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How Your Tax Return Can Help Your Insurance Premium

Written by Michele Wilmonen. Posted in Research Last Updated: 03/01/2016

Most people don’t think about it, but your tax return can improve your insurance premium.

Tax Refund for Your Insurance Premium

Tax Refund for Your Insurance Premium

Your tax return can do a lot more for you than just being spending money. For those that use it wisely, they can benefit from it for a much longer period of time than the enjoyment of a shopping splurge will last. For example, by using it in the following three ways for your car insurance you can save yourself money for years to come. You may even end up saving more in the long run than the amount your tax refund was.

Switching Insurance Companies or Payment Plans

A lot of drivers don’t bother looking for better insurance rates with other companies because they can’t afford to pay the required two months down that it takes to switch. However, they could if they paid for it with their tax refund. By sacrificing your tax refund to make a down payment on a less expensive car insurance premium, you would find yourself with more money in your pocket each month thanks to a smaller monthly payment.

You can also use your tax refund to switch from a monthly payment plan to paying your insurance in full for the term. Many insurance companies offer a “paid in full” discount and you will also save yourself those monthly payment plan fees or monthly EFT draft fees that get tacked onto your monthly payment every month.

Fix Your Credit Score

Everyone knows by now that your credit score affects your car insurance premium. So one way you can put your tax refund to good use to help your premium, is to use it to pay off outstanding debts or get caught up on you bills that are negatively affecting your credit.

By using your tax refund to help increase your credit score, you could be seeing better insurance rates as soon as your next renewal.

Fix Minor Car Damage

Instead of filing a claim for damages you did to your own car, use your tax refund to pay for them yourself. Yes, you purchase car insurance so that you don’t have to pay for stuff like that, but each claim you file negatively affects your record. By keeping it off of your C.L.U.E. report, insurance companies can’t use it when they determine your car insurance premium, thereby usually securing you a lower premium.

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Michele Wilmonen

Michele’s first introduction to insurance was working for a major insurance company as a file clerk and a mailroom supervisor in a regional office. She learned insurance directly from underwriters and claims adjusters from questions and also watching them do their job. Since then, she’s earned a number of insurance certifications from the Insurance Institute of America and also a Bachelor’s degree from the University of Idaho. She blogs at Car Insurance Guidebook.

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