs arise, you won't need to cover them with loans or, worse, credit cards. The strategy here is to have an emergency fund set aside with enough in it to cover any needed repair costs when choosing a higher deductible. Doing so will allow you to pay less in premiums and invest the difference, thereby creating wealth through the years with the savings you will incur. For more information on using emergency funds in conjunction with insurance, check out Dave Ramsey's Financial Peace University which is an excellent personal finance program that helps people beat debt and build wealth.
Bear in mind that where you will be spending most of your time driving - and keeping your vehicle parked at night - is going to have a significant impact on your perceived risk by an insurer. A good locality means less risk of theft of your vehicle. So, if you're looking for cheap auto insurance in California yet live in L.A. and do a lot of your commuting on the freeways there, odds are it's going to be tough to qualify for the lowest rates.
Your car's make, model, year, body type and engine size
The more expensive the vehicle, the more it will cost to insure. Newer models and expensive makes are quoted higher rates. Another factor also taken into consideration is whether the vehicle is considered a "performance" car. Sometimes two cars can be the same make and model, but one has the performance package - bigger engine, sportier body, manual transmission, etc. This can create a major disparity in rates. So, if you're in love with a car but don't really care about the performance options, opt for the smaller engine package. When you try to get cheap auto insurance quotes
for your new ride, you'll be glad you did.
Other factors used to calculate premiums include the vehicle's sticker price, typical repair costs, overall safety record, and the probability of theft.
Your vehicle's safety and anti-theft features
Many carriers offer discounts for safety features that reduce the risk of injuries or theft. These can include daytime running lights, air bags, an anti-lock braking system (ABS), and anti-theft devices. Buying a car with these features puts you one step closer to saving money from the start.
Don't forget the driver!
The age, driving record and credit history of the driver are all factors used by insurance carriers to determine premiums. A bad credit history makes it virtually impossible to qualify for lower rates because if one is irresponsible with their financial affairs, the insurer assumes they are also irresponsible on the roadways and, therefore, not a good risk.
Check the multi-policy discount
Carriers often offer a discount if you insure both your home and car with them. Ask how much that discount is and compare to see if it may actually be an overall better deal for you as a package rather than carrying separate policies through different insurers.
10 Things That Can Help You Get Cheaper Auto Insurance
1) Never be hasty when shopping car insurance. As with any hasty decisions, they often have bad consequences. In this case, it can mean paying more in premiums for less coverage than you could get from another insurer.
2) Look for the policy's exclusions and be sure you read and understand all of them. This is where the carrier details what is not covered by the policy. Be 100% sure you know what your policy covers and doesn't cover. Failure to do so could prove to be a very expensive mistake.
3) Do your homework on your coverage requirements. There's no point in buying excessive coverage above that which you really need. At the same time, be certain you are not underinsured which could have disastrous results to your finances. Run the numbers and see what is reasonable. If you need help, ask your agent to assist you in this. You can also do online quote comparisons at sites such as this one to discover the rates for a specific car at your locality. If you're shopping for a new car, better to research the premiums first rather than be unpleasantly surprised later!
4) Understand that insurance is a very competitive market so you must shop around. Always get a number of quotes before making a decision. Never buy upon reviewing only one quote. Never buy from a company that doesn't have a reputation as having a good track record for claims service.
5) Try to refrain from using your automobile for business. If your car is primarily used for commuting, you will enjoy lower rates than if you also use it for business.
6) In addition to the information on this page, spend time in our car insurance glosaary. The more auto insurance terms
you know, the more you'll understand what can be done to lower your premiums.
7) Read the U.S. government's publication entitled "Nine Ways to Lower Your Car Insurance Costs
" which offers more great tips for lowering your premiums.
8) Get more details on how to lower your rates as well as some excellent general insurance tips at USA.gov's insurance tips page.
9) Watch the Insurance Information Institute's video "Five Ways to Save Money on Car Premiums" which provides effective methods for reducing your premiums.
10) Read up on the 8 Auto Insurance Myths where the Insurance Information Institute separates fact from fiction on several of the most commonly held beliefs about car insurance. Some of these are sure to be news to many!
Well, that makes 10 for the list but we like to over-deliver so here's an extra one:
11) After you've done your homework and are ready to get the lowest quotes, enter your Zip code into the box below to begin the quote comparison process and find out just how cheap your car premiums can be!