The Cost of Ductwork_780x440

The Cost of Ductwork

There’s a lot that goes into making homes safe and comfortable. After plumbing and electric, many homes in warm and cold climates alike have heating, ventilation, and air conditioning (HVAC) systems to regulate temperature and air quality.

Installing or updating HVAC typically requires ductwork to effectively move air from the system to vents throughout a home or building. There are several factors that impact the cost of HVAC ductwork, including the size and layout of a home, materials used, and type of system.

This guide will give you the basics of how HVAC ductwork operates and key cost considerations.

What Is Ductwork?

In the broadest sense, ductwork can be defined as the channels used for transferring heated and/or cooled air through the rooms and zones of a home or building.

In many cases, HVAC systems need separate supply and return ducts to circulate, filter, and treat air continuously. Supply ducts bring air from the furnace, geothermal pump, or other type of system to blowers and vents to heat or cool an area. On the flipside, return ducts transport untreated air back to the HVAC system.

Some of the most common HVAC systems that need ductwork include:

•   Geothermal or ground source heating and cooling.
•   Central air conditioning.
•   Furnaces.
•   Central gas heating.

Between these different systems and a home’s unique characteristics, ductwork can be handled in a variety of ways.

Installing New Ductwork

Figuring out how to install ductwork varies in complexity and cost between new construction and finished and furnished home.

Additional steps that may be necessary for a finished home, such as cutting holes in existing walls, ceilings, and floors, may likely drive up the price of labor and require more materials and time for installation. Depending on where the system is placed, ducts may be run through closets, attics, basements, or up stairwells.

Since different homes require different amounts of ductwork, it’s helpful to think of cost on a linear foot basis. New ductwork can cost about $10 to $20 per linear foot on average, with the variation coming down to costs for materials and labor.

A home smaller than 2,500 square feet can expect to need up to 150 linear feet of ductwork, which could potentially cost between $1,500 and $3,000 to install.

Homes ranging in size from 2,500 to 3,500 square feet could need 250 linear feet of ductwork, with the total potential cost ranging between $2,500 and $5,000.

This means ductwork can be more expensive than fixing a plumbing leak and many other common home repair costs.

If you’re building a new home, including plans for HVAC ductwork from the getgo could reduce the overall installation cost. For starters, it would bypass the need to retroactively cut holes throughout a home for ducts and vents.

Additionally, it may be easier to design systems that utilize fewer linear feet since ductwork can be installed before walls and floors are completed.

Replacing Ductwork

If your home is already fitted with ductwork, replacing a portion of it or the entire system might be necessary due to leaks, cracks, or reduced efficiency over time. Since ducts are usually kept out of sight behind walls and ceilings or in attics and basements, accessibility is a key factor in repairing a system.

The replacement process involves both removing the existing materials and installing new ductwork. Replacing ductwork can cost from $12 to $25 per linear foot depending on the location of the existing system and choice of materials for the new ductwork.

Exposed ductwork can be easier for you to reach and replace on your own, but a professional contractor may be necessary for more complicated repairs and getting to concealed HVAC systems.

Additionally, a skilled professional could likely complete the job in less time than a DIYer might, and time may be a more pressing factor than money in the middle of a cold snap or during a heatwave.

The U.S. Environmental Protection Agency’s EnergyStar program recommends getting quotes from contractors with North American Technical Excellence (NATE) or Building Performance Institute (BPI) certification to get the job done right on the first try.

Recommended: The Cost of Buying a Fixer-Upper

Ductwork Materials

There are several types of materials to consider when planning how to install ductwork in a home. Broadly speaking, ductwork can be categorized as flexible or rigid, with options for materials within each category. Each comes with tradeoffs in terms of price, lifespan, efficiency, and flexibility.

Flexible Ductwork

True to its name, flexible ductwork is characterized by its ability to bend, which can come in handy when installing inside tight and tricky spaces.

In most cases, aluminum or non-metallic materials like plastic, polyester, and PVC are used for flexible ductwork. Let’s take a look at how they compare.

Flexible Aluminum: Costs between $2 to $5 per linear foot (excluding labor).

Pros:
•   Ideal for installing in hard-to-reach places.
•   Longer lifespan than non-metallic flexible ductwork.
•   Generally cheaper than rigid ductwork.

Cons:
•   Poor energy efficiency without added insulation and sealing.
•   Needs to be reinforced to minimize kinks and bends to improve airflow and efficiency.

Flexible Polyester, Plastic, PVC: Costs between $1 to $4 per linear (excluding labor).

Pros:
•   Useful for compact spaces.
•   Generally one of the cheapest options.
•   Resistant to mold and rust.

