You may think you’re automatically entitled to cheap car insurance, but there are top 10 automobile insurance rules you need to know.

What you don’t know is that keeping it safe on the street is only a decimal part of what it takes to save on your premium.

There are hundreds of different facts that insurance companies take into account when figuring out your rate.

Knowing their rules will save you big bucks.

Top 10 Automobile Insurance Rules: 1. It’s all About Risk

No better way to kick off a list of rules that insurers live by than getting straight to the bottom line: Risk.

Likelihood you’ll cost the insurance company money
=
how much money you pay for coverage.

May sound pretty straight forward – but there’s a lot of science behind determining the result of that formula for different drivers.

2. Where you Live Matters

If Clark Kent were insuring his truck in Smallville, he’d pay a lower rate than if he transferred his coverage to Metropolis.

For those of you who didn’t appreciate my Superman analogy – here’s a better way of breaking it down:

People living in the city pay more for automobile insurance rates than those taking it easy in the wide-open country. This is true within a state and, if you check out the top ten least and most expensive states to insure your car (link to that article here), it will also prove to be pretty accurate across the country as well.

Why? Because urban areas have a higher risk for claims. They have more drivers on the road, more people, and more theft.

3. A Claim is a Claim: Doesn’t Matter Who Did it

Any claim is going to cost the insurance company money – even if it’s denied, processing it cost them money. For this reason, they will penalize you for putting in multiple claims – even when an accident is not your fault.

Note: Even if you didn’t put in a claim – just a police report being filed may result in a rate hike.

4. Credit History is a Big Deal Here too

And you thought credit only mattered to people lending you money – nope! Studies show that credit is like a crystal ball when it comes to predicting if you’ll:

• Take more risks on the road
• Wind up in more accidents
• File more claims

According to one of the industry’s leading insurers, consumers with the worst credit scores are twice as likely to have an accident or file an insurance claim as those with the best scores.

5. Required vs. Recommended

Although some liability insurance is required in all states – just because you opt for the minimum doesn’t mean you are fully covered.

Liability insurance pays for damage or injuries you cause to somebody else and their property – according to the limits set in the policy.

Bodily Injury Liability - Coverage that kicks in when the policyholder and/or family members on the policy cause bodily harm or death to someone else.

Property Damage Liability – When you hit something with your car – whether it’s another vehicle, a lamppost or a tree – this coverage will pay for those damages.

• The cost of liability coverage will vary according to the limits you choose. Sure it may be cheaper to go with the minimum – but before you do, consider the value of your assets. Depending on what you’ve got to loose, you may want to consider going beyond the required minimum.
• The Insurance Information Institute recommends you carry $100,000 of bodily injury protection per person and $300,000 per accident.

6. Collision & Comprehensive: Not Always a Must

Collision Coverage pays for damage to your vehicle where you hit another car or object, flipped over, or drove over such a horrible pothole that you wound up with damage.

Comprehensive Coverage pays for loss or damage to your vehicle due to theft or damage caused by something other than a collision with another car or object.

These two types of insurance can run up your premium pretty quickly, so before buying, be sure that you need it.

Here’s how you can tell: Add what you’re quoted for the coverage by the insurance company. If you multiply that number by ten and your car is worth less than that, then getting it is likely not worth it.

Note: If you’re paying off a loan on your car or leasing it, then regardless of whether it’s new or used – the institution you’re making payments to will likely force you to get Collision & Comprehensive.

7. The Higher the Deductible, the Lower your Premium

The deductible is the amount of money you will pay out of pocket before the insurance company begins picking up the tab on a claim.

Choosing a $1000 deductible instead of a low $250 can save you up to 40% on your policy.

You’re not going to want to file claims for the small stuff if you’re following rule #3 – so the money you’ll spend out of pocket in the event of a big wreck will totally be offset by the HUGE savings you’ll enjoy on your rate as a result of getting a big deductible now.

8. You Should Pay your Premium in Full

Insurance companies prefer you pay up front for the term of the policy (usually 6 months) – and if you don’t – they will penalize you with a pesky little fee for taking monthly payments. May not seem like a big deal, but it sure adds up over time.

9. Insurers Like Getting all your Business

You may have heard that term “multi-line policy.” That’s when you buy your auto and homeowners insurance from the same company.

Insurance companies love it when you do that – and according to the Insurance Information Institute, a multi-line policy can save you up to 15% on both premiums.

However, don’t let that 15% discount keep you tied to a single company for life. Rates vary so much between companies that other factors could have you wind up with a better deal insuring with separate companies.

10. It’s a Legal Contract: Shop & Compare Before you Sign!

Regardless of what you discussed with the agent, what’s in black and white on paper is what counts. So before you sign up with anyone, be sure to shop around and get at least three quotes on the same coverage.

The quickest and safest way to do this is by going to a site that is unbiased, and will shop around to all the major companies for you like insurancerates.com. A lot of the auto quote sites online will only send you to specific insurance companies they’re contracted with – so be careful.

When you’ve decided on the best for you, before you sign on the dotted line, take a close look at the policy and make sure that it’s exactly what you agreed upon.

• Are your limits correct?
• Are your deductibles high enough?
• Are you being charged the correct amounts for coverage?
• Are there any extra items listed that you didn’t ask for?

The best way to win the battle against high insurance prices is knowing the top 10 automobile insurance rules. Now that you do, shop away and score yourself major savvy.