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How Do I Lower My Insurance Rate?

I received an email requesting I address the issue of ?How Do I Lower My Insurance Rate?? As a former agent this is the first question a client ask if they are shopping or the company has had a rate increase. In this article I will address what factors go into making the rates and what you can do to get the lowest rate possible.

The two products I will address will be auto and home insurance. Let?s look at what affects the auto insurance rate. Companies factor in 400-800 variables when determining an auto insurance rate. I do not claim to know all the factors, but I can give you some insight on what I know. When a company runs a quote they request your date of birth, social security number, and driver?s license number. Not all perspective clients give out this information so companies will assume certain variable to get you a quote. The insurance companies use this information to look all over national data bases of information and combined with an algorithm to determine an insurance score.

I bet you did not know insurance companies give clients scores. The top two companies use a scale of 0-9, the closer to zero, the lower the base rate will be. The third largest insurer uses a scale of A-Z, the closer to A, the lower the base rate will be. So what is factored in to this score?

Again there are so many variable and I can only tell you the few I know that have the biggest impact. The insurance companies keep their formulas a secret, just like the credit bureau. Take a look at the chart below.

Credit: Insurance companies do not pull your credit, but the do look for information related to credit issues. Examples would be accounts in collections, multiple lines of credit (the fewer the better), repossessions, types of credits (home loan, auto, credit cards) The more credit cards you have or open accounts count against you. So a clean credit history is a big plus with insurance companies.
Claims: Claims with prior carriers will look negatively on you insurance score. Every insurance company wants the clients that pay their bills on time and file no claims. So having a prior claim even if it is over five years will reflect on your score. The older the claim the better thought. I understand your argument that is what insurance companies are for so why does it hurt me? I do not have an answer unfortunately.
Residence History: How long you have lived in the same residence has an impact. The simple truth is the longer you have been in one place helps you insurance score.

Let?s move on, now that you know you have a score let?s look at other factors that affect your insurance rate. Age this is huge in base rate and available discounts for auto insurance. Ages 16-20 are considered high risk and carry stiff rates. If you are a young driver or have one in your household consider finding a company that caters to young drivers and keep all your home and auto insurance with the same companies. Keeping the policies together will save you as much as 28% with most companies with all the discounts. Another tip is to have the young driver drive a liability only car. I have seen some many parents buy their kid a new model year car and have a monthly insurance bill as much as the car payment.

Some companies will rate the kid on the liability car and the parents on the new car, in a multi car household. This allows the parents to buy the kid a new car, and still be covered to drive it.

Ages after 21 are much more reasonable, and some companies give discounts for being over 50, but under 70. With homeowners insurance you can receive a 12% discount if you over 50. So age plays into the equation, but it is a fixed factor, you can?t control it.

Let?s review; obtaining a low insurance score will save you big bucks off the bat so use the factors above to lower your insurance score. Tell your agent to rerun your score and see if that helps to lower your rate, he will be surprised by your knowledge. The age factor is out of your control; most companies give discounts for being over 30 with a clean driving and claim record over the last 5 years.

The next factor is marriage; being married for a male under the age of 30 will save you a bundle. The company sees you as settled down and less likely to cause a claim. Females it saves money but not as much as males.

Deductibles should be considered by calculating how much you save a year by taking a higher deductible. If over a year an a half you can save the difference take the higher deductible. With home insurance you should carry no lower that a 1,000 deductible. With home insurance you should not file a claim on any small stuff if you can pay out of pocket do it. Only use your home insurance for weather related claims, which do not count against you, or large losses. Most companies will cancel you if you file more that 2 claims within a 12 month period. And no company will write you with a prior claim within the last 3 years, if they can it will be double what you are currently paying. Remember that home insurance claims a very penalizing unlike auto claims.

Unfortunately there is no clear cut answer on how to lower your insurance rates with your current carriers. I now suggest clients shop around to find the best deal. So many large companies talk about their service and how they handle claims is why you need to stay with them. With today?s abundance of information companies big or small can?t cut corners on service or claims service. So don?t be afraid to take a policy from a smaller company like travelers, AIG, or Hartford. They don?t have the marketing budget as the top three companies, but they put their money into the company which pass saving on to clients. Just shopping around is free and can save you tons.

I currently operate a web site in my home town that allows you to get quotes from 4-7 different insurance companies with one quote request form. If you would like to try this you can vist us at www.johnsoncityquotes.com Simple enter your zip code and the product you need quoted. You can be any where in the U.S. our system is tied into a national database, and your quote will be sent only to agent in that zip code.

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