Cons:
•   Prone to tearing and less durable than flexible aluminum.
•   Needs to be reinforced to minimize kinks and bends to preserve airflow and efficiency.

Rigid Ductwork

Rigid ductwork can be made from several materials, such as fiberglass and galvanized steel or aluminum. These options can also vary in shape (e.g., cylindrical or rectangular) and size. Additionally, there are differences in cost and features for each type of rigid ductwork.

Sheet Metal Ductwork: Made from galvanized steel or aluminum, these materials usually cost anywhere from $3 to $10 per linear foot.

Pros:
•   Greater durability than other materials.
•   Can produce less noise than flexible ductwork.
•   Less susceptible to mold and mildew.

Cons:
•   Difficult to install if there isn’t space for long, straight lines of ductwork.
•   Adding insulation may be required for greater energy efficiency.
•   More expensive than flexible ductwork.

Fiberglass Ductboard: Consisting of metal ductwork lined with fiberglass, this option costs between $4.50 and $6 on average.

Pros:
•   Built-in insulation improves energy efficiency and temperature control.
•   Easy to cut and seal.
•   Well suited for installing between a building’s rafters or floor joists.

Cons:
•   Over time, they can release fiberglass particles into the air and be susceptible to mold and mildew.
•   Can be difficult to clean.
•   Often the most expensive option per linear foot.

Sealing and Insulation

Depending on the structure of a home, the type of HVAC system, and other factors, sealing and insulating ductwork may be necessary for health and safety concerns. It might also improve the efficiency of a system, thus potentially lowering your energy use, and may help pay for itself through lower utility bills.

In fact, leaky ductwork can reduce the efficiency of a HVAC system by as much as 20 percent .

If combustion is involved in your HVAC system, which is generally the case for furnaces and central gas heating, harmful gases like carbon monoxide are generated in the process. Sealing ductwork can further safeguard that such gases are not circulated into the living space of home instead of being emitted outside.

While professional contractors are recommended for sophisticated ductwork insulation and sealing jobs, homeowners may choose to take a DIY approach to sealing near vents and other ductwork connection points with metal tape. These locations, especially vents, can be more accessible and are more common locations for leaks.

How Often Should Ductwork Be Replaced?

While we may immediately notice when the power goes out or the plumbing is backed up, it’s harder to tell if we’re getting the most out of a heating and cooling system.

Maintenance and cleaning can help extend the lifespan of ductwork and heating and cooling systems, but a time will come when replacement is a safer and more financially sound choice.

Erring on the side of caution, you may want to have a heat pump or air conditioner (including ductwork) replaced if it’s more than 10 years old. For a furnace, the estimated lifespan is around 15 years.

To keep your ductwork in tiptop shape, there are some maintenance tasks, like changing air filters monthly, that can be done on a DIY basis. More complex procedures, such as cleaning blowers, checking electrical connections, and lubricating mechanical parts, may be better handled by a professional contractor.

Having a maintenance checklist handy can be helpful for staying on top of your cleaning and maintenance schedule, as well as making sure a contractor checks all the boxes when inspecting your HVAC system.

The Takeaway

Whether saving ahead or responding to a sudden home repair cost, there are options available for paying for HVAC ductwork.

Installing energy-efficient heating and air conditioning systems may qualify for a residential energy property tax credit. Additionally, some states offer incentives and rebates, such as the New York State Heat Pump Rebate Program.

Although helpful, these incentives and tax deductions still leave a portion of the cost to the homeowner. It can sometimes be difficult to save for potentially pricey repairs like these if a budget is already stretched thin.

Unsecured home improvement loans with SoFi have no fees and don’t require home equity as collateral. With low, fixed rates and a set term with a payment end date, a personal loan might save you thousands on total interest compared to a credit card when using it to pay for expensive home repairs.

Dealing with leaky ductwork? Check out SoFi home improvement loans to help pay for the repairs.



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Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
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5 Ways to Achieve Financial Security

We all have a vision for our financial futures, whether it’s a vacation home on a tropical beach, a completely debt-free (and work-free) retirement, or selling everything to buy a cabin on that cruise ship that travels the world. And while each of our dreams is uniquely personal, they all have one thing in common—they probably aren’t free.

Whether dreaming big, small, or somewhere in between, achieving financial security might be one way to make it a reality.

The government definition of financial security is “a state of being wherein a person can fully meet current and ongoing financial obligations, can feel secure in their financial future, and is able to make choices that allow them to enjoy life.”

In other words? It’s being able to pay the bills (without having to check account balances first), and not being worried about where the next paycheck is coming from. But beyond the physical state of having the money when it’s needed, financial security is also a state of mind.

