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How to Lower Your Car Insurance Premiums

When it comes to saving money in this economy, it appears that many people are dropping or lowering their auto insurance policies. It’s a bit of a gamble but adjusting your insurances, whether it’s homeowners or auto or anything else, can be a way to save a few more dollars if things are looking tight. However, the subject of how to lower your auto insurance costs has been covered a near infinite number of times already and everyone knows the basics – shop for alternatives, increase your deductibles, drop comprehensive and collision on older vehicles, package together policies for a discount, etc.

I would like to that think you all know that you should shop around for insurance, just as you would shop around for anything else. I would also hope that you understand the relationship between your premium payments and your deductible. Hitting those points really just smashes the some tired old ideas back into your brain and, honestly, wastes your time. So, this post will be about the more novel ways to lower your car insurance costs. Chances are you may not use any of these ideas but it may spur you to think of some clever ideas of your own (that you can share!).

Recreational Classification

One of the benefits of working from home is that I don’t drive my car to commute anywhere. On a whim, I decided to call up my car insurance agent to ask if my premiums could be lowered because I worked from home. As it turns out, I could have my car classified as a “recreational vehicle” and pay much lower premiums. The general rule is that you don’t drive that car to work or school, which I don’t, and that you drive fewer than 7,500 miles in a single year. They confirm this by asking for odometer readings.

The reclassification only saved me a few hundred dollars since I only had liability insurance but I imagine someone with liability, collision and comprehensive could save much more.

Drive Less (Carpool)

Your insurance premium is supposed to reflect your risk as a driver. One of the reasons a recreational classification lowers your premiums is because you are on the road less. Used car buyers often cite 12,000 to 15,000 as the “average” number of miles driven on a car in a year. If you see a used car with a higher average, you should consider passing on the vehicle or decreasing what you’d pay for it. Well, if you want to decrease the total cost of insurance, one way is to drive fewer miles.

This is subtle because driving less will not directly decrease your premiums, unless you’re able to get under the 7,500 annual mileage (which is difficult if you commute to work or school). It does, however, decrease the likelihood you get into an accident and decreases the “expected” cost of insurance and accidents (and premium increases because of accidents).

Maintain or Improve Creditworthiness

It’s not clear why your credit score should affect how risky you are as a driver but insurance companies do use your score in their assessment of your risk. While I’ve never heard of someone seeing their premiums increase because of their score falling, mainstream media has jumped all over this idea [3] and received confirmation from the Property Casualty Insurers Association of America that your credit history is being used to determine rates. Whether you like it or not, data suggests that credit risk and car accident risk are related.

If you can maintain a good credit score [4] or improve your credit score, you might see a decrease in your rates. Not every insurer uses your credit history to determine rates so give your agent a call to find out more. Also, it’s important to review your reports regularly even if it won’t do anything for your insurance premiums.

Do you have any less obvious ways to help lower your car insurance premiums?

(Photo: mcgraths [5])