Auto insurance premiums are a lot like the weather. Everyone complains about them, but no one seems to be able to do much about it. In reality, it is a good idea to discover if you are actually paying too much for your auto insurance. Here are five tests that you can use to see if you are getting a good deal on your auto insurance.
1. The first test is to determine if you are paying more each year for your insurance than your car is worth. If you drive an older vehicle, it is likely, that you could be paying $500 per year for collision insurance for a car that is only worth about $1,000. The rub comes when you realize that in the event of an accident, your insurance will consider your car a total loss if the damage exceeds the value of the car. This means that they will offer you $1,000 for your car. You will have to cover the $500 deductible and receive a check for $500. Basically, you will get your premiums refunded. However, if you pay that premium for more than one year, you have made a generous donation to the insurance company without receiving any real insurance in return.
2. If you had an accident five years ago, you may have gotten switched to high risk insurance. This comes with high premiums. It is the insurance company’s way of making you repay your claim for the accident. Auto insurers do not routinely elect to lower your premiums without action on your part. If you are still with the high risk policy, you will have to change policies and/or companies to get a lower rate.
3. Are you single and in your middle to late twenties? If you have been with the same company for several years, you are probably paying too much for insurance. Companies will tell you that once you reach a certain age (somewhere in your mid-twenties), your rates will go down. For most drivers, the only way that you will get this premium discount is by changing insurers.
4. Have you reached the level where you consistently live within your means? If so, you probably can save a bundle on car insurance. Most people who live in tight financial situations like to have low a deductible. This is to prevent an accident from being a financial nightmare. However, if you have enough income and surplus cash to bank $1,000 or $1,500 toward paying an auto insurance deductible, you can reduce your premiums by potentially hundreds of dollars per year. Essentially, you opt to carry more of your own risk. It is betting on your driving skills to keep you out of an accident.
5. Take a look at your driving habits. As people mature and settle into family life or reach empty nest time, they often drive fewer miles. The number of trips may increase or stay the same, but they tend to be shorter. This means that you can claim less miles when buying insurance. There are two or three magic spots on annual mileage that auto insurers consider. While companies vary a little, these numbers are around 7,500; 12,000; and 15,000 miles per year. If you have multiple cars, it will drop the miles that are driven on each vehicle. If your driving habits have changed, you may be driving less miles and be paying too much for auto insurance.