How to Lower Your Auto Insurance Premium

The average cost of an auto insurance premium in the United States is around $880 per year. But many people are paying much more than average, and for a variety of reasons. Maybe they drive a convertible sports car. Maybe they fall into a high-risk demographic, like a teenage male. Or maybe they just live in a state with higher-than-average premiums. Regardless of these factors, there are certain things you can do to lower your auto insurance premium. Doing so could save hundreds of dollars a year.

In this article, we will talk about the ins and outs of car insurance premiums. What are they? How do they work? What's the relationship between the deductible and the premium? And how can you lower the annual cost of your auto insurance premium? These are some of the questions we will address. But let's start at the beginning with a basic definition...

What is an Auto Insurance Premium?

We will talk about the ways to lower your auto insurance premium in a moment. First, we need to define the terminology being used here. You can think of your premium as the annual cost of insurance coverage. This is the amount you pay each year to have a policy protecting your vehicle. This is not to be confused with your deductible, which is something else entirely. We will discuss the deductible (and its relationship to the insurance premium) a bit later.

In the United States, drivers pay an average of $880 per year on auto insurance. But the actual cost you incur will vary, based on several factors. These factors include your age, location, vehicle type, driving record, and the way you use your vehicle.

1. Age: A 45-year-old driver will generally have a much lower auto insurance premium than a sixteen-year-old (with all other things being equal). Statistically speaking, younger drivers have a much higher risk of car accidents. That's why insurers typically charge more for teenagers.

2. Location: Where you live can affect the amount you pay for an auto insurance premium. For example, drivers in that state of Florida pay nearly twice as much for car insurance as drivers in Idaho (on average). Keep this in mind when you start getting quotes from insurers. The only way to know if you're getting a good or bad deal on your premium is to know what the average is for your state. So get on Google and conduct some state-specific research.

3. Type of Vehicle: You could lower your auto insurance premium by choosing a car with a strong safety record. Cars with a higher likelihood of accidents and damage will bring a higher premium. These ratings usually come from the National Highway Traffic Safety Administration (NHTSA) and similar organizations. Your premium will also be affected by the "steal-ability" of your car. For example, if you choose a vehicle that is frequently stolen (like a Honda Accord), your auto insurance costs will be higher.

4. Driving Record: Most people are well aware of the connection between their driving record and their insurance premium. The more accidents and violations you have, the more they will charge you for coverage. Enough said.

If an insurance company offers you a premium that is higher than average, you want to know why. There might be a good reason for it. Maybe you're in a high-priced demographic, like a teenaged male driver. Maybe you're driving a car with a statistically higher risk level, like a convertible Corvette or a jeep. Or perhaps you have a few citations on your driving record. All of these things will make it harder for you to lower your auto insurance premium.

Sometimes, there isn't much justification for a higher rate-quote. Maybe it's just part of the business model for that particular insurance company. This is why you need to get quotes from at least three different insurers, before you choose a policy.

How to Lower Your Premium Costs

We've talked about some of the factors that affect your insurance costs. Let's move on to discuss some of the things you can do to get a lower premium on your auto policy.

1. Compare quotes from several insurers.

I once read a statistic that said nearly half of all insurance shoppers chose the first policy offered to them. In other words, they didn't even bother to shop around or compare quotes. This is a big mistake. In some cases, the quotes from three different companies might come in very close to one another. Other times, one company could be much cheaper than the others. You won't know until you compare quotes. The only way to determine which company has the lowest auto insurance premium is to get multiple offers.