Buying a new car can be challenging, especially with the average new car costing $31,000 in addition to the monthly insurance premium. Fortunately, you can reduce your insurance costs without significantly lowering your coverage. Here are four of the most popular options.
Improve your credit score
Surprisingly, one of the easiest ways to get better rates on most types of insurance is to have a good credit score. According to insurance companies, customers who have a credit score in the “fair” or “poor” category are statistically more likely to file claims, and the premiums offered by insurance agencies reflect those statistics. It might not seem fair, but insurers bet more on probability and statistics than they do individual customers.
Luckily, improving your credit score has a ripple effect that gets you better rates and improves your chances for car loan approvals at much more competitive interest rates. Hence, it’s worth making an effort to get your score above 700. The two most significant factors for your credit score are the number of late payments made to creditors and your credit utilization rate, which is the amount of debt you carry every month over your total available credit. Many people will improve their utilization rate by taking out debt consolidation loans. But there are some nuances that you should know, so research “does debt consolidation hurt credit score?” to see if it’s a viable strategy for you.
Review your coverage
There are dozens of different variables that can be added or subtracted from your insurance plan, so review your coverage to see what it is you’re actually paying for because there might be some options you’re not going to use. At the very least, you’re legally required to have collision coverage, and most experts recommend comprehensive coverage should your car be totaled in an accident. Other options like property damage, bodily injury liability, personal injury protection, and uninsured motorist coverage might be unnecessary or could already be covered by your homeowner’s insurance. So, take a look at all your coverage options to see if there’s something that could be adjusted to get you a lower rate.
Bundle your insurance
Suppose you have multiple things that need to be insured, such as your home, car, another vehicle (motorcycle, boat, etc.), or personal property while you rent a home. In that case, it might be worth bundling them together with one insurance carrier to save money. Many carriers will offer reduced rates on all coverage if you bundle your insurance with them.
Negotiate a better rate for paying yearly instead of monthly
Negotiating with your carrier is always an option as it costs them more money on average to find a new customer to replace you than to keep you. However, you’ll typically need to compromise somewhere to get a better deal. Consider asking how much they’d knock off your premium if you paid for a year in full instead of monthly or quarterly.
The bottom line
Car insurance is one of the most important financial responsibilities you have as it can save you thousands should the unexpected happen. However, you don’t need to blow your budget on car insurance if you get creative. Try any of these four methods and see if you can lower your premium without significantly sacrificing your coverage.