Financial Security Is What You Make It

Perhaps the most important aspect of the definition above is the part that says “able to make choices,” because deciding what it means to be financially secure is entirely each person’s choice and how they answer one question: “What are you financially okay with?”

For some people, it’s all about the numbers—how much they own, how much they owe, the size of their portfolio, or their net worth. But for others, it could mean traveling the planet with all their earthly possessions in a backpack, working odd jobs wherever they land until they make enough money for a ticket to their next destination.

Talk about opposite ends of the spectrum.

Ways to Achieve Financial Security

For those who haven’t received a huge inheritance or won the lottery, achieving financial security is likely to involve lots of hard work, determination, and a DIY attitude.

Why? One reason is because the safety nets intended to protect Americans in retirement are starting to unravel. The Social Security trust fund is on the way toward depletion sometime after 2030. And that may sound like it’s far enough in the future for flying cars, but the reality? That’s only a decade away.

The good news is, it’s never too late to get in the game. And achieving financial security may even help achieve emotional wellness at the same time. Win-win!

Here are a few smart strategies that could help with laying out a financial security plan.

Strategy 1: Setting Goals

Financial goal-setting can be like jumping ahead to the last chapter of a book. It starts with the endgame, such as paying for kids’ college, traveling, or upgrading a home or vehicle.

From there, “reading” goes backward by breaking those goals into bite-size steps until the arrival at Chapter 1—an overview of the current situation and a plan to meet those long-term goals.

Short-term financial goals could include things like paying off high-interest debt, student loans or car loans, increasing a credit score, or growing an emergency fund.

Once those are achieved, money could be shifted into longer-term planning, such as retirement, buying or upgrading a home, paying off a mortgage, or investing.

No matter how long it takes, checking something off a goals list can be a huge feeling of accomplishment, as well as motivation to start the next chapter.

Strategy 2: Creating a Goals-Based Budget

As a good witch from the North once said, “It’s always best to start at the beginning.” And when outlining a plan for financial security, that can mean taking a refresher course on personal finance basics.

Getting reacquainted with simple concepts like avoiding credit cards, paying bills on time, and creating a budget could be a good way to help focus on a plan that’s all about individual goals.

It could also help kickstart a habit of tracking cash flow, because creating a budget that curbs spending isn’t likely to work if where the money is going is a mystery to begin with.

And remember that joy of checking off boxes? Every time money that used to be spent instead goes toward a savings goal, it could trigger that same feeling of accomplishment.

Strategy 3: Keeping Your Money Safe

This strategy isn’t about stashing cash under the mattress. In 21st-century terms, keeping money safe is more about making decisions that will protect an investment.

Tactics like diversifying a portfolio to include some low-risk investments, cash-based savings investments, or even commodities, can help keep that portfolio steady if the market has a bad day.

It could also be as simple as keeping finances organized so it’s obvious what money is where, knowing the penalties and late fees on each account, when bills are due, and how much interest is being earned.

And when much of today’s money management is done online, keeping money safe can also mean protecting identity, passwords, and offline financial documents.

Strategy 4: Getting Out of Debt

If those monthly credit-card payments didn’t exist, where would that money go instead? Paying off debt could free up a potentially big chunk of money to put toward those big dreams. And knowing calls from collectors will no longer be a worry can provide real peace of mind, too.

Creating a debt-payoff strategy can take just as much time and effort as creating a financial wellness plan, but if one is dependent on the other, it’s an essential step.

Two popular methods include the debt snowball, which calls for paying off the lowest balance first and then applying that entire amount to the next-lowest balance (on top of the minimum), and the debt avalanche, which is similar but focuses on the highest-interest debt first.

Strategy 5: Saving and Investing

Saving and investing are two similar concepts but have many differences. One of the biggest is risk. One school of thought is that the shorter term a goal is, the less risk should be taken.

If, for example, someone wants to build an emergency fund equal to three to six months’ salary, they might decide that a high-interest savings account is the safest route. (It can also provide the easiest access to money in a pinch.)

For the longer term, there’s goals-based investing, which is different from traditional portfolio investing in that instead of focusing on which assets will give the best returns over a period of time, strategy is adapted to meet individual needs.

An investment strategy to save for a down payment, for example, is different both financially and psychologically from saving for retirement in 15 years or more.

Making Sure Money Is Working as Hard as You

The “How to Achieve Financial Security” list can be long and varied, but as the old saying goes, there are two ways to make money: You work for it, or make it work for you.

One way to put money to work could be to make investments that will earn the best returns. For example, contributing the maximum to a 401(k) that an employer is willing to match at 100%.

