It’s no secret that auto insurance premiums are going up around the country. The U.S. Bureau of Labor Statistics found that car insurance rates rose more than 5% from March 2015 to March 2016 at a time when was inflation was negligible at less than 1%.
The Insurance Information Institute‘s (I.I.I.) newly released white paper, Personal Automobile Insurance: More Accidents, Larger Claims Drive Costs Higher, finds that the frequency of collision claims increased 2.6% between the first quarters of 2014 and 2016. Meanwhile, the severity of those claims rose by 8.2%.
That’s cut deep into the pockets of insurers and driven up rates for the average consumer.
What can you do about it?
Just because premiums are moving higher as a general trend, it doesn’t mean you’re fated to pay more for car insurance. Shopping around for coverage is the single best thing you can do to lower your premium. Here’s how to start the process…
Begin by identifying solid companies
Clark has long talked about the merits of Amica Mutual and USAA. But those aren’t the only two companies you should look at. Consider buying a one-time subscription to Consumer Reports and checking their latest list of the best auto insurance companies to find others that should make it onto your shortlist.
Get your quotes
Once you have a list of candidates, you’ll want to start getting quotes. This typically takes around 15 minutes on the phone per insurer. Have your most recent policy in front of you in case any questions come up about the make and model of your vehicle(s).
Working with an insurance broker is another option. He or she will get multiple quotes for you and you’ll have access to all the insurers they do business with. It’s an easy one-stop shop that lets you still have the flexibility of comparison pricing.
Once you get the quotes back, it’s time to compare them. Each quote should be based on the same amount of coverage so you can do an apples-to-apples comparison. What if a poorly ranked company offers you a great quote? Clark says to avoid them! While the premium might be tempting, you want to be sure your insurer is there for you when the chips are down.
Know when to drop comprehensive and collision
The general rule is when the cost of comp and collision exceeds 10% of your old vehicle’s value, that’s the time to dump it and just have liability coverage. You can determine your vehicle’s value at Edmunds.com, KBB.com or NADA.com.
So let’s take a simple example. Say your vehicle is worth $4,000. If you’re paying anything more than $400 annually (that’s 10% of $4,000) for comp and collision, it no longer makes any financial sense. One notable exception to this rule: If there’s no way you could financially cover the loss of your vehicle, forget the math and keep paying for comp and collision.
Be prepared to take a higher deductible
You should always opt for a $1,000 deductible for the best savings on your policy. At that level, you’ll pay a lower premium and won’t be tempted to file any small piddling claims.
Don’t forget about discounts!
The I.I.I. reminds you that there are a ton of different discounts out there. Here are some you can ask about:
- Antitheft devices
- Multiple policies with the same company
- College students living away from home
- Defensive driving courses
- Drivers ed courses
- Low annual mileage
- Long-time customer
- More than one car
- No accidents in three years
- No moving violations in three years
- Student drivers with good grades