Getting started
Those quirky characters in auto-insurance TV ads might
give you more laughs than actual savings, according to a 2009 survey by
the Consumer Reports National Research Center. Only 14 percent of 4,500 ConsumerReports.org subscribers who compared premiums found that they would save money by switching insurers.
That doesn't mean shopping is a waste of time. But it's only one way to save on auto premiums, which these days are buffeted by a slew of variables, such as:
That doesn't mean shopping is a waste of time. But it's only one way to save on auto premiums, which these days are buffeted by a slew of variables, such as:
Rising costs
Auto-insurance premiums are up 10 percent since 2008,
compared with zero for overall inflation. That's a big change from the
three prior years, when rates rose 1 percent per year on average.
Credit-based insurance scores
Hard times have hurt many consumers' credit scores. That
could result in rate increases, thanks to most carriers' use of
credit-based insurance scores in setting premiums. Consumer advocates
(including Consumer Reports) have long argued that credit-based scoring
is unfair because scores are not related to accident risk. But
legislative efforts in 27 states to ban or restrict the practice over
the last two years have been unsuccessful.
Uninsured motorists
The recession has prompted unemployed consumers to go
without insurance, which could shift some or all of their liability
costs to you.
Data mining
Some insurers use consulting firms that mine databases
for personal policyholder information that may or may not be accurate.
One company claims to dig for information about your kids, your marital
status, your job, and other data with which to confront you for a
possible rate hike.
Corner-cutting repairs
Some insurers push policyholders to get their cars fixed
at specified repair shops, which left our readers less satisfied, so
that the companies can cut costs, often through use of cheaper
aftermarket replacement parts.
Some cost factors are beyond your control, but there's still plenty you can do to cut your premiums for the auto coverage you need.
Some cost factors are beyond your control, but there's still plenty you can do to cut your premiums for the auto coverage you need.
Do an annual rate check
Check rates from other insurers annually to make sure
you're getting the best deal. But if you've been with the same insurer a
long time, it might be tough to beat its rates. That's one reason
shopping around didn't pay off for our survey respondents: More than 60
percent have been with the same carrier for 10 or more years. "Insurers
reward longevity, particularly loss-free longevity," says Bill Wilson,
associate vice president for education and research at the Independent
Insurance Agents and Brokers of America. Long-term policyholders get
bumped up into better rate tiers.
But most consumers, 75 percent, haven't shopped for auto insurance in the past year, and of those who did, most researched only one or two companies, according to a recent insurance-industry survey. By looking father afield, you'll have a better shot at savings.
For example, a San Diego multicar couple in their 40s with a 17-year-old male driver on their policy and no violations or accidents might jump at Progressive's $6,104 annual premium if they were already paying $8,593 to Farmers Mid-Century. But they'd find even lower rates at State Farm ($4,625), Safeco ($3,717), Geico ($3,648), and USAA ($2,883), according to rate comparisons published by the California Department of Insurance.
Check whether your state insurance department provides rate comparisons; go to www.naic.org/state_web_map.htm to find a link to your state's agency. You can also compare multiple insurers online at Answer Financial, Insure.com, InsWeb, and NetQuote. You usually won't get an immediate quote online, but you will get e-mail messages from hungry agents.
Consider forming a relationship with an independent agent, who will check rates for you at a range of carriers.
But most consumers, 75 percent, haven't shopped for auto insurance in the past year, and of those who did, most researched only one or two companies, according to a recent insurance-industry survey. By looking father afield, you'll have a better shot at savings.
For example, a San Diego multicar couple in their 40s with a 17-year-old male driver on their policy and no violations or accidents might jump at Progressive's $6,104 annual premium if they were already paying $8,593 to Farmers Mid-Century. But they'd find even lower rates at State Farm ($4,625), Safeco ($3,717), Geico ($3,648), and USAA ($2,883), according to rate comparisons published by the California Department of Insurance.
