on any of the topics in the Table of Contents listed below to go directly
to that discussion.
Press "Home" to return to top.
10 Cost-Cutters To Save You Money
|The amount of money you spend for car insurance can vary
dramatically depending on the insurance company you choose, the
coverage you want and the kind of car you drive. Are you spending
more than you need to on insurance premiums? This Financial Guide
will help you get the most for your car insurance dollar.
TABLE OF CONTENTS
Choose Your Coverage Carefully
Consider Higher Deductibles
Drop Collision And Comprehensive On Older Cars
Buy A Low Profile Car
Avoid Duplicate Medical
Collect All Of The Benefits You're Entitled To
Use Car Repair Networks
Drive Carefully And Take Your Car Key
All that is required to cut car insurance costs is a little of your
time. Here are 10 cost-cutting suggestions for lowering your auto
Do not assume that all insurance companies charge the same rates. There
are several thousand different auto insurers in competition. You can save
from 30 to 50% just by comparing costs. Costs are usually based on factors
such as the age, gender, and driving record of the vehicle’s driver's);
the state of residence; the age and value of the vehicle; and the
frequency and purpose of the vehicle’s use.
First, contact the insurance regulating body in your state and find out
whether they provide a free pamphlet that ranks insurers by price. Many
state insurance departments do this. Obtaining this pamphlet will save you
a lot of time on the phone asking for price quotes. If no pamphlet is
available, get quotes from independent agents (those who represent several
insurance companies) and from "direct writers." Direct writers
sell directly to the public and not through agents. You may save about 10%
because you are not covering an agent's commission.
When calling an insurance company, ask if the insurer is a mutual
company, one owned by its policyholders. If so, ask what
percentage of its premiums are returned to policyholders. You may find,
for example, that one company's premiums are higher than those of some
other companies, but that it pays annual dividends of 18 to 20% to
policyholders, which reduce your insurance costs.
In addition to asking insurance agents and insurance companies, be sure
to ask colleagues and friends about their carriers. You might also look on
the Internet, look in the yellow pages, check with your state insurance
department, and review consumer guides.
||Planning Aid: For independent advice
on how to shop for car insurance and which companies offer lower
rates, see Consumer Reports
It is important not to neglect factors other than price. Although
quality personal service may cost a bit more, it provides added
conveniences, so talk to a number of insurers to get a feel for the
quality of their service. Ask them how you can lower your costs.
sure to check the financial ratings of carriers. Check them out in
ratings services, such as Moody’s, and then supplement your review
by calling your state insurance department for further information.
Some state agencies will supply you with the number of justified
complaints that have been made about insurers.
||TIP: Consider using an
independent buying service. Consumer Reports Auto Insurance Price
Service (Tel. 800-288-6776)
will search its database of almost 200 companies in 15 states and
provide you with the 25 lowest cost companies. You will get a
personal report that lists up to 25 of the lowest priced policies
for you. Then you compare and chose the one you want to get the best
deal on your auto insurance. The cost is $12
for the 1st vehicle in your family. $8 for each additional
some states, car owners with good driving records cannot be turned
away by the insurance company of their choice. On the other hand, an
insurance company can deny you coverage—or charge you
substantial premiums—if you have a poor driving record.
Although certain minimum coverages are mandatory in most states, the
amounts of such coverage vary among policies. Most coverages are
discretionary. Therefore, you should choose your coverage carefully to
avoid being over insured, resulting in unnecessary premium costs. For
those who are not familiar with auto insurance policies, here are the
Liability covers physical injuries to other people,
including compensation for expenses that might arise from such injuries,
and damage to other people’s property.
Comprehensive and collision covers damage to your car due to
collision or overturning, fire, flooding, or theft (there is usually a
Uninsured (or underinsured) motorist covers the expenses of
an accident if the other driver has insufficient insurance.
- Medical protects you against medical costs for
injuries to you and other riders in the car.
certain states with "no-fault" insurance laws, personal
insurance protection coverage is required and there are some
restrictions on liability lawsuits.
Your policy will show the total amounts of bodily injury, liability,
and property damage coverage. For instance, a policy of $25/$50/$20 means
that, in a single accident, you are covered for $25,000 for an individual
injured, $50,000 for all persons injured, and $20,000 of property damage.
The amount of coverage you choose will depend on the state’s minimum
requirements, the replacement cost of your vehicle, and how much medical
coverage you already have under other policies.
It may pay to absorb the cost of fender-benders yourself. In other
words, get the highest deductible you can afford. If you absorb the cost
of small claims and the insurance company covers the large ones, it makes
a huge difference in your premium. For example, raising your deductible
from $100 to $500 will reduce your premiums by 10% to 20% and raising it
to $1,000 will save 25% to 30%.
not file a claim for a minor accident. If the damage costs a couple
of hundred dollars in repairs, pay for it yourself. The expense will
be more than offset by the rise in your insurance rates that will
occur when you file a claim.
You may wish to drop collision and/or comprehensive coverage on older
cars. (Collision coverage takes care of the cost of repairing your car if
you are in an accident, regardless of who's at fault; comprehensive pays
if your car is stolen or damaged by fire, flood, hail or wind.) If your
car is not worth much, why pay a premium for repairs on a vehicle you will
probably replace if it's badly damaged? Collision damage for an older car
can cost more than the car is worth.
collision if your car is worth less than $2,000 or if your premium
is equal to 10% or more of the value of your car. But remember that
you generally can't drop collision until your auto loan is paid off.
the value of your old car in the "National Automobile Dealer's
Association Official Used Car Guide," known as "The Blue
Book" (auto dealers, banks and libraries have copies) or on the
Internet, a faster, more efficient procedure.