It’s like doubling an employee’s contribution. Add to that the magic of compounded interest, and money can seem to grow right before your eyes.

Another smart way to grow money might be to use a cash management account like SoFi Money®️. SoFi Money has no account fees and no ATM fees at 55,000+ ATMs worldwide.

Get on the path to financial security today with SoFi Money®️.


Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
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The 50/30/20 Rule Demystified

If you like the idea of setting up a budget, but worry the process will be too complicated, or recoil at the thought of having to put every random item you buy at Target into a budgeting category, don’t despair.

There’s a simpler way to get a handle on your spending and start saving more–it’s called the 50/30/20 budget.

The 50/30/20 budget or “rule” is a budgeting framework that can be relatively easy to create and implement, and is one potential way to help keep your finances on track and help you work towards your goals.

The 50/30/20 numbers refer to percentages of your income that you would allocate to three main categories–”needs” (essentials), “wants” (nonessentials), and saving (financial goals), respectively.

The primary goal of the 50/30/20 rule is to learn to prioritize saving money by making it a key part of your spending plan.

Everyone’s financial needs and goals are different, however. And, while these percentages can be a great starting point, you may find that you need to tweak these exact numbers to better suit your needs and current financial situation.

Read on to learn how the 50/30/20 rule works, along with tips for implementing this easy-to-follow budgeting method.

How the 50/30/20 Rule Works

In the 50/30/20 budget, you allocate your take-home (or after-tax) income into three main categories or buckets according to percentages. Here’s the breakdown:

50% to “Needs”

These are things you cannot live without and the bills you cannot avoid paying. This includes rent or mortgage payments, car payments, groceries, insurance, health care, minimum debt payment, and utilities.

The “needs” category does not include items that are extras, such as Netflix, dining out, and clothing beyond what you need for work.

30% to “Wants”

Also known as personal, discretionary, or nonessential spending, these are the things you buy that you could technically live without. This includes dinner and movies out, a new handbag, tickets to concerts or sporting events, vacations, and the latest electronic gadget. Wants are all the little extras and upgrades you spend money on that make life more fun.

20% to Savings

This is the money you save for future financial goals. This includes adding money to an emergency fund, saving for a downpayment on a home, making IRA contributions, and extra payments to help pay off your loans sooner (minimum payments are part of the “needs” category).

Even though the budget is written as 50/30/20, the purpose of this system is to prioritize the saving–the 20%. (It may be more appropriately named the 20/50/30 budget.)

The idea is to make space for the 20% without laboring over the rest–because, really, the minutiae of where your fun money is going ($5 for a latte here, $10 for an appetizer there) isn’t super important if you’re saving enough to meet your financial goals.

If you aren’t saving 20% of your income right now, that’s okay. The process of setting up the 50/30/20 budget will help you find out where your money is going so that you can make adjustments. After completing your budget breakdown, you can address the areas where you’d like to cut back.

Benefits of the 50/30/20 Budget

The 50/30/20 rule may be a minimalist budget, but it can pack the same powerful benefits you would get with a more labor-intensive budget.

Some of the payoffs of setting up and following a 50/30/20 include:

•  Knowing where you stand. As the popular adage goes, “what gets measured gets improved.” It can be hard to start spending less and saving more if you aren’t clear on how much and where you are currently spending.

•  Identifying easy ways to cut back. As with any budgeting process, the 50/30/20 budget can reveal opportunities to cut back on spending. Simply going through the process–and seeing exactly where your money is going each month–can help to motivate you to make some relatively pain-free adjustments.

•  Reducing financial stress. While building a budget may seem like stress-inducing exercise, it can ultimately relieve a lot of financial worry by adding structure and clarity to your spending. Instead of angsting over every purchase, you’ll have built-in boundaries that allow you to spend freely within your budget.

•  Simplifying the budgeting process. By having fewer categories than a traditional monthly budget, the 50/30/20 rule of thumb can be simple to set up and to maintain. It can also be easy to track a 50/30/20 budget digitally.

•  Achieving your savings goals. By making saving a priority–and setting this money aside before you start spending–a 50/30/20 budget can help you work effectively towards your financial goals, whether that’s creating an emergency fund, making a downpayment on a home, or going on a great vacation.

Implementing the 50/30/20 Budget

Want to give the 50/30/20 budget a try? If you decide to go this route, or you’re just looking for some budgeting basics, here are some steps you can take to get started.

Gathering Your Financial Records

To get started with any kind of budget, it’s helpful to collect the last three months or so of bank and credit card statements, pay stubs, receipts, and bills.

