Smart ways to save money on auto insurance.
Saving money on insurance is seen by many a specialty skill much like wine tasting and quantum physics. The truth is that anyone can save money on their car insurance. Actually, I challenge you not to save money on your car insurance by carrying out the suggestions this article includes.
The first step to save money on your car insurance is to understand how car insurance works.
When you buy car insurance policy it is like you are buying a lottery ticket. It is likely that they will never to claim any large amount from the insurance. But the chance does exist. Now would you expect a lottery that has hundreds of numbers to be the same price as a lottery that has thousands of numbers if the prize was of the same amount? Of course not. We know that the larger the jackpot and the smaller the pool of “players” the more expensive “playing” is. This is a simple example of the effects of probability on a business situation.
Not surprisingly car insurance companies, and any insurance company for that matter, don’t like playing the lottery with their investment. That is why they calculate the odds of having to pay a jackpot to any of their customers. The more likely a customer is to claim from the insurance the riskier he is and the pricier his policy premium is going to be. How can you save on your car insurance? There are two main strategies:
1) Lower the jackpot, make your potential claim less risky.
Following our lottery illustration we should expect to pay less or more for a lottery ticket depending on the prize you are “playing” for. If the prize is a “scooter” or a Ferrari Testarrosa the price of the ticket will reflect it. You can lower the cost of your claim by reducing your coverage in areas you don’t need. For instance :
- If you already carry medical coverage why include it in your car insurance. Or if you do, why not reduce it?
- If your car is not very expensive, lower than 2,500$ it might be more expensive to pay insurance than the actual risk of total loss. A good solution is to limit coverage on the damages to the car and keep your liability coverage. This can actually reduce your premium from 40 to 60 per cent without affecting your coverage if you have a BIG accident and are liable to paying compensation.
2) The other method to save your money is to lower the risk you pose as a client. If we follow our illustration it would be like increasing the number of players in a lottery. The chances of winning fall and so should the price of the ticket. You can do this by:
- Being a safer driver. Take special courses to increase your skills.
- Buying safety features on your car like ABS and anti-theft devices.
- Live in an area where crime is low.
- Having a good driving record.
These are smart ways of saving money on your auto insurance every one can carry out with little or no effort.