3 Ways to Lower Your Monthly Car Insurance Payments
Have you ever found a twenty dollar bill in your pant pocket that you didn’t know you had? It’s quite a joyous occasion. Now imagine you had a pocket that may contain several dozen twenty-dollar bills. You’d probably check it, no?
Slashing your monthly auto insurance bill by hundreds of dollars is pretty much the same thing. Luckily it only takes a few steps.
Improve Your Credit Score
You might not be aware of this, but your credit score impacts your car insurance rates. The underlying reason is that insurance underwriters (the people who determine who pays what amount for insurance) have determined that people with lower credit scores tend to be more likely to file a claim.
Of course, you can’t change your credit score overnight–but the sooner you start, the sooner you can reap the benefits. According to MyFico.com, there are a few things you can do right now:
- Check Your Credit Report – Credit score repair begins with your credit report. If you haven’t already, request a free copy of your credit report and check it for errors. Your credit report contains the data used to calculate your credit score and it may contain errors. In particular, check to make sure that there are no late payments incorrectly listed for any of your accounts and that the amounts owed for each of your open accounts is correct. If you find errors on any of your reports, dispute them with the credit bureau.
- Setup Payment Reminders – Making your credit payments on time is one of the biggest contributing factors to your credit scores. Some banks offer payment reminders through their online banking portals that can send you an email or text message reminding you when a payment is due. You could also consider enrolling in automatic payments through your credit card and loan providers to have payments automatically debited from your bank account, but this only makes the minimum payment on your credit cards and does not help instill a sense of money management.
- Reduce the Amount of Debt You Owe – This is easier said than done, but reducing the amount that you owe is going to be a far more satisfying achievement than improving your credit score. The first thing you need to do is stop using your credit cards. Use your credit report to make a list of all of your accounts and then go online or check recent statements to determine how much you owe on each account and what interest rate they are charging you. Come up with a payment plan that puts most of your available budget for debt payments towards the highest interest cards first, while maintaining minimum payments on your other accounts.
Consider signing up for a service like CreditKarma, which makes it easy to view your credit score and track it for free.
Shop Around Right Before Your Current Policy Ends
Most auto insurance policies are for six months or one year…but that doesn’t mean that you can’t save money by switching right now. In fact, our research shows just that: most people are overpaying for auto insurance, and those that are can save $460/month by switching.
Car insurance companies are betting on the fact that you put in the effort to switch, because the auto insurance industry is mired confusion and lack of transparency. From the article above:
Companies can overcharge their customers is that the market has little transparency. It is difficult to say the least for customers to compare their rates and get a full market overview. It often entails filling out endless forms, getting spam and sales calls. It’s so intimidating, people often just give up on the process and accept a higher rate.
There are a few ideal times to switch your insurance, such as a few months before your current policy expires. Rather than constantly check available rates, consider signing up for Gabi–we’ll let you know when a better rate is available.
Utilize Low-Mileage (And Other) Discounts
Policies often give discounts to people who drive less than the average amount per year. If you can reduce your mileage to 5,000 miles every year, you may be entitled to a low-mileage discount on your insurance.
There are other discounts that insurance companies offer, such as discounts for:
- Having a bachelor’s degree.
- Having a certain occupation, such as: engineer, teacher, or a pilot.
- Having safety features or anti-theft devices like a LoJack teletrac.
- Being married.
- Being a student with a GPA above 3.0.
Insurance companies are sneaky, however, and often won’t give these discounts out unless you ask them directly. If you qualify for any of the factors above, make sure that you ask your insurance company whether or not you’re entitled to a discount.
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