Before you buy a new or used car, check into insurance costs. Cars that
are expensive to repair or that are favorite targets for thieves have much
higher insurance costs.
Not surprisingly, the more expensive the car, the more expensive the
insurance. Cars that thieves love—Porsches, Jaguars, BMWs and sports
models in general—are more costly to insure. The latest study shows
that it costs three to four times as much to insure a Porsche as a Ford.
If you buy a used car, insurance will be significantly lower.
||TIP: Call your
insurance company or agent before buying a car and ask about the
costs for several different models.
If you have an adequate comprehensive health insurance plan, you should
consider dropping the of medical expense coverage from your auto insurance
policy. This could lower your premium by up to 40%.
Most insurance companies will reduce premiums 10% to 20% for some or
all of these situations. However, you may have to bring up the subject
with your agent.
- Automatic seat belts and air bags;
- Anti-lock brakes;
- Insuring more than one car;
- No accidents in three years;
- No accidents ever;
- Drivers over 50 years of age;
- Driver training courses;
- Anti-theft devices;
- Good grades for students;
- Low mileage discounts;
- Insuring your home or apartment with the same company;
- College student living at least 100 miles away from home without a
car on campus;
- Not smoking;
- Not drinking;
- Serving in the armed forces (past or present);
- Car pooling;
- Ignition cutoff system and/or a hood or wheel-locking device;
- Being a doctor, lawyer, farmer, or member of a profession that the
insurance company regards as a good risk;
- Being female and the only driver in the household; or
- Renewing for longer than a year
Here are some tips for making sure that you obtain a fair settlement
and obtain payment on a claim as quickly as possible.
- Start a file on the accident immediately. Put into it hospital
bills, police accident reports, and copies of claims you have
- Where practical, write a follow up letter summarizing any phone conversations
with an insurance company representative. Include the
date of the conversation and the name of the person spoken to. Put a
copy of the letter in the file.
- If it is taking a long time to obtain your settlement, check your
policy to see whether interim rental car expenses are covered. If so,
rent a car. The insurer will be motivated to speed things along to
avoid incurring this cost.
- If you feel the company is being unreasonable—is delaying or not
acting in good faith—make a complaint to your state’s insurance
- If you are getting nowhere, and the claim is substantial, consider
consulting an attorney.
The Direct Repair Program, or DRP, is a type of "managed
care" approach to getting your car repaired, available from many
major insurers. The idea behind DRP's is that they will save insurers money
by cutting car rental periods for loaners, by eliminating the need for
adjusters and by taking advantage of discounts on parts and labor. Some of
these savings should be passed on to you. In some cases, insurers have
been known to take up to 20% off premiums for collision/damage coverage.
Whether most people will save much with a DRP is unclear. However, if
you have a busy schedule, the DRP’s advantage is that it will certainly
save you time. In addition, it can take the stress out of filing a claim.
seldom advertise their DRP's, so you will have to ask. Then get a
list of repair shops near you. Skip the plan if you have to travel
too far to an approved garage.
The DRP plan lets you choose between using a prescreened network of repair
shops or your own mechanic. The repair shops participating in the network
have already negotiated agreements with the insurance company. Use one of
them and the insurance company will cover all costs except the deductible.
Without this program, the old rules apply: you get the best estimate and
then hope your insurer will pay.
The great advantage is that you do not have to shop for estimates because the
garage is authorized by the insurer to do the repairs. Some even loan you
a car while repairs are being done. And, because you do not have to wait
for a claims adjuster, you will probably get your car back sooner.
Sometimes the garage or the insurer also guarantees the repairs for as
long as you own the car.
Before signing up for a DRP, get answers to these questions:
- Will I get a break on my premiums or a lower deductible on
- Are eligible repair shops nearby?
- What if I have an accident while traveling out of state?
- For how long is the repair work guaranteed?
- Will I get a free loaner while repairs are done?
||Planning Aid: For information on auto
insurance and help in choosing a company that best fits
your personal needs, see Insurance
Finally, at the risk of being obvious, drive carefully. Accidents can greatly
increase your premiums as well as cause the insurance company to refuse to
renew (or, in serious cases, to cancel) your policy. And don't
forget to take your car key when leaving your car: a car is stolen every
19 seconds in the U.S. and over 20% have the key in the ignition.
by month suggestions and ideas to improve your financial life.
Books and Other Publications
- Merrit Editors, How
to Insure Your Car: A Step by Step Guide to Buying the Coverage You
Need at Prices You Can Afford , (Merrit Company, March
1996), ISBN 1563431173.
- Lynn Brenner and Barbara Taylor, How
to Get Your Money’s Worth in Home and Auto Insurance, (McGraw-Hill,
October 1990), ISBN 0070631786.
- Sheryl Lilke, Understanding
Personal Auto Insurance, (Dearborn Trade, March 1995),
- For free brochures on buying and insuring cars, contact:
The Insurance Information Institute
110 William Street
New York, NY 10038
Tel. 800-331-9146 or 212-669-9200
BACK TO TOP
When calling insurers to request price quotes, this checklist of
come in handy.
|Vehicle ID No.
|City/State/Zip For Car's Location
|Total miles driven per year
|Miles driving to & from work
|Miles driving to & from School
|Miles driving for Business
|Miles driving a farming
Driver Information (for each driver to
|Relationship to Applicant
|Date of Birth
|Moving violation convictions in past three (3) years
(be ready with details).
|Accidents in past three (3) years.