Check whether your state insurance department provides rate comparisons; go to www.naic.org/state_web_map.htm to find a link to your state's agency. You can also compare multiple insurers online at Answer Financial, Insure.com, InsWeb, and NetQuote. You usually won't get an immediate quote online, but you will get e-mail messages from hungry agents.
Consider forming a relationship with an independent agent, who will check rates for you at a range of carriers.
Pick a top-rated insurer
Saving is not only a matter of finding the lowest
premium. An insurer can charge less in premiums but cost you more
overall by lowballing loss estimates, hassling the repair shop to cut
corners, and forcing you to pay extra for the manufacturer's replacement
parts if you choose them over cheaper knockoffs. It can also unfairly
jack up your premiums after an accident.
We surveyed 28,241 ConsumerReports.org subscribers who filed a claim between 2006 and the first half of 2009. Eighty-six percent of them were highly satisfied with the handling of their claims. Among the highest-rated groups were NJM, USAA, Amica, and Auto-Owners, with overall satisfaction scores of 92 or higher. Availability for some insurers is limited by region or policyholder eligibility rules.
Only 10 percent of Auto-Owners policyholders complained about claims-related problems, such as delays and disputes over fault or damages. By contrast, 26 percent of Commerce customers had a complaint in that area.
We surveyed 28,241 ConsumerReports.org subscribers who filed a claim between 2006 and the first half of 2009. Eighty-six percent of them were highly satisfied with the handling of their claims. Among the highest-rated groups were NJM, USAA, Amica, and Auto-Owners, with overall satisfaction scores of 92 or higher. Availability for some insurers is limited by region or policyholder eligibility rules.
Only 10 percent of Auto-Owners policyholders complained about claims-related problems, such as delays and disputes over fault or damages. By contrast, 26 percent of Commerce customers had a complaint in that area.
Set the deductible right
A higher deductible reduces your premium because you pay
more out of pocket if you have a claim. Hiking your deductible from $200
to $500 can cut your premium on collision by 15 to 30 percent. Go to
$1,000 and you could save 40 percent. If you have a good driving record
and haven't had an at-fault accident in years, if ever, opting for a
higher deductible on collision might be a good bet. Just make sure you
can afford to pay it if your luck runs out.
Review all of your coverage
Your liability coverage pays for bodily injury and
property damage that you cause in accidents. Don't get caught short by
reducing your liability limits to the state minimums. Buying more
coverage might seem like an odd way to save, but the benefit comes if
you have a costly claim, which can put your personal assets at risk. Buy
standard 100/300/100 coverage, which pays for bodily injury up to
$100,000 per person and $300,000 per accident, and property damage up to
$100,000. If you have a high net worth, boost bodily injury to $250,000
per person and $500,000 per accident.
One of every six drivers today may be uninsured, according to the Insurance Research Council. If you get hit by an uninsured at-fault driver, you'll have to pay for repairs out of your own pocket and sue the at-fault driver for damages. Protect yourself by buying uninsured/underinsured motorist protection with the same limits as your liability coverage.
You can probably cancel your collision and/or comprehensive coverage when the annual cost equals or exceeds 10 percent of your car's book value. Otherwise, you could end up paying more over time than you would recoup for repair or replacement of your damaged, stolen, or totaled vehicle.
If you have another car that you can use while your vehicle is being repaired, you don't need to pay for rental-reimbursement coverage. Dump roadside assistance if you have an auto-club membership that's a better deal. Think carefully about personal-injury protection and medical-payments coverage: Forget it if you have good health coverage; keep it if you don't or if your usual passengers might not be well insured.
One of every six drivers today may be uninsured, according to the Insurance Research Council. If you get hit by an uninsured at-fault driver, you'll have to pay for repairs out of your own pocket and sue the at-fault driver for damages. Protect yourself by buying uninsured/underinsured motorist protection with the same limits as your liability coverage.
You can probably cancel your collision and/or comprehensive coverage when the annual cost equals or exceeds 10 percent of your car's book value. Otherwise, you could end up paying more over time than you would recoup for repair or replacement of your damaged, stolen, or totaled vehicle.
