Pricing and Costs of Car Insurance

Find out how auto insurance providers calculate your premiums

It can be difficult to figure out the method behind the pricing and costs of car insurance because car insurance quotes can vary widely. Generally, it pays to shop around; however, too many hits to your credit report can be detrimental to your credit score and cost you more in the long run. Make sure you know when the auto insurance providers run your credit.

Car insurance companies use a list of criteria to calculate your premium. Not long ago, there were just a few tiers to pinpoint rates; now companies have hundreds of them. Tiering factors include the vehicle itself and its susceptibility to loss, the drivers, their ages and driving records, where the vehicle is kept, how often it's driven, loss history and credit history, to name just a few. The difference between the lowest credit score and the highest can make a 100% difference in premium, so this factor alone can save you hundreds per year.

Ask lots of questions to make sure you know what coverage you're getting. That way, you have no surprises about your coverage if you have a loss. You can take more control of your auto insurance premiums by doing the following:

1. Check your credit information before vehicle insurance companies do.

2. Control auto insurance costs by the vehicle you choose.

3. Seek out discounts to save money on your auto insurance.

 

Look at the credit information that auto insurance companies check

Automobile insurance companies use your credit information in their calculations because it's a reliable predictor of loss. However, your credit report may not give them a true picture if the information is incorrect. To make sure your credit report reflects the reality of your finances, have all the information that isn't yours is removed.
Try: A TrueCredit report from TransUnion shows (for a fee) your insurance score, how this compares to the norm and what you can do to improve your score. If you find an error on your credit report, you can start a dispute online with TransUnion. Cross-check your information by getting a free copy of your credit report through Experian as well.

Find out how the car you choose affects vehicle insurance rates

Think about the car itself as a variable in your car insurance rates. When you shop for a new vehicle, call your insurance agent to get a quote for a specific vehicle before you make the purchase. It helps to provide a VIN because the same vehicle model with different features can have vastly different insurance rates.
Try: Use MSN Money's insurance rate tool to see how your vehicle compares to other vehicles. This tool helps you compare vehicle ratings for liability, safety and damage. Insure.com lists the least expensive vehicles to insure and explains why their rates are so much less compared to other vehicles.

Ask car insurance providers about discounts

Discuss potential discounts with your insurance agent or company, such as a good student discount for high school and college students, driver's education, multiple car discount, auto safety features or a multiple policy discount for having both home and auto insurance with the same company. Check into defensive-driving discounts for drivers of any age. Many states allow the discount to apply to your insurance for three years and can take as much as 10 percent off your premium.
Try: Sign up online for defensive-driving courses such as I Drive Safely. Check for a lower cost if you're an AAA member. Also, watch the demonstration of the defensive-driving course from the National Safety Council. You can purchase the class online, and it's offered in English and Spanish.

 

• Be cautious not to skimp on the coverage to save a buck. An accident without the proper auto insurance can jeopardize your assets, including your home and your business.

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