RoxanneIf you’re making any of these mistakes that seem like sound moves, you could be. Learn how to avoid them so you can keep your monthly costs low.
You probably know that getting into a car crash can increase your insurance premium. Adding a new teenage driver to your policy can do the same. But what about more unknown factors that can cause your car insurance rate to spike? Here are some that may surprise you, especially if you thought they’d work in your favor.
Staying Loyal to One Company via Automatic Renewals
Loyalty is usually regarded as a desirable trait. In the car insurance world, however, it can cost you. How much? According to J.D. Power, sticking with your current auto insurance provider for multiple years can result in you overpaying $300 per policy period.
Why is loyalty penalized with car insurance? You could blame it on price optimization that leads to rate increases. Existing policies can be subject to yearly premium hikes too. Combine those, and you can see how loyalty equals forking over extra cash.
Of course, you may not want to switch providers, even if it cuts costs. You may enjoy the level of service and peace of mind they provide. If this is the case, you could get a price cut by getting lower quotes from their competition. With those quotes in place, you have the leverage to get your current rate lowered. Their incentive to appease you will come from the fact that they probably want to keep you as a customer.
When renewal time approaches, shop around. You may decide to switch to a new company to save money. Or you may choose to use your options to make your current company’s offer more affordable. Either way, you’re likely to save as long as you don’t let your policy renew automatically without seeing what’s out there.
Having a History of State-Minimum Coverage
Until you need it after an accident or some other unfortunate incident, car insurance seems like an unnecessary cost. It is essential due to laws and protection of your property, though, which is why you do everything you can to reduce it.
One common mistake when it comes to reducing car insurance is keeping it at state-minimum levels. While this could cut costs in the short-term, the long-term expense of car insurance could rise. Why? In short, companies may see you as a higher risk than someone who maintained higher coverage levels.
Higher long-term costs aren’t the only reason to avoid minimum state coverage. Another is to protect yourself in the event of an accident.
For example, let’s say you carry state-minimum coverage in California. You total another driver’s brand new vehicle that has a starting MSRP of $40,000. While your minimum coverage has $5,000 of property damage liability, you could be on the hook for the other $35,000. For that reason alone, avoiding minimum coverage is a solid practice you may want to employ.