Calculating Your Monthly Income

You can use your statements to figure out exactly how much money you are bringing in each month after taxes are taken out. You can think of after-tax dollars as the pot of money you have to siphon into the three budget categories each month.

Setting a Savings Target

You may want to begin with the most important category–the 20% (savings). Since the goal for this budget is to turn the 20% into a nonnegotiable part of the plan, you’d calculate 20% of your monthly after-tax income and set that figure aside for things like debt repayment, cash savings, retirement investing, and any other financial goals that you have.

Even if you don’t feel it’s realistic for you to put 20% into saving right now, you might run the exercise assuming that you will–you’ll be able to tinker with the numbers later.

Calculating Essential Monthly Expenses

Next, you may want to make a list of all of your monthly essential or fixed expenses, such as rent/mortgage, utilities, groceries, and insurance.

Currently, do essential items absorb more than 50% of your take-home income each month? If so, what percentage do they comprise? And, is there any way to reduce any of these monthly expenses?

Building a Hypothetical Budget

After adding up savings and essentials, what is left over is what can be allocated towards discretionary spending–the “wants.”.

It can be helpful to keep in mind that the 50/30/20 numbers are just a guideline. If the cost of living is high where you live, for example, it may not be feasible to keep essentials to 50% of your take-home income. In this case, you may need to reduce spending on wants. Or, you may decide that at this point you can’t quite afford to put 20% into savings.

Once you see your numbers in black and white, you can play with the percentages and come up with a workable plan for roughly how much you can spend on nonessentials, or fun, each month.

Putting Your Plan into Action

Now that you have a basic guideline of how much money you will put into savings each month and how much cash you can spend each month on wants, it’s time to give your budget a try.

You may want to plan on tracking your spending for two to three months to start. You can do this by saving receipts and logging expenses according to the three categories at the end of the day. Or, you could use a budgeting app that makes it easy to track and categorize expenses.

Making Some Tweaks

After tracking your spending for several months, you’ll probably have enough data to refine your original 50/30/20 budget. From there you can adjust the categories based on your actual spending, not just your projected spending.

You may also find that you need to adjust your spending. Discretionary spending is typically the easiest place to do some trimming.

You may decide you need to cook at home (rather than get takeout) a few more times a week, cancel a streaming service you rarely watch, or ditch the gym membership and work out at home.

it may also be possible to pair back some of your fixed monthly expenses. Reducing utility bills, transportation costs, and, if possible, rent, could free up more money for fun spending.

After making some adjustments, you can execute your new and improved budget. You may want to continue to track spending in a method that works best for you until spending according to your budget becomes second nature.

The Takeaway

The 50/30/20 rule of thumb is a set of easy guidelines for how to plan your budget. Using them, you allocate your monthly after-tax income to the three categories: 50% to “needs,” 30% to “wants,” and 20% to your financial goals.

Your percentages may need to be adjusted based on your personal circumstances and goals. But using this simple formula can be a good way to get a better handle on your finances, and to start working more effectively towards your goals.

You may find that technology can help make sticking to a budget simpler. SoFi Money®, for instance, is a cash management account that has features built directly into the app that help you track spending and set aside savings for specific goals.

Check out how SoFi Money can help you stick to your budget today.



SoFi Money®
SoFi Money is a cash management account, which is a brokerage product, offered by SoFi Securities LLC, member FINRA / SIPC .
Neither SoFi nor its affiliates is a bank. SoFi Money Debit Card issued by The Bancorp Bank. SoFi has partnered with Allpoint to provide consumers with ATM access at any of the 55,000+ ATMs within the Allpoint network. Consumers will not be charged a fee when using an in-network ATM, however, third party fees incurred when using out-of-network ATMs are not subject to reimbursement. SoFi’s ATM policies are subject to change at our discretion at any time.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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How to Lower Car Insurance & Save Money

How to Lower Car Insurance & Save Money

Some things that affect the price of auto insurance.you can’t do anything about—like your age—and some you might not want to change, like where you live. But by comparing rates, you may be able to figure out how to get cheaper car insurance.

Here are some other considerations.

How to Get Cheaper Car Insurance

Wondering how to lower car insurance costs?

There’s no downside to looking for a lower premium than you’re currently paying on car insurance. If you find out you have a better deal than you thought, you can stick with the company, and premium, you have.

But if you’ve had the same coverage and carrier for years (or even a year), you may benefit from making some changes.

Shop Around and Get Some Quotes

Rates for the exact same coverage can vary from one insurance company to the next—and from one customer to another. So using an online comparison site to shop for a policy and premium based on your specific needs (or your family’s needs) can be a good way to start your search for savings.

