Nearly every day we see advertisements from car insurance companies that tell us we can save lots of money if we switch to their insurance policies. But how can so many insurers make the same claim that their policies are cheaper?
Scott Testa, a marketing expert and assistant professor of business administration at Cabrini College in Radnor, Pa., says some policyholders could probably save money by switching car insurance companies, but not everyone will.
"Car insurance companies come up with these marketing claims because they will often survey a select group of new customers who actually did save money by changing to their brand," he says.
However, many of those customers may have had outrageously high limits or previous coverage with a very expensive auto insurance company, says Testa.How much can you really save on car insurance?
Not everyone who switches auto insurance providers will save the amount of money mentioned in the ads. In fact, a recent ConsumerReports.org survey found that only 14 percent of 4,500 subscribers discovered that they could save money by switching car insurance companies.
So are these ads even true?
In many cases, you have to look at the small print or research the details of a car insurance company's advertisement carefully, says Testa. Usually companies tout that you "could" save more money, not that you "will." Or they may say that savings are based on an "average." Technically, it's true, Testa says.
And there are some lucky people who can save money by switching providers. The amount of money you may be able to save by changing insurers depends on that insurance company's underwriting, says Testa.
"Every auto insurance company uses their own calculations to determine your premium," he says. For example, some companies may offer better premiums than others for drivers with high credit scores. Other insurers may not consider your credit score at all but instead rely more heavily on your driving history.
One provider may offer affordable auto insurance rates (compared to other companies) to drivers who have a DUI conviction. Another insurer may offer better rates to folks who've had a lapse in insurance coverage.Ways to reduce your car insurance rates
No matter which ads you see, there are ways to lower your car insurance rates. You may not even need to switch companies. To keep down insurance costs, try these tips:
- Improve your credit score. Many car insurance companies use a person's credit history to help assess his or her auto insurance risk. A poor credit history may make you more of a risk, and your insurance premiums could be higher. Improve your score, and over time, your rates may drop.
- Shop around. Pull out the declarations page on your current car insurance policy. It's the front page that lists your coverages, deductibles and limits. Find car insurance quotes online for the same level of coverage. You may find a better deal. Be sure to make apples-to-apples comparisons, though. Some companies charge less by offering lower coverage.
- Drive less. The fewer miles you travel, the less of an insurance risk you are to companies. If you've recently started working closer to home or have found another way to significantly cut your commute, make sure your car insurance company knows. This could be an easy way to lower your rate.