Buying Auto Insurance: How to get more for your money
When is the best time to purchase car insurance? Despite what some folks think, you’ll want to line up your insurance before you buy the car.
“You’re going to pay to insure a car for quite awhile, so if you can’t afford the premiums, you can’t afford the car,” says Jeanne Salvatore, senior vice president for public affairs at the Insurance Information Institute (www.iii.org).
Unlike some other types of insurance, you can’t just skip buying auto insurance. Every state has financial responsibility laws that require drivers to have a certain minimum amount of liability protection. And until your car is paid off, your bank or finance company may also require you to have comprehensive coverage (for damage to another car) or collision coverage (for damage to your car).
The cost of auto insurance premiums varies widely and is affected by many factors: the make and model of the car you drive, the sticker price, how much it costs to repair the car, its safety features and how likely it is to be stolen. (Hondas, for example, are a favorite target of car thieves.)
And then there are the factors that relate to you, the driver, such as your accident record, your age, your marital status, the safety of your neighborhood and your credit score.
So how do you drive down your auto insurance premiums? Shop around! Whether you are in the market for a new vehicle or simply want to pay less to insure the one you’re driving now, comparison shopping for insurance rates can save you a carload of cash.
Recent studies have shown that the amount charged for a new six-month policy with comparable coverage varies as much as $586 from one company to another.
The Insurance Information Institute recommends that you get price quotes from at least three different insurers. Be sure to give exact information about yourself and your vehicle to each company so you can do an apples-to-apples comparison.
But remember: money isn’t everything.
The cost of auto insurance is affected by many factors, including the make and model of the car you drive, the sticker price, how much it costs to repair the car, its safety features and how likely it is to be stolen.
When it comes to choosing an auto insurance policy, “car owners should not be guided by price alone,” cautions Salvatore. “Any time you’re relying on an insurer, you want to select one that’s financially strong.”
You can see how independent rating services grade insurance companies at websites like www.ambest.com and www.fitchratings.com.
It’s also important to go with an insurer that gives good customer service. ”Get referrals from family and friends, especially those who have filed claims, to see if they were satisfied with the service they received,“ says Salvatore.
In addition to shopping around, here are some other ways you can lower your annual auto insurance costs:
Boost your deductible. The more you’re willing to kick in if you experience an accident or theft, the fewer claims you’ll need to file—and insurers reward you for that! Increasing your deductible from $200 to $500 could reduce the cost of your collision and comprehensive coverage by 15 to 30 percent. If you up your deductible to $1,000, you could save 40 percent or more on your annual bill. (Just remember to set aside the cash so you’ll have it in case you’re in an accident.)
Don’t have more coverage than you really need. It doesn’t make sense to pay more to insure something for more than it’s worth. Check out the value of your car on www.kbb.com or www.edmunds.com. If your car is worth less than 10 times the amount you pay for coverage, think about dropping collision and comprehensive insurance.
Get the discounts you’re entitled to. There are a variety of ways to chip away at your premium, often as much as 5 to 10 percent of the total cost. Insurers reward anything that reduces the possibility of a claim, such as adding safety or antitheft features like a burglar alarm and antilock brakes and parking your car in a garage rather than on the street.
If you have auto coverage with the same company that provides your homeowner’s and life insurance, you may be entitled to a multiple-policy discount. If you carpool or just don’t put much mileage on your car, perhaps you’re due a low-mileage discount. Young drivers get rewarded for good grades, and senior drivers get rewarded just for getting older (and, presumably, more responsible).
There are many other types of discounts, but don’t count on your insurance company to remind you of them. Ask your agent or customer service representative to tell you about any and all price breaks that may apply to your situation.
Marcy Tolkoff, JD, has been a writer and an editor for almost 20 years. Tolkoff was a staff editor at Woman’s World magazine, where she edited articles in a broad spectrum of fields over a period of 13 years, the last 6 of which were exclusively centered on personal finance. She is a member of the Society of American Business Editors and Writers and the New York Financial Writers Association.
