Facts That Could Help Reduce Your Auto Insurance Rates

Learn more about five facts that could help you save more on your auto insurance.

By Renee Wade

If you’re on the hunt for a better auto insurance policy, you’ve probably encountered a wide variety of providers, coverage levels and options.

With so many things to think about and compare, many consumers miss the tidbits that could help them find a better policy.

Here are five facts that could help you cut through the confusion and find the auto insurance policy that best suits your needs – at a price you can afford.

Fact #1: In most states, good credit makes a difference.

Your car type and driving history serve as well-known contributors to an auto insurance rate, but many people don’t realize that their credit history can also dramatically affect rates, too.

Tell me more: According to an article from the Insurance Information Institute, an independent research and media relations organizations, insurance companies use a person’s credit score to generate an “insurance score.” The article, “What Does My Credit Rating Have to Do With Purchasing Insurance,” goes on to note that this insurance score is then used to set rates.

According to the Institute, statistically, people with a low insurance score (which would be a reflection of a low credit score) are more likely to file a claim, and therefore, might get stuck with higher rates.

That said, there are several states where insurers might not use credit as a factor in determining rates.

Fact #2: Payment plans can wind up costing you more.

It seems like a good deal, right? Instead of paying a lump sum for your insurance, you make smaller payments at regular intervals. However, these payment plans are often marketed to individuals with lower income because they appear to make affording insurance easier. But if this is something you’re considering, make sure you won’t have to pay dearly for it.

Tell me more: In a 2008 article entitled “Insurance Premium Installment Fees,” Consumer Action, an advocacy organization focused on defending consumers’ rights, reported that many insurers charge a discreet fee for each payment. This could mean that the total bill comes out higher. With one insurer, the “premium” for a payment plan was 21 percent.

Fact #3: Where you live will have an impact on your rate.

“Something as simple as moving homes can affect your rates,” says Jeremy Bowler, senior director of insurance practice at J.D. Power and Associates. And it makes sense, if you think about it – where you live is also where you park your car, which could influence the likelihood of your car being damaged.

Tell me more: Bowler said the zip code where your car is kept overnight can “heavily increase your car insurance costs.” The types of nearby businesses and roadways could also impact your rates – especially if your home is close to a particularly dangerous intersection or a popular bar, according to Bowler.

Fact #4: You may already be qualified to save money on your next insurance policy.

Did you know that being affiliated with your alma mater could save you money on your car insurance? This doesn’t just refer to your college or university. Bowler notes that a variety of affiliations and memberships – from professional organizations to groups like AARP to credit unions – could have arrangements with auto insurance providers to save money for their members.

Tell me more: According to Bowler, almost everyone can find at least one company that has an “affinity discount” for which they qualify. He adds that credit card loyalty program members could use those cards to make payments with some companies, earning points or rewards that way.

If you do your research carefully, you’re likely to find at least one company with perks tailored to you.

Fact #5: Having a teenage driver doesn’t have to make insurance unaffordable.

There’s no getting around it – a new driver in your household is going to drive up your insurance costs. The National Association of Insurance Commissioners (NAIC), an organization that includes state government officials in charge of regulating insurance companies, reports that female teen drivers could increase auto insurance costs by as much as 50 percent, while teenage boys could add a hefty 100 percent to the overall price tag. But the same agency notes that there are ways to ease that burden.

Tell me more: Many insurance companies offer discounts if your teen driver maintains high grades in school, according to the NAIC. Taking a safe driver education class could also help keep teen insurance rates manageable. Before you set your young driver loose on the roads, the NAIC recommends researching the premiums for different cars, as some vehicles carry heftier insurance costs for teens.

By paying attention to all these opportunities for small discounts, you could wind up with big savings – and a safer student driver – overall.