Car insurance rates change daily. How often should you compare quotes to be sure you have the cheapest premium rates?
Car insurance is meant to protect drivers from financial loss in the event of an at-fault accident. But it doesn’t always feel like insurance is out to save us money when the monthly premium rate is due.
While paying for car insurance is inevitable, you do have a choice in how much you pay for your coverage.
To ensure you’re getting the cheapest car insurance, you should shop around every six months.
While it isn’t fun, the internet and rise of mobile devices have made comparing auto insurance quotes faster and easier than ever. So why not set aside 10 minutes twice a year?
1. Car insurance companies change rates all the time
Car insurance providers change their rates many times throughout the year to account for different risk factors.
Premiums rates can fluctuate from month to month or even day to day.
For example, if you live in a state like Alabama your premium rates will most likely be higher if you’re shopping for car insurance between March and May because it’s peak tornado season.
Therefore most property is at risk for damage within this short period of time. An increase in claims means companies must increase rates to cover these payouts.
Changes in car insurance quotes from day to day won’t be significant enough to turn heads, but those fluctuations over a longer period of time, like 6 months, can save you hundreds a year.
Insurance companies use their claims payout data from the past to predict risks for the upcoming year. An increase or decrease in risk due to weather predictions or criminal activity may cause your provider to adjust their costs.
It’s important to know that companies’ rate hikes or reductions must be approved by your state’s insurance department.
2. States change insurance laws and requirements
Your state’s insurance department sets the legal requirements for liability, personal injury protection, and other coverage options. For example, drivers in California are legally required to purchase a minimum of $15,000 for bodily injury/death to one person, $30,000 for bodily injury/death to more than one person, and $5,000 for damage to property.
Drivers in California can also opt out of insurance with a cash payment of financial responsibility OR they have the option to sign up for government subsidized auto insurance.
No matter which state you call home, insurance requirements can change with new legislation which means you may need more or less coverage in order to comply with the law.
3. Changes in your credit history
It is legal in most states for car insurance companies to use your credit score to determine your premium rates. The only states that do not take credit score into account are California, Hawaii, and Massachusetts.
In a study conducted by the Bureau of Business Research at UT’s McCombs School of Business, there is a correlation between your credit score and how likely you are to file a claim or be at fault in a car accident.
Insurance companies use this research to mark drivers with poor credit scores as financially irresponsible and thus raise their premium costs.
It’s estimated that drivers with poor credit scores pay an average of $214 more a year on their premium than drivers with good scores.
An insurance company’s ability to ask for credit scores, known as red-ling, is seen as discriminatory because it’s built upon the social, racial, and economical disadvantages deep-rooted in low income and minority groups.
The Consumer Reports union advocates the banning of red-lining in all 50 states.
4. Tickets, traffic violations, and accidents fall off your record
Blemishes on your driving record like traffic violations and at-fault accidents live on your driving record forever.
While that sounds threatening, it won’t affect your premium rates forever. Auto insurance companies cannot legally factor in violations or accidents after a certain number of years from the time of the mishap.
The average time a violation will affect your insurance rates is 3 to 5 years.
5. Changes in lifestyle
A lot can change in a week! So by the time 6 months have passed your lifestyle changes could save you money on your car insurance rates.
Birthdays: The older you get, the less you pay for car insurance (that is, until you hit your 60’s).
It’s important for younger drivers to shop around often because car insurance premiums drop once you reach age 20 and continue to drop every year after that until age 60.
New Driver: In the last 6 months maybe your teen got their license or your mother in law moved in with you or a child moved back home after college. Whatever the reason, adding a new driver to your policy is a good time to shop around for a new car insurance policy.
Because anyone living under your roof who may drive your car at any time (even just once) should be added to your policy to ensure your vehicle is covered. Whoever lives with you will still be considered in your rates as a licensed driver living in your household.
There’s a chance for your rates to increase or decrease depending on someone’s driving and financial record.