The Insurance Information Institute recommends getting at least three price quotes when you’re shopping for a better rate.

You’ll likely see plenty of company names you know when you use a comparison site, but you also may run into some that are less familiar. If you’re intrigued by a company’s rates and coverage options but if you want more information, you can read consumer reviews online.

You also can check out a company’s financial health with a rating service like AM Best or Standard & Poor’s. And you can contact your state insurance department to ask about any complaints related to a particular insurer.

Once you’ve done some research, you also may want to contact your current insurance provider to see what savings options it might offer to keep you as a customer.

Recommended: How Much Auto Insurance Do I Really Need?

Look for Discounts

When you’re shopping, it’s smart not to overlook the opportunity to save money on your auto insurance premiums with discounts.

Many insurers offer price breaks based on things that make a driver statistically safer to insure—like a good driving record or a vehicle with extra safety or anti-theft features. Drivers of all ages may qualify for a discount after taking a defensive driving course. And carpoolers and those who work from home may benefit from low-mileage discounts.

You also might be able to get discounts for behaviors that cut costs for the insurer—by going paperless, for example, using automated payments, or paying premiums annually instead of two or more times a year.

All discounts are not created equal: Some provide a larger price cut than others, so it can help to look at the bottom line. The amount you can save also may vary by company and location, and the options can change from year to year.

Which is another reason it can be a good idea to check car insurance rates regularly.

Explore Bundling

Another way to get a price break can be to “bundle” your insurance coverage with one insurer. That might mean purchasing your homeowners (or renters) insurance and car insurance from one company, or using one company for both your car and boat insurance.

You also might get a reduction if you are insuring more than one vehicle.

Bundling can result in a substantial discount. Still, you may wish to get separate policy quotes as well, just to be sure you’re really saving money and getting exactly what you want.

Consider a Higher Deductible

Choosing a higher deductible can significantly reduce your premium. (Your deductible is the amount you’ll pay out of pocket before your insurance company pays the rest of a claim.)

According to the Insurance Information Institute, increasing your deductible from $200 to $500 could cut the cost of collision and comprehensive coverage by 15% to 30%. And going even higher, to $1,000, could save you 40% or more, the insurance industry association says.

Of course, there’s a catch: If you have an accident, you may end up having to fork over a larger chunk of money than you’re comfortable with before the insurance company kicks in its share on a claim.

Before you go for the savings, you may want to be sure you can afford an unexpected repair bill.

Review Coverage Needs

If you have a car that’s getting older, it might be time to reevaluate the coverage you’re carrying on it.

You may decide to drop your comprehensive coverage (the portion that helps pay to replace or repair your vehicle if it’s stolen or damaged in an incident that’s not a collision) or collision coverage, for example, or lower the amount of those coverages.

Keep in mind, though, that if you do give up this coverage, you may have to pay to repair or replace your vehicle if it’s damaged. So it’s important to balance today’s savings with tomorrow’s what-ifs.

As you make your decisions, you’ll have to keep any coverage that’s required by the laws in your state and by your lender (if you’re still paying for the car) or a lease agreement.

Before Buying a Car, Consider Insurance Costs

Some cars cost more to insure than others, so before you save up for a car, you may want to check out how buying a car (used or new) might affect your premiums.

Insurance companies base their prices, in part, on a car’s sticker price, its safety record, what it might cost to repair it, its engine size, and the chance that the car will be stolen.

You may have heard that color is also a factor—and that a red car can cost more to insure—but according to the Insurance Information Institute, that is a myth. You can, however, expect a powerful sports car to kick up your costs.

Improve Your Driving Record, If Needed

This one’s pretty basic: A person with a bad driving history—with multiple accidents, insurance claims, and/or traffic violations—can expect to pay more for car insurance than someone with a good record.

If you aren’t sure where you stand, or you think there might be an error on your record, you can get a copy of your motor vehicle report through your state’s department of motor vehicles or the agency that handles driver’s licenses.

Improve Your Credit, If Necessary

You probably already knew that maintaining a good credit record can save you money in many ways—and you can include lower car insurance premiums on that list.

Just how much a solid credit score can save you may depend on the insurance company and the state you live in. But you can expect your credit data to play some part in your provider’s underwriting decisions.

The good news is, there are steps you can take to build credit fast, including disputing any errors on your credit reports and paying your bills on time.

Recommended: Pros & Cons of Car Refinancing

Ask About Group Insurance

Some companies and other organizations offer group plans with lower rates for their employees or members. Your human resources department can fill you in on what’s available through your employer.

If you’re a member of a large organization, you may receive insurance offers in the mail or by email, or you can inquire with the main office.

