For many Americans, car insurance represents a significant line in the budget– and prices are still rising. With premiums at an all-time high, it’s only natural for consumers to want to get the best deal.
But unlike the vehicles they protect, insurance companies don’t allow customers to negotiate prices. In this article, we’ll dig into why you can’t talk down your coverage rates, and how to reduce your premiums in other ways.
Why Insurance Companies Don’t Allow Negotiation
The main explanation for why you can’t negotiate your car insurance is due to state regulations. Because insurance is a heavily regulated industry, carriers must file rate changes with state departments of insurance and receive approval before implementing them. That goes for increases and decreases alike.
To understand this, it’s important to note the difference between rates and premiums. Although they’re often used interchangeably, the underlying definitions are relevant to how the policies are priced.
A premium is the amount of money you pay for your policy, typically on a monthly basis. A rate, on the other hand, refers to the cost of a given amount of coverage. For instance, a carrier might set a base rate of $500 for $100,000 in liability coverage. While the rate is $5 per thousand dollars of liability, you’d pay a premium of $500.
While a carrier needs to provide consistent rates based on state approval, the premium may change due to a variety of factors. However, instead of allowing consumers to plead their case for lower costs, they rely on proprietary algorithms to calculate a non-negotiable premium.
What Goes Into Your Coverage Costs
Understanding the factors that determine your premium can help you identify opportunities for savings. Here are some of the main factors carriers take into account.
- Driving history: Previous infractions and collisions– mainly over the past three years
- Car usage: How many miles you put on your car
- Credit-based insurance score: A type of credit score that predicts the likelihood of your filing a claim and the likely cost of that claim
- Demographics: Driver age and gender (not race or religion)
- Location: A risk assessment based on crime and accident rates in your area
- Vehicle type: Make, model, and age of your insured vehicle, which impacts the cost of repairs
How to Lower Your Rates When Negotiation Isn’t an Option
While direct negotiation isn’t possible, you can take several strategic steps to reduce your car insurance costs.
1. Shop around before policy renewal
Experts advise comparing insurance rates every six months– or before each policy renewal. Different companies weigh risk factors differently, so shopping around can reveal significant price variations for the same coverage.
Shop now and save!
2. Be selective with claims
Think carefully before filing a claim. Data by The Zebra illustrates that one at-fault claim on your insurance can cost you an additional $2,301 over a three-year period.
Before filing a claim, assess the damage and consider whether paying out-of-pocket might be more economical in the long run.
3. Understand your coverage needs
Review your policy to ensure your coverage reflects your needs and lifestyle. For instance, drivers with older vehicles that they own outright might consider adjusting comprehensive and collision coverage based on the value of their car.
At the same time, it’s important to make sure you have sufficient coverage to meet all state, lender, and lessor requirements. Otherwise, you may pay more in penalties than you’re saving.
4. Bundle your policies
Most insurers offer significant discounts when you combine multiple policies. For instance, many carriers provide their own auto, home, and renters insurance– and reward you for bundling them.
5. Take advantage of available discounts
Many insurance companies offer special discounts for certain groups or qualifications. However, offerings can vary by provider.
Here are a few common programs you’ll want to look out for.
- Safe driver discounts for maintaining a clean driving record
- Multi-car discounts for insuring multiple vehicles
- Good student discounts for maintaining good grades
- Professional/membership discounts for belonging to certain organizations
- Safety feature discounts for vehicles with advanced safety technology
- Payment discounts for paying in full or setting up automatic payments
- Loyalty discounts for staying with the same insurer
Start Saving on Car Insurance
While you can’t negotiate car insurance with your carrier, there are many other ways to reduce your premium. More than anything, regularly reviewing your coverage needs and shopping for better rates can lead to substantial savings over time.
If you’re in the market for a new policy, check out our shopping tool for a personalized list of options in your area. You can also sign up for our free tracking tool to get alert when your rates change to ensure you’re always getting the best deal.