For example, adding a new driver to your policy can unlock a multi-driver discount. On the other hand, if your in-law with a terrible driving record just moved in you can expect to see a rise in your premium costs.
Get your coverages and discounts sorted so you’re not paying too much or too little for a coverage plan that could leave you vulnerable.
New House or Address: Your home or apartment address comes with a number of risk factors that affect the cost of your car insurance. So, if you’re a young adult who moves frequently after each leasing year you should always be shopping for new insurance quotes.
When setting your premiums, insurance providers consider the crime and traffic rates of where your car spends most of its time. High risk areas mean higher insurance premiums.
If your home is located in an area with high rates of both, you may want to add on comprehensive or collision coverages that will cover you in the event of theft or damages.
If you just bought your first home, car insurance companies give a generous discount to homeowners!
Marriage: The National Institute of Health found that drivers who had never been married were twice as likely to be in an accident than married individuals.
If you and your spouse or domestic partner have compatible auto insurance policies, you’ll be able to unlock some serious discounts if you merge them into one policy.
Compatibility of insurance policies depends on factors like your driving records, credit scores, vehicles, and mileage.
If your spouse drives a very expensive car, has a poor credit score or driving record it may be best to keep them off of your insurance policy.
Graduation: You educational background has an effect on your car insurance premiums. The more education you have, the less you pay for coverage.
Study show that drivers without a Bachelors or Masters degree pay an average of 20% more for their car insurance coverage than those with advanced degrees.
The thought process behind this is the same as why single people pay more for insurance. Insurance companies find correlations between drivers without degrees and a higher number of at-fault accidents and consider it a verifiable cause.
6. You’ve maintained coverage for the past 6 months (or year)
Car insurance is usually most expensive for first time buyers or for drivers who have had a lapse in coverage for a long period of time.
Insurance providers consider drivers without a history of previous coverage to be high risk. They have no data on the number of claims you make or how good you are at making timely payments; so they prepare for the worst.
Once you have car insurance for 6 months or longer you’re considered a safer risk and you can unlock continuous coverage and loyalty discounts.
7. Your vehicle loses value over time because of depreciation
You shouldn’t be paying the same insurance rate every year for a car that has less value than when you originally insured it.
Depreciation is the loss in value of a new vehicle the moment it’s driven off the dealership lot.
Depreciation continues for the entirety of a car’s life whether you purchased it new or used. However the value of brand new cars drop by 40% within the first year of ownership.
Reassessing your car insurance policy every 6 months to a year will refresh your discounts and coverage options, like collision and comprehensive, that will match the decreasing value of your vehicle.
Research shows that 5 year old car models spend 20% less on car insurance than new year models.
8. Your neighborhood’s weather, population density, and crime levels
External factors outside of your control unfortunately have control over the cost of your car insurance.
Even if you have a clean driving record and credit history, if you live in a highly populated area with severe weather or high levels of theft you will be paying more to protect your vehicle.
Your rates can be even more expensive if you buy insurance through a carrier that insures a large portion of the population you live in. The company is taking on more risk by serving that area and thus will need to charge more to cover claims payouts.
Researching and getting quotes from carriers that serve fewer people in your area may get you a lower rate than your neighbors.
9. “New” customers get better rates
Drivers looking for car insurance will get better rates if they wait 6 months or more to shop for quotes. Why?
According to insurance company insiders, new customers are given lower rates simply as a way to get them in the door.
“New” customer doesn’t necessarily mean you’ve never had insurance before. Simply requesting quotes from a different insurance company after 6 months with your current provider makes you new and appealing.
A little online research every 6 months can save you around $50 on a policy.
Remember to shop for car insurance quotes every 6 months
Shopping around for car insurance quotes every 6 months allows you to keep track of situational changes in relation to your coverage and it will keep your insurance provider on their toes when it comes to offering you discounts and coverage recommendations.
While your insurance agent should be helpful, they have dozens of clients. It’s your responsibility to alert them when you encounter a situation that might change your policy needs and premium rates.