Last updated on March 1, 2003
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AUTO INSURANCE
How to get a Good Deal
Auto-insurance premiums have long since reached big-ticket status, so it pays to look
for opportunities that will keep your costs down without sacrificing protection. Here are
some things you can do: Do some homework
Posing as ordinary buyers, investigators with the Pennsylvania Insurance Department
once visited 186 insurance agencies in three cities. Of the 92 Philadelphia agents
contacted, fewer than 30% volunteered information on discounts and deductibles that could
have reduced premiums 20% to 40%.
The lesson: Arm yourself with as much information as you can before you start calling
companies. You'll find that some kinds of information are easier to get than others.
It is fairly easy to solicit cost, coverage and deductible information from auto insurers;
it's much more difficult to find out their financial stability and service record --
things you'd be interested in knowing if, for example, you get a good cost quote from
a company you're not familiar with.
You can check out stability in Best's Insurance Reports: Property-Casualty at
your local library; insurers with the top two ratings can be considered solid. (You can
also ask an agent how A.M Best, the rating service that publishes the above guide, rates
his or her company.)
Also contact your state insurance office; many of them keep track of consumer
complaints and will share the results if they're asked. Most have Web sites. Finally,
read through your policy carefully so that you're sure of the kind and amount of
protection you have.
Compare the premiums
Survey after survey confirms that auto-insurance companies often charge greatly
different premiums for the same coverage. In New York, Pennsylvania and elsewhere,
premiums have been shown to vary sometimes by more than 100%.
A shopping trip by the Arizona Department of Insurance in 1996 found six-month premiums
for a 48-year-old Phoenix man driving a late-model car ranged from about $500 at one to
company to more than $1,500 at another company, with others scattered somewhere in
between.
Rates may not vary as wildly in your area, but the odds are you will discover
substantial differences if you take the time to get premium quotes from a number of
companies. Begin with a market leader, such as State Farm or Allstate. Then use that quote
as a measure against which to judge identical coverage at other companies.
Many state insurance offices distribute auto-insurance pricing guides, but the
categories they use may not match yours. Your best bet is to use such a guide to identify
your state's most cost-effective insurers. Then get price quotes from a handful and
you'll have a truly comparative guide.
Manage your teenagers' driving
Young drivers pay much more than most others because, as a group, they have more
accidents. Rates will drop several notches when they reach age 25 or marry. But meanwhile,
if possible, avoid letting them become the principal driver of a car, which pushes up the
premium even more. Most companies give good-student or driver-education discounts to young
drivers -- commonly 5% to 25% off for a consistent B average -- because statistically,
good students are superior drivers. Young drivers can also get discounts for completing an
approved driver-training course. The parents of students who spend part of the year at a
school more than 100 or 150 miles away from home (and away from the family car) may also
get a break.
Drive carefully yourself
Discounts are common for safe-driving records: Some companies give 5% off for drivers
with three years of a clear record, raising the discount to 10% for drivers with six or
more accident- and violation-free years.
Depending on which company insures you and where you live, you may even get a discount
if you're a nonsmoker, a woman who is a household's only driver, a senior
citizen, or a member of a certain profession (such as law or medicine) that is
statistically less accident-prone.
All ten of the leading insurers polled by the Insurance Information Institute offered a
15% to 20% discount to commuters sharing driving responsibilities in car pools, meaning
they don't drive their cars to work every day.
When comparing policies, consider discounts but don't fixate on them. A discount
may very well be offset by a higher premium to begin with.
Check your car's rating
Insurers charge more for cars with high claims rates, no matter how good the driving
record of the owner. Some charge less for collision and comprehensive coverage on models
that score well for safety and durability, but add surcharges for others. A surcharge or a
discount isn't a judgment of a car's quality. The rate variations reflect repair
costs, accident frequency, theft losses and other factors.
Before you buy your next car, it might pay to check on such differentials. The
Insurance Services Office provides a rating service used by hundreds of insurance
companies, and your agent should be able to tell you the new car's rating.
Highway Loss Data Institute
provides loss data on nearly all makes and models.
Loss data do not necessarily translate into discounts, but they do show which vehicles
are most likely to qualify.
Consider raising your deductibles
It might make sense to choose the highest deductible you can afford to pay without
seriously disrupting your finances. The idea is to pay for affordable damage yourself and
let insurance kick in for bigger losses.
Whatever your situation, you can save something by accepting a larger deductible and
thus transferring part of the risk from the company to yourself. It's not an ideal
solution, but it's one of the few cost-cutting opportunities that are readily
available. By raising your collision deductible from $100 to $500, for instance, you might
be able to cut your collision premium almost in half.
Reduce the coverage on an old car
You could consider dropping comprehensive and collision coverage on an old car to
reduce your insurance costs fast. That would expose you to additional risk, but remember
that the insurance company won't pay more to fix a car than it's worth. Each
year's depreciation therefore diminishes the maximum claim you can make against your
collision coverage.
If your car is five or more years old, depending on its value, you may be better off
dropping both collision and comprehensive coverage and banking the savings. Estimate your
car's value by studying the classified ads or by consulting used-car price guides,
and consider how much protection you're really buying for your collision and
comprehensive premium.
Insure all cars with the same company
You get a break for the second and successive cars covered by the same policy, so
it's usually more economical to put all your cars on one policy. Similarly, consider
using the same company for other policies. Some insurers offer discounts of up to 10% if
you cover both your car and your home with them.
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IN THIS TUTORIAL
How to get a Good Deal