The Takeaway

Wondering how to lower your car insurance? A good starting point on the road to deciding how to get cheaper car insurance can be to compare your current policy to offers from other insurance companies.

Try an apples-to-apples comparison of your existing policy to others to find the best deal, and if you like your quote, buy the policy right then and there.

Get started with SoFi Protect today.


Insurance not available in all states.
Gabi is a registered service mark of Gabi Personal Insurance Agency, Inc.
SoFi is compensated by Gabi for each customer who completes an application through the SoFi-Gabi partnership.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s
website
.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
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Auto Insurance Terms, Explained

Auto Insurance Terms, Explained

Shopping for auto insurance or dealing with an insurance claim? It’s common to hit a few potholes on the way to understanding car insurance.

Auto insurance terminology can be difficult to navigate, so this glossary may help you find your way.

Car Insurance Terminology

Here are a few basic auto insurance terms explained.

Accident Forgiveness

Accident forgiveness is a benefit that can be added to a car insurance policy to prevent a driver’s premium from increasing after their first at-fault accident.

Each insurer’s definition of accident forgiveness may vary, and it isn’t available in every state. Some insurers include it at no charge, or it may be an add-on, which means it could be earned or purchased.

Actual Cash Value

Actual cash value is the term used to describe what a vehicle was worth before it was damaged or stolen, taking depreciation into consideration. The amount is calculated by the insurer.

Adjuster

An adjuster is an employee who evaluates claims for an insurance company. The adjuster investigates the claim and is expected to make a fair and informed decision regarding how much the insurance company should pay.

Agent or Broker

Both agents and brokers help consumers obtain auto insurance, but there are differences in their roles. An agent represents an insurance company (or companies) and sells insurance to and performs services for policyholders.

A broker represents the consumer and may evaluate several companies to find a policy that best suits that individual, family, or organization’s needs.

Both agents and brokers are licensed and regulated by state laws, and both may be paid commissions from insurance companies.

At Fault

Drivers are considered “at fault” in an accident when it’s determined something they did or didn’t do caused the collision to occur. A driver may still be considered at fault even if no ticket was issued or if the insurance company divides the blame between the parties involved in the accident.

In some states, drivers can’t receive an insurance payout if they are found to be more than 50% at fault.

Casualty Insurance

Casualty insurance protects a driver who is legally responsible for another person’s injuries or property damage in a car accident.

Claim

When an insured person asks their insurance company to cover a loss, it’s called a claim.

Claimant

A person who submits an insurance claim.

Collision Coverage

Collision coverage helps pay for damage to an insured driver’s car if the driver causes a crash with another car, hits an object (a mailbox or fence, for example), or causes a rollover.

It also may help if another driver is responsible for the accident but doesn’t have any insurance or enough insurance to cover the costs.

Collision coverage is usually required with an auto loan. Learn more about smarter ways to get a car loan.

Comprehensive Coverage

Comprehensive coverage pays for damage that’s caused by hitting an animal on the road, as well as specified noncollision events, such as car theft, a fire, or a falling object.

It is usually required with an auto loan.

Recommended: How Much Auto Insurance Do I Really Need?

Damage Appraisal

When a car is in an accident, an insurance company’s claims adjuster may appraise the damage, and/or the car owner may get repair estimates from one or two body shops that can do the repairs.

Policyholders can appeal an appraisal if it seems low and they have some backup to prove it.

Declarations Page

This page in an insurance policy includes its most significant details, including who is insured, information about the vehicle that’s covered, types of coverage, and coverage limits.

Deductible

This is the predetermined amount the policyholder will pay for repairs before insurance coverage kicks in. Generally, the higher the deductible, the lower the monthly premium.

Depreciation

Depreciation is the value lost from a vehicle’s original price due to age, mileage, overall condition, and other factors. Depreciation is used to determine the actual cash value of a car when the insurer decides it’s a total loss.

Effective Date

This is the exact date that an auto insurance policy starts to cover a vehicle.

Endorsement

An endorsement, or rider, is a written agreement that adds or modifies the coverage provided by an insurance policy.

Exclusion

Exclusions are things that aren’t covered by an auto insurance policy, (Some common exclusions are wear and tear, mechanical breakdowns, and having an accident while racing.)

Full Coverage

Full coverage usually refers to a car insurance policy that includes liability, collision, and comprehensive coverage.

GAP Coverage

Guaranteed asset protection insurance is optional coverage that helps pay off an auto loan if a car is destroyed or stolen and the insured person owes more than the car’s depreciated value. It covers the difference, or gap, between what is owed and what the insurance company would pay on the claim.

