October 23, 2017

Check Out New Routes for Saving on Car Insurance

View of looking over the dashboard to the open road.

Published: 25 November 2011 09:47 PM  The Dallas Morning News

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 the lowest at $503. Texas fell in between with an $854 average.

“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 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.

Also, 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 the 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 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.”

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 for 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 also 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 8 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.

Gregory Karp,

Chicago Tribune

DID YOU KNOW: Insurance resources

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 CLUE. 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:

Find more tips and advice, information about companies and online quotes, etc.: www.insureuonline.org, III.org, Insure.com.

Find your vehicle’s private-party sale value at such websites as KBB.com and NADAGuides.com. Texans can check companies, compare rates and file complaints with the Texas Department of Insurance: www.tdi.texas.gov.

Eight Auto Insurance Myths

View of looking over the dashboard to the open road.

When purchasing car insurance, it’s important to understand the factors that affect your car insurance premium rates and coverage. But how do you differentiate between truth and fiction? A good place to start is by dispelling some common myths about auto insurance:

Myth 1 – Color determines the price of auto insurance

It doesn’t matter if your car is red, green or purple. What does matter is the type of car you select. Before you buy a new or used car, check into insurance costs. Auto insurance premiums are based on make, model, body type, engine size, the age of the vehicle and the age, driving record and credit history of the driver. Premiums are also based, in part, on the car’s sticker price, the cost to repair it, its overall safety record, and the likelihood of theft. Many insurers offer discounts for features that reduce the risk of injuries or theft. These include daytime running lights and anti-theft devices.

For years there has been a notion that color plays a significant part in calculating insurance premium costs, many people believing that red cars cost more to insure because they are linked to aggressive driving or speeding. The fact is, insurers have no interest in the color of a car, but they are interested in knowing if you have had any previous car accidents, the number of miles you drive annually and where you live.

Myth 2 – It costs more to insure your car when you get older

Quite the opposite—many drivers over 55 years of age can, in fact, qualify for a reduction in auto insurance rates, typically for three years, if they have successfully completed an accident prevention course. Insurance companies will usually provide up to a 10 percent discount on car insurance, but check with your provider before you sign on. Mature driving courses are available through local and state agencies as well as through the AAA and AARP. You can also check with your insurance agent to find out which defensive driving courses are approved by your insurer. If you are retired or are not employed full time, you may also be eligible for a discount of up to 5 percent off your car insurance. Age requirements for this type of discount vary by state and insurance carrier.

Myth 3 – Your credit has no effect on your insurance rate

Your credit-based insurance score does matter. An insurance score is a measure of how well you manage your financial affairs, not your financial assets. Many insurance companies take your insurance score into consideration when you want to purchase, change or renew your auto insurance coverage. Because the majority of people have good credit, and insurance scores are derived from a person’s credit history, most people pay less for insurance when insurance scores are entered into the pricing equation.

Myth 4 – Your insurance will cover you if your car is stolen, vandalized or damaged by falling tree limbs, hail, flood or fire

Comprehensive and collision coverage are optional coverage’s. Lenders frequently require drivers to buy comprehensive and collision coverage as a condition of a car loan agreement. Those driving older cars sometimes drop these coverage’s as a way of saving money. If a car is worth less than $1,000 or less than 10 times the insurance premium, purchasing the optional coverage’s may not be cost effective. But bear in mind that you need to purchase both collision and comprehensive coverage in order to fully protect your vehicle from all types of damage.

Myth 5 – You only need the minimum amount of auto liability insurance required by law

Almost every state requires you to buy a minimum amount of auto liability coverage. Chances are that you will need more liability insurance than the state requires because accidents often cost more than the minimum limits. In today’s litigious society, buying only the minimum amount of liability means you are likely to pay more out-of-pocket for losses incurred after an accident—and those costs may be steep. The insurance industry and consumer groups generally recommend a minimum of $100,000 of bodily injury protection per person and $300,000 per accident.

Myth 6 – If other people drive your car, their auto insurance will cover them in the event of an accident

In most states, the auto insurance policy covering the vehicle is considered the primary insurance, which means that the owner’s insurance company must pay for damages caused by an accident. Policies and laws differ by state, and you should be familiar with these differences when allowing another person to drive your car.

Myth 7 – Soldiers pay more for insurance than civilians

If you are in the military—regardless of which branch—you actually qualify for a discount on auto insurance. In some situations you might be able to have your commanding officer make a phone call on your behalf, but for most auto insurance companies, you will need to supply documentation that lists your name, rank and the time that you will be enlisted in the service. This allows insurance companies to determine how long you will be eligible to receive a military discount. Many auto insurance companies provide discounts for former members of the military as well as their families.

Myth 8 – Personal auto insurance covers both personal and business use of your car

If you are self-employed and use your vehicle for business purposes, personal auto insurance may not protect you. While auto insurance geared for businesses can be more costly than a personal policy, one of the best ways to keep your auto rates down is by having a good driving record. If there are others, such as employees, using your car make sure they also have good driving records. Check the records of your employee drivers at least twice a year to ensure they maintain a clean driving record.

What is covered by a basic auto policy?

View of looking over the dashboard to the open road.

Your auto policy may include six (6) coverages. Each coverage is priced separately.

1. Bodily Injury Liability

This coverage applies to injuries that you, the designated driver or policyholder, cause to someone else. You and family members listed on the policy are also covered when driving someone else’s car with their permission.

It’s very important to have enough liability insurance, because if you are involved in a serious accident, you may be sued for a large sum of money. Definitely consider buying more than the state-required minimum to protect assets such as your home and savings.

2. Medical Payments or Personal Injury Protection (PIP)

This coverage pays for the treatment of injuries to the driver and passengers of the policyholder’s car. At its broadest, PIP can cover medical payments, lost wages and the cost of replacing services normally performed by someone injured in an auto accident. It may also cover funeral costs.

3. Property Damage Liability

This coverage pays for damage you (or someone driving the car with your permission) may cause to someone else’s property. Usually, this means damage to someone else’s car, but it also includes damage to lamp posts, telephone poles, fences, buildings or other structures your car may hit.

4. Collision

This coverage pays for damage to your car resulting from a collision with another car, object or as a result of flipping over. It also covers damage caused by potholes. Collision coverage is generally sold with a deductible of $250 to $1,000—the higher your deductible, the lower your premium. Even if you are at fault for the accident, your collision coverage will reimburse you for the costs of repairing your car, minus the deductible. If you’re not at fault, your insurance company may try to recover the amount they paid you from the other driver’s insurance company. If they are successful, you’ll also be reimbursed for the deductible.

5. Comprehensive

This coverage reimburses you for loss due to theft or damage caused by something other than a collision with another car or object, such as fire, falling objects, missiles, explosion, earthquake, windstorm, hail, flood, vandalism, riot, or contact with animals such as birds or deer.

Comprehensive insurance is usually sold with a $100 to $300 deductible, though you may want to opt for a higher deductible as a way of lowering your premium.

Comprehensive insurance will also reimburse you if your windshield is cracked or shattered. Some companies offer glass coverage with or without a deductible.

6. Uninsured and Underinsured Motorist Coverage

This coverage will reimburse you, a member of your family, or a designated driver if one of you is hit by an uninsured or hit-and-run driver.

Underinsured motorist coverage comes into play when an at-fault driver has insufficient insurance to pay for your total loss. This coverage will also protect you if you are hit as a pedestrian.