Are You a Good Driver? You Might be Paying Too Much for Car Insurance
If you're living in a moderate income area with the minimal liability coverage required by law, you're probably paying between $1,000 and $1,500 per year for auto insurance. The logic most insurance companies use is that everyone pays according to their risk level, but people with very similar driving histories can end up paying drastically different rates depending on where they purchase their coverage. The same person may be quoted a price of $800 from one company and a whopping $3,000 from another. There's clearly more to the overall picture, and you may be able to save more than you think.
The Factors That Contribute to Your Bill
The Insurance Information Institute has a list of things that affect your rate. It contains the obvious items like where you live and how much you drive, but did you know that where you choose to park your car can play a role? If your house has a garage, it's a gamble as to whether or not it will actually lower your rates. The head of Confused.com's auto insurance department says, “In most cases[,] parking your car in the garage can reduce your premium[.] However, in rare circumstances[,] you may find that it has the opposite effect."
While insurers always base their estimates on statistical correlations, to the untrained eye, they may as well use voodoo magic to determine how much they should charge you. What you'll want to do is make a list of all the things that could potentially be a factor, and then ask the representatives of various insurance companies about how those things affect their calculations.
The Urban Conundrum
If you live in a city, you're almost guaranteed to pay a higher rate than you would elsewhere. The reasons for this aren't entirely clear; most insurance providers will tell you that it's because the risk of physical injury is much higher, and the cost of medical claims is higher as a result. Getting something more specific than that is unlikely, so it will probably be one of your blind spots no matter how thoroughly you research various companies.
Keep in mind that the same logic applies if you live in a suburban or rural area as well. That's the reason parking your car in a garage isn't an automatic boon. If the insurance company assumes that there's more risk to you and your vehicle inside the garage than out of it, that will raise your rates.
Getting the Best Bang for Your Buck
If you're seeking to answer the question of whether you're paying too much for car insurance, it's a good idea to assume that the answer is yes. If you chose an insurer before looking at a quote from every local company, or you bought more insurance than you actually needed, then shaving some cash off your bill comes down to persistence.
Remember that there is no magic formula. There is no single factor that every insurance company will treat the same. Even when it comes to things that you'd think everyone agrees on, there can be variations in price. A bad driving history doesn't doom you to a high premium, and having bad credit doesn't mean that every insurer will use it as an excuse to charge you more. When insurance companies calculate risk, it works more like an art than a science. That gives you a lot of room to negotiate that you may not have known you had, and leveraging it can make all the difference.