Indemnity

Indemnity is the insurance company’s promise to help return policyholders to the position they were in before a covered incident caused a loss. The insurer “indemnifies” the policyholder from losses by taking on some of the financial responsibility.

Liability Insurance

If you’re at fault in an accident, your liability coverage pays for the other driver’s (or drivers’) car repairs and medical bills.

Coverage limits are often expressed in three numbers. For example, if a policy is written as 25/50/15, it means coverage of up to $25,000 for each person injured in an accident and $50,000 for the entire accident and $15,000 worth of property damage.

The required minimum level of liability insurance varies by state.

Recommended: What does Liability Auto Insurance Typically Cover?

Limit

This is the maximum amount a car insurance policy will pay for a particular incident. Coverage limits can vary greatly from one policy to the next.

Medical Payments Coverage

Medical payments coverage (or medical expense coverage, or MedPay) is optional coverage that can help pay medical expenses related to a vehicle accident.

It covers the insured driver, their passengers, and any pedestrians who are injured when there’s an accident, regardless of who caused it.

It also may cover the policyholder when that person is a passenger in another vehicle or is injured by a vehicle when walking, riding a bike, or riding public transportation. This coverage is not available in all states.

No-Fault Insurance

Several states have no-fault laws, which generally means that when there’s a car accident, everyone involved files a claim with their own insurance company, regardless of fault.

Also known as personal injury protection, no-fault insurance covers medical expenses regardless of who’s at fault.

(It doesn’t mean, however, that fault won’t be determined. No-fault insurance refers to injuries and medical bills. If a person’s car is damaged in an accident and they were not at fault, the at-fault driver’s insurance company will be responsible for the repairs.)

Optional Coverage

Optional coverage refers to any car insurance coverage that is not required by law.

Personal Injury Protection

Several states require personal injury protection (PIP) coverage to help pay for medical expenses that an insured driver and any passengers suffer in an accident, regardless of who’s at fault.

PIP also may cover loss of income, funeral expenses, and other costs. PIP is the basic coverage required by no-fault insurance states.

Primary (and Secondary) Driver

The person who drives an insured car the most often is considered its primary driver. Typically, the primary driver is the person who owns or leases the vehicle.

If spouses share an insurance policy, they may both be listed as primary drivers on a car or cars.

A car may have multiple secondary, or occasional, drivers. These are generally licensed drivers who live in the same household (children, grandparents, roommates, nannies, etc.) and may use the insured car occasionally but are not the car’s primary driver.

Primary Use

This term refers to how a vehicle will most often be used—for commuting to work, for business, for farming, or for pleasure.

Premium

A premium is the amount a person pays for auto insurance. Premiums may be paid monthly, quarterly, twice a year, or annually, depending on personal choice and what the provider allows.

Replacement Cost

Some insurance companies offer replacement cost coverage for newer vehicles. This means that if a car is damaged or stolen, the insurer will pay to replace it with the same vehicle.

Coverage varies by company—and not every insurance company offers replacement coverage.

State-Required Minimum

Every state has different legal requirements for the types and amounts of insurance coverage drivers must have.
The limits are usually low. Lenders may require more coverage for those who are buying or leasing a car.

Total Loss or ‘Totaled’

If a car is severely damaged, the insurer may determine that it is a total loss. That usually means the car is so badly damaged that it either can’t be safely repaired or its market value is less than the price of putting it back together.

If a state has a total-loss threshold, an insurer considers the car a total loss when the cost of the damage exceeds the limit set by the state.

Underwriting

The underwriting process involves evaluating the risks (and determining appropriate rates) in insuring a particular driver.

Insurance underwriting these days is often done with a computer program—but if a case is unusual, a professional may step in to further assess the situation.

Uninsured and Underinsured Motorist Coverage

Uninsured motorist and underinsured motorist coverage protects drivers and their passengers who are involved in an accident with a motorist who has little or no insurance.

Some states require this coverage, but the limits vary.

Uninsured/underinsured motorist bodily injury insurance covers medical costs. Uninsured/underinsured motorist property damage pays to repair a vehicle.

The Takeaway

Understanding car insurance basics is important for drivers. Knowing auto insurance terms, coverage your state or lender may require, and what other types of coverage could further safeguard your finances can make you a more informed consumer.

When you’re ready to shop for car insurance, compare rates from top insurers to get the coverage you need at a price that feels right.


Insurance not available in all states.
Gabi is a registered service mark of Gabi Personal Insurance Agency, Inc.
SoFi is compensated by Gabi for each customer who completes an application through the SoFi-Gabi partnership.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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