Across the country, millions of Americans pay a lot of money each year – usually several thousand dollars – for their health insurance and auto insurance coverage. However, studies show that many often pay more than they probably should for such policies, while experts stress the importance of shopping around as well as trying to learn more about what goes into those costs, and why.
For instance, a recent survey found that the average American is paying hundreds of dollars more per year for auto insurance than they probably should. Part of the reason for that is that people have grown quite sedentary when it comes to staying vigilant about which companies are going to provide the best possible plans at the lowest costs. In fact, the number of drivers who shop around for auto insurance each year is at a recent low.
Why is shopping helpful?
The auto insurance industry is quite cutthroat these days, so much so that companies are willing to give consumers substantial discounts just for switching policy providers. Most people who make that switch may be able to save hundreds of dollars per year. For this reason, taking the time to shop around a little bit might at least give consumers an idea of what they might want to do next, even if they don't end up making that switch right away.
Moreover, there's a very common policy in the auto insurance industry these days called "price optimization," and that can also cost many Americans hundreds or more annually. This is actually somewhat devious on the part of auto insurers, because they've figured out in recent years that once people have had a policy for a while, their inclination to shop around diminishes. As such, they realized they can slowly raise prices on existing customers, and not worry about them jumping ship. Indeed, they've figured this out so well that they often know what price will cause a person to start shopping around, down to the dollar.
What else can drivers do?
Another thing that can really increase a person's auto insurance costs, strangely, has nothing to do with driving at all. In almost every state, insurers can use a driver's credit standing to help determine their rates, and studies show that a good driver with a low rating could actually pay more than a person with a good credit score and a DUI on their recent record. Currently, only three states outlaw this kind of data use, meaning that the vast majority of drivers nationwide may be paying a lot more for their auto insurance than they probably should. For this reason, consumers should have an even greater motivation to improve their credit scores going forward.
If consumers can reduce their insurance costs by hundreds of dollars per year, that's money they may be able to devote to paying down debt (thus improving a credit score further) or creating an emergency savings account. That, in turn, can greatly improve a person's overall financial picture going forward.