If you have another car that you can use while your vehicle is being repaired, you don't need to pay for rental-reimbursement coverage. Dump roadside assistance if you have an auto-club membership that's a better deal. Think carefully about personal-injury protection and medical-payments coverage: Forget it if you have good health coverage; keep it if you don't or if your usual passengers might not be well insured.
Watch crash repairs closely
Claims payment is where the rubber hits the road. Your
insurer might push you to use shops in a direct-repair program (DRP) or
use cheaper replacement parts, rather than the original equipment
manufacturer (OEM) parts. Tests have found that some non-OEM parts fit
poorly, are more prone to rust and corrosion, don't always meet federal
safety standards, and may not provide good protection in a crash.
In our survey, respondents' satisfaction with repairs was significantly lower among those who felt pressured to use DRP shops and non-OEM parts. And respondents who said they were pressured to use non-OEM parts had significantly more problems with their repairs.
In our survey, respondents' satisfaction with repairs was significantly lower among those who felt pressured to use DRP shops and non-OEM parts. And respondents who said they were pressured to use non-OEM parts had significantly more problems with their repairs.
Take advantage of discounts
Discounts are designed to attract the business of
lower-risk drivers. Those drivers include students with good grades, new
drivers who have taken a driver-training course, older drivers who have
taken a refresher course, and members of affinity groups, such as
college alumni and certain occupations and professions. Antitheft and
safety equipment can also get you a discount.
Insurers also offer discounts if you buy your homeowners, renters, or life-insurance policy from them. But be sure you check out total costs both ways: premiums from different insurers combined compared with single-insurer packages.
At least two insurers offer discounts in some states based on electronic monitoring of your driving habits. With Progressive's "Snapshot" discount, eligible drivers in 22 states plug an electronic data recorder into their car's data port (available only for cars from model year 1996 or later). The device tracks miles and time of day the car is driven and how often you brake suddenly. If the device shows that you drive less than average, avoid operation from midnight to 4 a.m., and don't stomp on the brake pedal, you might get up to a 30 percent discount. If it shows that you're a riskier driver, you could see your rate go up by as much as 9 percent in some states. If you quit the program, Progressive won't use the data to set your premium, except in Alabama, where the insurer can use it for a year after you quit.
State Farm's "Drive Safe & Save" discount, available only in Ohio, uses your GM vehicle's OnStar system to track and transmit monthly odometer readings. A 30- to 49-year-old driver who pays $600 per year in premiums, for example, will get a 9 percent discount if he drives 13,000 miles per year and a 23 percent reduction if he drives only 6,000 miles. But if he's rated as "short annual mileage," less than 7,500 miles per year, he could end up paying more if the data show that he drives more.
Insurers also offer discounts if you buy your homeowners, renters, or life-insurance policy from them. But be sure you check out total costs both ways: premiums from different insurers combined compared with single-insurer packages.
At least two insurers offer discounts in some states based on electronic monitoring of your driving habits. With Progressive's "Snapshot" discount, eligible drivers in 22 states plug an electronic data recorder into their car's data port (available only for cars from model year 1996 or later). The device tracks miles and time of day the car is driven and how often you brake suddenly. If the device shows that you drive less than average, avoid operation from midnight to 4 a.m., and don't stomp on the brake pedal, you might get up to a 30 percent discount. If it shows that you're a riskier driver, you could see your rate go up by as much as 9 percent in some states. If you quit the program, Progressive won't use the data to set your premium, except in Alabama, where the insurer can use it for a year after you quit.
State Farm's "Drive Safe & Save" discount, available only in Ohio, uses your GM vehicle's OnStar system to track and transmit monthly odometer readings. A 30- to 49-year-old driver who pays $600 per year in premiums, for example, will get a 9 percent discount if he drives 13,000 miles per year and a 23 percent reduction if he drives only 6,000 miles. But if he's rated as "short annual mileage," less than 7,500 miles per year, he could end up paying more if the data show that he drives more.
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