Good Grades, Cheaper Car Insurance Rates

You probably remember the commercial that was running a couple of years ago in which a scruffy looking kid informed his dad that he could save on his car insurance thanks to a good grades discount. If you were like me, you probably thought that the good grades discount was more of a public relations overture than a solid business decision - kind of like how the local video store gives a free rental for each A on a kid's report card. But while the video store is trying to build its ties with the community, car insurance companies that offer good grades discounts do so for reasons that are strictly business.

It's a Numbers Game

Car insurance companies have teams of number crunchers, known as actuaries. These people have developed formulas that calculate a tremendous amount of data to determine how much of a risk you pose to insurers. The less risk you present, the lower your car insurance rates will be.

Some of the obvious factors that actuaries take into account are your age, gender (women get in fewer accidents than men), and driving history, but some other, not-so-obvious data is also compiled. For example, did you know that having bad credit can negatively impact your car insurance rates? The reason is that the actuaries' numbers tell them that people with bad credit present a greater risk to insurers than people with better credit. If you're in high school, you probably haven't gotten your first credit card offer yet, but when you do, be sure to use them responsibly! Paying more for your car insurance is probably one of the least nasty things that people with bad credit are forced to do.

The same can be said of students with better grades. Having good grades shows that you're more responsible than your slacker peers, and lack of responsibility is one of the leading causes of teenage car accidents. So keep your grades up and you could be saving yourself (or your mom and dad) some serious money. And hey, even if Mom or Dad pockets the savings, you will score major points with them, right?

Turn the Game Upside Down

When you go to just one car insurance company, you give them all the power. They screen you and tell you what your car insurance rates are going to be. Instead, you can turn the game on its head by screening them.

Insurance can be thought of as a financial game. The car insurance company evaluates you, determines how much risk you pose to them, and then assigns you premiums based on that risk. Of course, they factor in a little extra to make a profit, too. What you can do to limit that profit (and thus keep your rates as low as possible) is shop around. You shouldn't pay one dime more than you have to do for car insurance, and with the internet, it's easy to comparison shop for the best deals.

This does not mean you should skimp on coverage - you need to have enough to be legal and to protect your interests - but if you're driving a $500 beater, you clearly don't need to pay for full coverage. Use websites like carinsurancerates.com to learn as much as you can about car insurance, because the more you know, the more you'll save!