4 Car Insurance Factors and 5 Ways to Drive Down Costs

4 Car Insurance Factors and 5 Ways to Drive Down Costs

Whether it’s clipping coupons and shopping in bulk or skipping that morning latte and packing your lunch, many of us have found ways to save money. Though you may not think about it daily, taking a fresh look at your car insurance rate has cost-saving potential as well.

Factors that impact car insurance rates

What drives your insurance costs anyway? From vehicle type to where you park at night, several variables can impact auto insurance premiums.

1. State requirements
   Most states require auto insurance to legally operate a vehicle. Typically, the minimum coverage includes bodily injury liability and property damage liability coverages at prescribed limits. Common liability limits are 100/300/100.  Many states also require uninsured motorist coverage as well, so check to determine what your state requires.
   
   Here’s how it breaks down:
   
   • $100,000 for bodily injury liability coverage per person.
     
   • $300,000 for bodily injury liability coverage per accident.
     
   • $100,000 for property damage liability coverage per accident.
     
   But every state is unique and so are the requirements for auto insurance. If more coverage is required, your premium will likely increase. And if you’re still making payments on your vehicle, liability coverage and comprehensive and collision coverages are usually required by the lienholder, which costs more.
   
2. Location, location, location
   Home may be where the heart is, but where you live can cost you more — or maybe less — in auto insurance costs.
   
   Big city residents, for example, are likely to have higher car insurance costs than someone who calls a more rural area home. Why? Crowded roads with more cars mean an increased risks of accidents. Even a difference in ZIP codes within the same city can increase what you pay if one area is deemed “riskier” than another.
   
3. Type of vehicle
   While we’ve probably all admired a sleek sports car zipping down a highway, chances are, the owner is paying a lot more for car insurance than someone who drives a sedan. Typically, sports cars are more expensive to replace and repair than sedans, so higher insurance premiums are needed to cover the costs.
   
4. Credit score
   Like many companies, car insurance providers use credit information to help determine insurance rates. Known as an insurance-based credit score, the rating assigned to customers is based in part on their consumer credit standing. Typically, the lower your consumer credit rating, the higher costs you will pay for car insurance.
   
   Additionally, your age, how you use your car (for commuting or for business), driving and accident history, and even your marital status are factors that can play into insurance costs.

Lowering your rate

Now that you know what can make your rate go up, it’s time to look at a few ways to maximize your savings to reduce your car insurance rates.

1. Shop around
   There is no shortage of insurance providers, which makes it easier to shop around for better rates. Just keep in mind that you must maintain your state’s minimum coverage requirements. Also, ensure there are no gaps in your insurance coverage if you do decide to switch.
   
2. Reduce your coverage
   While you must maintain state minimum insurance coverage, there are circumstances where you can explore reducing coverage to obtain a lower premium.
   
   If you drive an older vehicle that’s paid off, you may not need to carry as much collision or comprehensive coverage. In this example, you may even be able to drop full coverage for just liability. But again, it’s best to discuss any changes like this directly with your insurance company.
   
3. Remember your discount
   While “bundling” auto insurance coverage with a renter or homeowners policy can get you a discount on your premiums, other discounts may be available. Being part of a college alumni group, having veteran status, working in a certain industry or even taking a defensive driving course are just a few. Check with your insurance provider to ensure you’re receiving all the discounts available to you.
   
4. Raise your deductible
   A deductible is what you pay out of pocket before insurance covers the costs of any repairs or damage in case of an accident. Typically, if you raise your deductible, it will save you money on your premium.
   
   One word of caution: Before raising your deductible, make sure your budget will allow you to comfortably pay a higher deductible. It’s also a good idea to “vet” the potential savings of raising your deductible. For example, if your deductible is $500, you can ask your insurance provider to quote the difference in your premium cost if you raise your deductible to $1,000. Depending on how much you’d save, you can determine if the savings are worth a change in your deductible.
   
5. Get monitored for savings
   For a glimpse at your driving habits, some insurance companies offer in-vehicle monitoring. With the provided information, insurance companies can reward safe driving practices with lower insurance rates. You can even receive a discount for simply signing up for the program.
   

Working closely with your insurance company is the best way to find the most competitive rates. OnStar Insurance provides customized care and personal attention that can find the rates that best fit your budget and lifestyle, with the security OnStar is known for. Reach out to their team to get a quote or explore savings options with your current OnStar policy.

By Katrina Lewis, GM Financial

A fan of suspense novels, food trucks and pop culture, Katrina Lewis is passionate about writing to educate and inform, especially when it comes to finances and customer options when leases or contracts are ending. A “boy mom,” Katrina loves playing monster trucks with her son, random day trips and venturing out to various festivals with her family.