Insurance 101: Car Insurance Premiums
What is an insurance premium?
Buying insurance, whether it’s auto, home, life, or any other type of insurance, is intimidating. There’s so many options and variables to consider. Which company? Which coverages? At what level of coverage? It’s easy to get overwhelmed without an advisor there to help you.
Looking at and comparing premiums should be one of many ways you pick your policy. A premium, for those unfamiliar with insurance lingo, is your cost to the company for the coverage they offer you.
Different types of insurance base their premiums on different factors and, therefore, have different ways of lowering a premium. For example, where auto coverage uses your driving record as one factor in determining your premium, a life insurance premium would be more impacted by your health. Today, we’ll focus on car insurance.
Car insurance premiums have so many factors, but some of the biggest ones include your age, driving record, your claims history, your vehicle, and the amount of coverage you are purchasing.
While the premium goes up as your coverage increases, it’s not linear. Double the coverage doesn’t mean double the price, since there are different parts of your policy that can move independently of each other. These different parts are your medical, liability, and damage coverage (comprehensive and collision are the two sides of damage coverage).
However, while minimizing the amount of coverage is one way to lower your premium, this is often unwise. Minimizing your coverage could leave you on the hook for thousands of dollars should you get into an accident.
So, what are some short-term ways of lowering your premium?
1. Always compare rates to ensure they’re affordable for you before purchasing insurance
2. Raise your deductible – so long as you would feel comfortable paying it in a claim, raising your deductible will lower your premium (check to see by how much before you change it)
3. Evaluate if you need comprehensive and collision coverage on older cars. For some older cars, damage coverage may not be worth the cost
4. Bundle your policies!! Almost all carriers offer steep discounts for policies that are purchased together and bundled
5. Maintain good credit and payment! A good credit score has the potential to lower your premium, since companies will feel confident they’ll get on-time payments
6. Use low-mileage discounts that are available. Talk to your agent to see if you qualify - every company has a different threshold
7. Use a telematics discount. Every company calls it something different, but they’re the up-and-coming software every company wants to use. This is often done with an app using a Bluetooth connection to keep track of safe driving habits. Safe drivers can often save up to 40 and 50%, but beware, as some companies penalize unsafe drivers
If your coverage doesn’t feel like it’s worth your current premium, ask us to review it with you here. We are happy to help make sure you’re getting the right bang for your buck.
