Ever wanted to know what an insider knows about how to save money on auto insurance premiums? I can help. In 2018, I got a job at a friend’s insurance agency, my property and casualty insurance license, and a practical office education. I learned critical things I didn’t know even after purchasing auto insurance for myself for 35 years. Now you can know those insider secrets on how to save money on auto insurance, too.

BE A GOOD RISK

There are two primary factors that make someone a good risk: a clean driving record and a clean claim history. Don’t bother trying to scam the system by lying to the agent about either. They don’t take your word for it. Every time you apply for auto insurance, the company runs two reports on you. 

One is the MVR. It’s a motor vehicle report that queries DMV records and pulls up any tickets you’ve gotten in the previous five years. The other is CLUE report. It queries your insurance records (yes, you have an insurance record. And an insurance score – more about that later.) Any claims you’ve made against your insurance policy(ies) in the past five years – even if you’ve changed companies – are listed. Activity in either report will increase your premium rate.

THINK TROUGH CLAIMS

It’s a no-brainer that you should avoid traffic tickets for texting, speeding, moving violations, and heaven forbid, a DUI or hit and run (the latter two making you nearly uninsurable.) But you should think it through before filing a claim, too.

If you have a minor accident or minor damage, before you pick up the phone to file a claim, decide if the damage exceeds the deductible you’ll have to pay. If it doesn’t, say nothing to your insurance company. Pay for the repair yourself or live with it. Because here’s the truth: if your insurance company knows about your minor damage, that information will go on your insurance record EVEN IF THEY PAY NOTHING TOWARD IT. It’s called a zero-pay claim and it counts against you. 

Same goes for a not-at-fault accident. Those also count against you. I know, I know! That seems unfair. But remember, the insurance company evaluates you as a risk. They don’t like people who seem to be magnets for risk whether it costs them or not. They believe eventually it will.

RAISE YOUR INSURANCE SCORE

Similar to your credit score, you also have an insurance score. In fact, your credit score is a component of your insurance score. So, keep that credit score as high as you can. But unlike credit scores, insurance scores aren’t as standardized. Some companies use a rating between 200 and 997. A number higher than 770 is good, below 500 is bad. Other companies use a system between 1 and 32. One being the best and 32 being nearly uninsurable. 

Our office recently quoted a guy in his late 20s, driving a 2017 vehicle, $19,800 for a SIX MONTH premium. His insurance score was a 31. His best legal option was to quit driving for 3 years until his wrecks and violations fell off his record. No joke.

So, here’s the best things you can do to raise your insurance score and save money on auto insurance.

  • As stated previously, keep your credit score as high as you can.  (For tips how to raise it quickly, check out this article.)
  • Buy your policies from standard insurance companies. Standard companies (like Met Life, Travelers, Grange, State Auto, Safeco, State Farm) offer rates for standard risks. Non-standard companies (like Geiko, The General, Progressive) offer the same coverages, but at generally higher rates to compensate for higher risk. Your insurance score takes into account WHERE you buy your insurance.
  • Stay with your insurance company for two years before you think about switching. Three is better. We all want to save money and think shopping for the best price every 6-12 months is how to keep on top of it. But insurance companies do not like it. If they know you’re a constant shopper (and they do know it), you’ll end up paying more in the long run because it will hit your insurance score.
  • Do not, I repeat, DO NOT let your car insurance lapse. Most standard companies will not even look at anyone who has let their policy lapse regardless of the reason. Your insurance score is affected and you’ll be forced to go to a non-standard company who will make you pay. So, if you have to park your car because you can’t afford to fix it or you’re leaving the country for a few months, here’s what you do. Drop the liability and collision coverage and keep the comprehensive coverage (in case a tree falls on it or something like that.) That way, the policy stays in effect and you aren’t paying for what you don’t need.

KNOW THE IMPORTANCE OF “COST NEW”

A man called in to our agency incredulous at his multi-car policy premium. He saw the cost for insuring his 2004 “beater” Lexus sedan was about 40% more than the cost of his “good” 2018 Chevy sedan. To him, “this makes no sense!” 

But it makes sense to the insurance company who will have to put new parts on that old Lexus if it’s wrecked. That’s why insurance companies heavily factor in the cost of an automobile when it’s brand new when assigning a premium to insure it. 

So if you want to save money on auto insurance, don’t buy a used luxury vehicle just because the depreciation hit was taken by the previous owner. The luxury car retains its luxury insurance cost.

NEVER BUY TOWING COVERAGE

If an agent offers to add towing coverage to your policy because it’s cheap – about $4-6 per month – just say no. If you have it, remove it. Why? Remember every claim against your policy will raise your premium for the next five years. That applies to $75 towing claims. What is cheap in the short run is expensive in the long run.

Here’s what you do instead. Buy a AAA membership for $100 per year if you feel like you’ll need to be towed or just want that security. But you don’t really need to buy that either if you have a smart phone. You can find a 24-hour towing company near you and call them if and when you have an emergency. Why pay for coverage you probably won’t use?

DON’T BE A CAPTIVE AUDIENCE

The best thing you can do to save money on auto insurance, regardless of your credit or insurance scores is to buy your policies from an independent insurance agent. Independent agents can shop your policy with multiple companies to get you the coverage you need at the best price. Captive policy companies (such as State Farm, Allstate, Geiko) can only sell you their policies at their price. 

I could kick myself for staying with State Farm for 35 years out of blind loyalty. When I finally thought to ask if they would lower my premium with a loyalty discount of some kind (also had home, life, and personal articles policies with them), they simply said “No.” I’m sure I threw away thousands of dollars over the years.