Avoid Insurance Rate Hikes by Planning Ahead

Saving money on your automobile insurance is something that we all want to do. Fortunately, there are several discounts that you can take advantage of in order to save between 20 and 60% on your auto insurance. However, before you talk to your agent about taking advantage of special discounts, you need to be aware that some of these discounts can backfire on you when you least expect it.

Usage Discounts

One of the latest trends in auto insurance is usage discounts. Usage discounts give drivers a rate break that is based on how many miles they drive, when they drive and how fast they drive. While some insurance companies will take your word on how many miles you drive in the average year, others are now utilizing technology to track your mileage, the time of day you drive, and your driving behaviors.

Tracking devices for this discount are installed in your vehicle. They collect data and send it via your cell phone or some other wireless transmission back to your agent. This data is then used to determine what your renewal rate will be. If you're driving behaviors remain constant or if you drive less than you expected for the year, then your insurance rates will either stay the same or go down at your renewal; however, if you drive more than you expect during the year or if you drive fast as a result of a new commute on the highway, then your rate can actually go up.

Good Student Discounts

Any insurance discounts that are based on behaviors are volatile in terms of long-term savings. Having a discount for being a good student driver is great and can save you 10 or 15%. However, if you have one bad semester or if you graduate then your rates are going to go up.

Working with Volatile Discounts

Any conditional discount for auto insurance is going to come with some element of risk. This does not mean that you should not take advantage of any and all discounts that you can get. At least you will have the discount for one policy term. To extend the value of these discounts, however, you need to be aware of how you are driving and of other factors that will impact your renewal rate. The more you are aware of your changing factors the better able you will be to plan ahead for changes.

For example, you can talk with your agent about a once in a lifetime road trip you are planning this year which will impact your usage discount for the next renewal period. By notifying your agent of this one-time event you may be able to avoid higher rates at your next renewal.

References

http://www.insurancerate.com/mileage-affects-car-insurance.php