For good drivers, there is nothing more frustrating than getting a car insurance bill and seeing the price go up when you haven’t had any claims.
The first question that comes to mind is, “How did my rates increase when I didn’t have any tickets or claims?”
It is important to stay on top of this by consistently checking your auto insurance rates at least after every six months to ensure you still have the best rate.
The Purpose of Auto Insurance
Auto insurance protects you from financial loss in case you are involved in an at-fault car accident. However, when monthly premiums are due, cash is not being saved, but going out of your pockets. You pay auto insurance for your own benefit and there is no way around it, as it is mandatory for all drivers to pay it.
What Can You Do Then?
The best way to avoid overpaying is shopping around for the cheapest auto insurance after every six months, or simply giving us a call and we’ll see how we can adjust your premiums. There are several sites available that allow you to do a quick comparison, but as we mentioned in a previous video, most of the sites provide inaccurate quotes.
It only takes ten minutes to compare different auto insurance rates and the best part is that you are doing it only two times each year! Those ten minutes that you take out of your jampacked and busy schedule to compare auto insurance rates will help you in the long run, as who doesn’t love saving money, right?
Now, we’re going to assume you said a “Yes” and tell you the benefits of shopping around for auto insurance every six months.
The Benefits of Shopping for Auto Insurance
Here is a list of benefits you will receive by going shopping for auto insurance every six months:
1. Auto Insurance Companies and Their Love for Changing Rates
Auto insurance companies change their rates several times during the year. Influencing their ever-changing rates are several different risk factors. Premium rates do not stay stagnant but keep changing from month to month and sometimes, day to day.
High-risk months, such as February where chances of snow in Connecticut are high, can negatively affect the auto insurance rates, leading to an increase due to the probability of car accidents occurring on the road.
Insurance companies hike their auto insurance premiums because they need to cover the costs associated with these car accidents. A hike in criminal activity such as car theft can also cause insurance companies to adjust their rates.
However, be rest assured that the fluctuations in auto insurance quotes on a day to day per basis will not be significant. What you need to be alert about is the changes that occur over a long duration such as six months.
You need to keep an eye out for these changes in car insurance, as they can result in big savings for you. Expect to save hundreds of dollars by switching to a new auto insurance company after six months. Remember, Connecticut’s insurance department needs to approve the insurance companies rate hikes or reductions before they can go into effect.
2. States Introduce New Insurance Laws and Requirements
The state of Connecticut increased the minimum amount auto insurance necessary for residents to maintain to register their car with the state at the beginning of 2018. It went into effect on January 1.
Before the implementation of this law, residents needed to maintain a minimum liability coverage of $20,000 for each person, $40,000 for each accident (physical injury), and $10,000 for each accident (property damage). The new law increases the minimum liability that residents need to carry to $25,000, $50,000, and $25,000, respectively.
Therefore, you need to stay alert to the changing insurance laws and requirements in your state, as they are responsible for establishing legal requirements for personal injury, liability, and other insurance policy options. Insurance coverage requirements change when the state introduces new legislation, which means you require either less or more insurance coverage to remain compliant with the state’s laws.
3. Credit Score Influences Insurance Rates
Connecticut is just one state out of the many that allows auto insurance companies to offer residents rates based on their credit score. If you live in Connecticut for instance, the premiums you pay depend on your credit score.
A bad credit score equals high premiums whereas a good credit score equals low premiums.If you have a bad credit score, insurance companies will deem you as a financially irresponsible person and increase your premiums.Drivers with a bad credit score pay an estimated $214 more premiums each year than drivers with a good credit score.
4. Traffic Violations and Auto Accidents Increase Premiums
Once you have a blemish on your driving record, your auto insurance company can use that against you. They will offer you a higher insurance premium than people with a good, unblemished driving record.If you have been in several minor car accidents or one major car accident, your premiums will increase.
Do not worry because a traffic violation or an accident will only increase your insurance rate for 3 to 5 years and after that, it will be erased from your driving record, thus lowering your insurance premiums. As per law, it would be illegal for an auto insurance company to factor in traffic violations and accidents after a certain number of years have passed since the incident.
5. Lifestyle Changes
Changes in lifestyle can affect your insurance premiums. For instance, as you age, your insurance premiums decrease. In short, your lifestyle changes can save you money on auto insurance. That is why, we emphasize the importance of shopping around for auto insurance every six months, especially for younger drivers.
When young drivers turn 20, their insurance rate decreases and continue to decrease each year until they turn 60. Parents adding their relative to their auto insurance policy because their child has moved back home or their teen has just received their driver’s license or their elderly parent has moved in with them should shop around for auto insurance.
