- Collision Coverage and What Car You Drive
This is the most expensive part of the policy. The insurance company knows that they are the ones paying the bulk of the cost for major repairs or vehicle replacement if you have an accident. Collision coverage is insurance for the cases where you are at fault (hit another car), no other driver was involved (hit a deer or a telephone pole), or the other driver that hit you is uninsured or under insured.
If you own an expensive car, or a car that needs specialty parts, you pay higher premiums for this coverage. If you drive a more economical car, the insurance company will not charge you as much to insure it (all other variables remaining equal). This higher cost may be justified if you like to drive a luxury brand car. It is purely a choice for you.
- Your Deductible
This is a cost that you may only look at if you need to file a claim since it is what comes out of your pocket. Some policies will have $250 standard deductible while others will have $500 as their standard.
Why is this affecting your cost? The lower your deductible, the less you pay for repairs or replacement and the more the insurance company pays.
You could save money on your insurance costs by having a higher deductible. In many conversations with clients I have discussed this, and they realized they most likely wouldn’t use their insurance unless the damage was significant. From that discussion they considered raising their deductible, which had the result of lowering their premium costs.
- Your Driving Record
If you are a good driver the insurance company feels they are less likely to have to pay on a claim. These companies analyze risk, and if you have a history of speeding violations or accidents, they charge you more because you are a higher risk.
If you have a good driving record or it has been a long time since your last ticket or accident you could save money by having your policies reviewed.
- The Miles You Drive
The more time you spend on the road, the more likely you may be to have an accident. If you have a long commute to work you may be paying more for your insurance. You may be a great driver with a spotless record, but the risk is that there could be bad weather, road construction creating more hazards, or reckless drivers around you.
If you take steps like carpooling or shorten your commute you might be able to save money on your insurance.
- You Are Not Taking Advantage of Discounts
This one might seem obvious because so many companies advertise their discounts on auto policies, but there are often multiple discounts available to you.
Some seem simple, like a safe driver discount. Some might not be as obvious, like a discount if your teenage drivers have good grades. Other could be a little more complex, such as bundling discounts that mean you need to move your homeowners or renter’s insurance to the same company to get the discount.
Having your agent do a check to what discounts you are eligible for is a quick way to save on your premiums, and since these change so often with companies it is a good idea to ask at each renewal.
These are just five things that often come up in many of my planning meetings with clients, but there are multiple other factors that could be playing into you having higher auto insurance costs. The best way to know for sure is to have a conversation with your agent and always reevaluate your coverage at policy renewal time.
LPL Financial does not offer auto insurance. This is meant for general educational purposes only. It should not be considered specific advice, nor does it constitute a recommendation to take a particular course of action. Please consult with the appropriate professionals regarding your personal situation prior to making any financial related decisions.
