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Keeping Car Insurance Costs Low

The more you know about auto insurance and how the industry works, the better off you will be, and the more money you can save. The following are key factors that auto insurers use to determine the price of your auto insurance and what you can do to keep it as low as possible:

  • Age: If you’re very young or quite elderly, your risk of being in an auto accident is statistically much higher than for middle-aged folks. You can’t do anything about your age. However, some insurers may penalize you less than others with regard to your cost of insurance.

  • Auto insurance claims history: Safe drivers are rewarded with lower auto insurance premiums. Your history of making claims against your auto policy will directly affect the cost of your insurance. The more you use insurance, the more your insurance will cost.

  • Commuting distance to work: The farther you drive, the higher your risk of being in an accident.

  • Credit history: Insurance companies have determined that there is a direct correlation between your credit history and your risk as a driver.

  • Driving record: If you have received a traffic ticket for speeding or another form of reckless driving, you’ll pay for that carelessness in higher insurance premiums.

  • Marital status: Married people historically are more stable drivers.

  • Place of residence: Your zip code can have a drastic effect on your cost of insurance. Insurance companies penalize you for living in a zip code that has a history of auto theft, vandalism, and so on.

  • Safety and security of the vehicle: Passive restraint systems, front and side-curtain airbags, and other safety features make it less likely that you'll be seriously injured in an accident, avoiding medical bills that the insurance company would otherwise be obliged to pay. Alarm systems make it less likely that your vehicle will be stolen and need to be replaced.

  • Type of car you drive: A Dodge Dart station wagon versus a Hummer or a Corvette? The latter two will pay substantially higher auto insurance premiums because those cars will cause or potentially receive much more damage in the same accident as the Dodge station wagon, and they cost a lot more to repair or replace than the older, less expensive vehicle.

Here are some tips to help you save money on your auto insurance:

  • Don’t file small claims. The more you use your insurance, the higher your premium rates will be. Submitting claims that exceed your deductible by just a few hundred dollars doesn’t make financial sense; paying for smaller losses yourself can save you money over the long term.

  • Don’t let other people drive your vehicle. Multiple drivers create multiple risks. More risk, more cost of insurance.

  • Wear your seatbelt. Studies prove more people survive accidents and receive fewer severe injuries when they wear their seatbelts. Less injury, less insurance claim, less cost of insurance.

  • Drive the speed limit. Speeders cause accidents. Accidents result in claims. Claims jack up your cost of insurance.

  • Take a driver safety course. Many companies provide a discount to drivers who have taken a safe driving course.

  • Continue to improve your credit score.

  • Pay your auto insurance premium annually. Most companies charge a service fee if you pay your premiums monthly, quarterly, or semiannually.

  • Before buying a vehicle, check out its insurance safety rating through Consumer Reports.

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