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The ideal
way to save money is to exert effort once and
automatically reap savings over and over again, every
month. That’s why examining your car insurance makes a
lot of sense.
Auto
insurance prices vary widely. On average, car insurance
cost Americans $789 per vehicle annually in 2008, the
most recent year of data provided by the National
Association of Insurance Commissioners.
But your
costs could be far higher or lower because of the state
you live in. For example, Florida, New Jersey and New
York were among states where the average was more than
$1,000 annually. North Dakota’s average expenditure
was $503.
“In an
age when people are cutting out cable television, it
pays to look at car insurance,” said Des Toups,
managing editor of CarInsurance.com.
Here are
ways to save on car insurance.
COMPARE:
If you think all auto insurance rates within a state are
about the same, you’re wrong. Premiums can be very
different for the exact same policies, depending on what
factors an insurer chooses to emphasize in its rate
formula.
“It’s
a calculated bet,” Toups said. “The insurer asks,
‘What’s the least amount of risk we can take to make
the most amount of money?’ That’s why the numbers
are so different.”
For the
youngest drivers, comparison shopping could save about
$1,100 a year, according to a study by CarInsurance.com.
You might think you get better service from
higher-priced insurers, but there seems to be no
correlation, according to a study by the Consumer
Federation of America.
“Many
people stick with the same insurance carrier year after
year without ever shopping for a better deal,”
Consumer Reports says in its guide to car insurance.
“Blind loyalty to one insurer can cost you dearly.”
You can
request quotes by phone or online. For online quotes,
you might want to set up a separate, free email account
at Hotmail, Gmail or Yahoo to receive them so they
don’t litter your regular email inbox.
Check
your state insurance department website for comparative
information on insurers in your state. You can check on
the financial health of an insurer at such rating agency
websites as moodys.com and standardandpoors.com.
BUNDLING:
Choosing an auto insurer is important, too, because you
might want to get your home insurance through the same
carrier. Auto rates vary more and probably are more
expensive, so let that be the insurance that, well,
drives your decision.
Like
bundling your pay-TV, phone and Internet access with one
company, you can get discounts for bundling your
insurance with a single insurer, said Jim Fults,
associate vice president of auto and personal insurance
at Fireman’s Fund Insurance. At Fireman’s, he said,
customers can save $400 to $600 a year by bundling auto
and home insurance.
If you
have multiple vehicles with the same company, your most
expensive driver will be assigned, by default, to the
most expensive car. So, if your teenager will drive the
Honda far more than the Lexus, make sure the teen is
listed as primary driver of the cheaper vehicle, Toups
said.
DEDUCTIBLES:
A deductible is the part of the bill you pay
out-of-pocket before insurance kicks in. The higher
deductible you’re willing to accept, the lower your
premiums will be. Changing from a $200 deductible to
$1,000 could save you 40 percent, says the Insurance
Information Institute.
Fults
suggests examining several different deductibles to see
how they affect premiums.
“I
think people would be really surprised, when they looked
at changing a deductible of just $500 or $1,000, by what
that does to the price (of premiums),” he said. “For
some vehicles, it might move it considerably. In other
cases, it might not.”
Personal
finance experts typically advise choosing the highest
deductible you can financially stomach if it will give
you big price breaks on premiums.
BIG
BROTHER DEVICES: There are some new high-tech devices
that insurers are starting to offer. For example, some
devices will block the use of cellphones in a moving
car, often used for teenage drivers, Fults said.
Insurers
are also starting to introduce optional “telematic”
devices, which, once installed on a vehicle, collect
data about your driving habits for the insurance
company. You get a discount for agreeing to use one, and
your rates are based on your driving habits.
People
who drive less and drive slower might have lower rates
than people who drive a lot at high speeds, for example.
Such
devices are available from several insurers and are
allowed in most states. Insurance companies say the
devices are used only for discounts, not for raising
premiums, Toups said.
“From
the insurer’s point of view, these things are meant to
reward and isolate those low-risk drivers,” he said.
“You’re signing up for the prospect of a
discount.”
(EDITORS:
STORY CAN END HERE)
CREDIT:
You wouldn’t think your proficiency at paying bills
would have anything to do with whether you’ll crash
your car, but auto insurers insist there’s a link.
Drivers with problems on their credit reports are more
likely to file claims, they say, and are charged higher
insurance rates in states that allow tying rates to
credit.
“Credit
has become, in the last 10 years, a very widely used and
fairly significant part of the calculation of what your
final price will be for auto insurance and home
insurance,” Fults said. “It was introduced in the
1990s and has slowly been incorporated into every
carrier now.”
Carriers
aren’t so much looking at your three-digit credit
score as they’re looking at the stability and good
standing of your relationships with creditors, Fults
said.
Still,
there’s a correlation with scores. A CarInsurance.com
study showed that drivers with credit scores over 750
save an average of $783 a year compared with a drivers
in the same age bracket with average scores.
Check
your credit report once a year for free from each of the
three major credit bureaus at AnnualCreditReport.com.
DISCOUNTS:
Make sure you’re getting all the discounts you’re
entitled to — for driving low miles every year, for
example. A teen driver, who can raise rates 50 percent,
can get a discount if he or she has good grades,
typically at least a B average, Toups said.
Taking
time annually to review your coverages with your insurer
will make sure you’re getting those discounts, Fults
said. You’ll not only incorporate your life changes
into your auto insurance, but you’ll learn about the
insurer’s new products and pricing, which change
often.
DROP
COLLISION: It might be worth dropping collision coverage
on older cars that aren’t worth much. Consumer
advocate Clark Howard said the time to consider dropping
collision is when cars get to be about eight years old.
His rule of thumb: If your annual, not monthly, premium
for collision and comprehensive is more than 10 percent
of your car’s value, remove collision coverage and
just pay the liability premium. Find your vehicle’s
private-party sale value at such websites as KBB.com,
NADAGuides.com and NADAGuides.com.
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DID YOU
KNOW?
Similar
to a credit report, you also have an insurance-claims
report. It can affect whether an insurer agrees to issue
a policy and what rates you pay. To see what insurers
know about your claims history, get a C.L.U.E. It’s
your free, annual auto and personal property claims
reports by the Comprehensive Loss Underwriting Exchange.
Get it once a year online at http://personalreports.lexisnexis.com.
Other
resources: Sampling of online resources about auto
insurance: www.insureuonline.org, III.org, Insure.com
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AVERAGE
COST:
Average
auto insurance expenditure per vehicle for select
states:
—California,
$776
—Connecticut,
$950
—Florida,
$1,055
—Illinois,
$720
—Maryland,
$922
—Pennsylvania,
$817
—Virginia,
$663
—Nationwide,
$789
SOURCE:
National Association of Insurance Commissioners, 2008
data
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