If someone living at your home who would drive your car, even if just one time, needs to be included in your auto insurance policy. This will ensure your car is covered. Every licensed driver living with you in your home needs to be added to your auto insurance policy.
By adding them to your auto insurance policy, your rates can either decrease or increase depending on their credit score, driving record, and financial record. For instance, by including a new driver to your auto insurance policy, you can obtain the multi-driver discount.
If the person you are adding to your auto insurance policy has a poor driving record, expect your rates to increase. Other risk factors include:
- Home address or change of address — Areas where risk of car theft is high.
- Marriage — Unmarried people are more likely to get into accidents than married people. Couples on the same auto insurance policy can receive discounts and lower premiums.
- Graduation — The more educated you are, the lower your premiums will be. If you have completed your Bachelors or Masters, you will pay 20% less than people without a degree.
6. You Have Maintained Your Auto Insurance Coverage for the Past Six Months or Year
If you are a first-time buyer, you will find auto insurance coverage expensive to buy. The same goes for people who have had a lapse in auto insurance coverage for several years. Auto insurance companies consider people who have no record of auto insurance coverage as high risk.
Without any record, auto insurance companies do not have any details on the number you have filed or on whether you can make timely payments. Therefore, they increase the auto insurance premiums because they have no idea on how much it would cost them to cover you in the event of an accident.
Auto insurance companies will view as a low-risk client if you have maintained your auto insurance coverage for six months or longer. This would also make you eligible for continuous auto insurance coverage and savings.
7. Your Car Decreases in Value Due to Depreciation
When you initially insured your car with the auto insurance company, you paid more premiums. Since then, your car has decreased in value over time. If you are paying the same amount of premiums for a car that has decreased in value due to depreciation, you need to shop around for new auto insurance.
Depreciation occurs when you buy the car from the dealership and start driving it. Depreciation will occur as long as you continue to drive the car. It does not matter if you had bought the car new or old, depreciation will still occur.
The value of new vehicles reduces by 40 percent within the first year of you driving it. Hence, it is important you reexamine your auto insurance policy after every six months will provide you with new discounts and more insurance coverage options such as comprehensive or collision coverage.
The news options will correspond with the depreciation value of your car, meaning you will receive lower premiums. For instance, you will pay 20 percent less on auto insurance rates on a car that is five years old than on a car that is new.
8. Your Neighborhood’s Weather, Population, and Crime Rate Matters
External factors such weather, population, and crime rate of your neighborhood all play a significant role in determining your auto insurance rates. You do not have a control over these factors so there is little you can do.
Your good driving record and credit score does not matter here. Auto insurance companies will examine these external factors to offer you an auto insurance rate. You will end up paying more premiums if you reside in a severely populated area with bad weather or increased risk of theft.
You should not purchase auto insurance through an insurance company that provides insurance to several people in your area. In this instance, the insurance company is taking a huge risk by serving your area. Therefore, they will charge you higher premiums so they can cover the claims people file in the event they get into an auto accident.
As a driver, it is important you shop around for auto insurance from different insurance companies to settle on the best one. You should also obtain auto insurance from an insurance company that does not serve several people in your area, as that will enable you to receive a lower rate than the rest of the people in your area.
9. New Customers Receive Lower Premium Rates
You should wait six months or more before you shop around for auto insurance because auto insurance companies give low premium rates to new customers. One of the reasons auto insurance companies offer low rates to new customers is because they want to do business with them.
New customers do not mean you have never held auto insurance before, it means that you are asking for an insurance quote from a different company after six months or more. For them, you are a new customer.
By shopping around for auto insurance every six months or more, you can save anywhere around $50 on an insurance policy. When you look at different auto insurance quotes every six months, you learn to keep track of factors that affect your auto insurance coverage.
Knowing that you shop around for auto insurance will keep your insurance company alert and to keep you with them, they might offer you discounts and suggestions on your current policy. You should also be proactive.
This means letting your insurance agent know that your situation has changed and they need to amend your current auto insurance coverage and premium rates. Your insurance agent has several clients they attend to and they will not have the time to check on the status of each client.
If you are to take one thing from this article it would be this, your auto insurance rate is not definite and can (most likely) change throughout the year even if you never file a claim.
To avoid overpaying we suggest (best case scenario) checking your bill every month. If you’re a customer of Pawson, you can simply call us if you see a change, and we’ll work to fix the rate or find you a better solution.