If you lose your job, take a pay cut or encounter another kind of
financial hardship, affordable auto insurance quickly turns from nice to
necessity. While it's easy enough to find companies offering cut-rate
car insurance, is that the best way to go?
Not really, according to consumer watchdogs and insurance experts. To
find the lowest possible rates from an insurer that'll be there when
you need it, learn what type of coverage you must carry, research the
reputations of insurance companies and take advantage of every possible
discount for which you're eligible, experts say. They also recommend
checking out pay-as-you-drive policies
that peg premiums to how many miles you put on your car each year.
Finally, if you're eligible, look into low-cost auto insurance programs
that such states as California, Hawaii and New Jersey offer to people
with very low incomes.
When it comes to buying affordable car insurance, you're your own
best advocate. At the same time, it's not always easy to take on that
role, says J. Robert Hunter, a former Texas insurance commissioner and
insurance director at the nonprofit Consumer Federation of America
in Washington. Don't settle for the first insurance company or agent
you find, Hunter says. Shop around. "That's how big buyers of insurance
do it," he says. "They put it out for competitive bids. That's what you
should do, too."
Here's a step-by-step guide to finding the lowest rates without getting ripped off:
1. Start with the car. What you pay for
comprehensive and collision coverage depends on the year, make and model
of the car you drive. Generally speaking, the newer, more expensive the
vehicle, the higher the premium. Rates for comprehensive and collision
coverage don't vary much, so if you can't afford to pay a lot for
insurance and you're in the market for a car, buy one that's
inexpensive.
2. Know your limits. Most states have set minimums
for liability insurance coverage, both for bodily injury and property
damage. Look up coverage minimums here or on your state insurance commission's Web site. The National Association of Insurance Commissioners lists insurance commissions in all 50 states and U.S. territories. If
you're taking out a loan to purchase a new or used car, the lender will
likely require you to carry a certain level of comprehensive and
collision coverage, according to the NAIC.
3. Take the highest possible deductible. Want an
easy way to lower your premium? Take a high deductible. By opting for an
annual deductible of $1,000 instead of $250, you'll pay less up front,
but should you be responsible for an accident, you'll foot more of the
bill before insurance payments kick in.
4. Check your credit score. Some states
allow insurers to take your credit history into account when compiling
what's called an insurance credit score, which they use to calculate
your premium. Bad credit because of overdue bills or a personal
bankruptcy means you could end up paying more for auto coverage. To
improve your insurance credit score, pay your bills on time, monitor
your credit report and do anything you can to fix problems that could be
lowering your score.
5. Narrow the field. Use the process of elimination
to come up with three or four reputable insurance companies or agents to
approach for quotes. Start at your state insurance commission's Web
site, which usually lists several dozen of the area's top insurers.
Choose the half dozen or so companies with the lowest prices for
coverage that's closest to what you need. Next, check the reputations of
insurers by going to the NAIC's Consumer Information Source
Web site to find the "complaint ratios" for each. Complaint ratios show
the number of complaints that consumers filed against a company in a
given year and then compare this to the company's share of all premiums
for a specific type of auto policy during that period. The national
median is 1.0, and highly rated companies can score well below that.
Here's exactly how to see where your candidate companies stand. In
the search box on the right side of the Consumer Information Source
page, type in the name of the insurance company you want to research,
your state and "Property/Casualty" for the statement type. From the
results page, click on "Closed Complaints." To see complaint ratios for
the company's auto insurance policies, choose "Closed Complaint Ratio
Report" and "Private Passenger."
If a company's ratio is substantially higher than the median, go back
to your state insurance commission's Web site to see if regulators have
taken action against them. With that information, whittle your list
down to the three or four insurers with the lowest complaints. Then
contact them directly. Consumers who are really financially strapped —
to the extent of not having Web access at home for this research — can
ask a friend or relative with Internet access for help, or use free
Internet service at a public library.
6. Find an agent. If the insurance companies you've
identified as possibilities sell directly to customers, you can plug
information into a form on their Web sites, get a quote and have someone
contact you. If the companies sell through an agent network, ask
friends or family who they use, or go back to your state insurance
commissioner's Web site to look up agents in your area. Give anyone you
contact specific details about the coverage you want and let them know
you're comparison shopping. "Say, 'I've talked to this company and got a
quote for $480. Can you beat it?'" says Hunter, with the Consumer
Federation of America. "Then you've put them to the test."
7. Grab those discounts. Insurers offer a multitude
of discounts, including lower rates for drivers with short commutes,
retirees, students with good grades or vehicles with safety devices such
as car alarms or motorized seatbelts. If you're over 55, you could
lower your premium by 10 percent by passing a defensive driving course,
according to the Insurance Information Institute.
When you're talking to agents, don't forget to inquire about the group
discounts that some insurers offer to members of professional
organizations or other groups. Companies including State Farm, Auto Club
of Southern California and Progressive have begun offering pay-as-you-drive
discounts, with premiums tied to your annual mileage, with a cap at
approximately 19,000 miles. In many of these programs, you report your
mileage online or to your agent when your policy's up for renewal.
8. Consider opting out of some — but not all — coverage.
If you drive an older car and own it outright, consider dropping
comprehensive and collision coverage. If the vehicle is really old, you
could be paying more in insurance than what it's worth. But hold onto
that liability insurance. It's illegal in most states to drive without
it, and insurers in some states charge significantly higher premiums if
you let coverage lapse, even if you haven't been driving.
9. Investigate state-run low-cost insurance programs. If you live in California, and if your household income is close to or less than the poverty
level, you may qualify for state-run low-cost or no-cost insurance
programs. Policies under the for example, cost less than $400 a year and cover about 12,000
low-income drivers at any given time, according to Doug Heller,
executive director of Consumer Watchdog,
an advocacy group in Santa Monica, California. He expects more people
to sign up as a new state law takes effect that lets agents sell the
program online for the first time. "That's important not just for people
who can get online from their homes, but for agencies that provide
resources for low-income families," Heller says. Lawmakers in Nevada and
Michigan recently proposed or approved pilots for similar programs.
10. Assess insurance needs and premium costs annually.
Life isn't static, and your auto insurance premiums shouldn't be
either. Review your policy once a year, especially if you've moved or
switched to a job that has you driving more or less. A review is also a
good time to check on whether you're eligible for additional discounts.
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