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Driving a Car Insurance Bargain

By Marc Eisenson & Nancy Castleman      
There's a fast, easy way to deal with insuring your cars. Pick up the phone and call any broker, agent, or insurance company. Answer a few questions about your cars and drivers, write the check, and get back to whatever you'd rather be doing. Let your policy automatically renew every year, and you'll never have to think about it again. What could be simpler?

Of course, if you're willing to invest a bit more effort you could save hundreds of dollars ... every year ... maybe even more. For example, a friend of ours got a bunch of quotes for the same exact coverage on her family's two cars. They varied by $400. Although we've seen disparities in quotes of over $1,000, let's be conservative, and stay with the $400 figure.

Overpay by that amount every year, for 30 years of driving, and voilá, you've wasted $12,000. Instead, if you were to invest that $400 every year at 7%, you'd have put aside $25,182 - after federal and state taxes, assuming 3% inflation! Since most of us will drive for far more than 30 years, the dollar amount would be even higher.

Don't Leave Home Without It
Car insurance, as crazily confusing, convoluted, and costly as it can be, is mandatory in our book - as well as in most states, where it's required by law. Having the wrong coverage, or limits that are too low ... followed by an accident and the inevitable lawsuits ... could literally destroy your world!

Apples, Oranges, and Auto Insurance
In most comparison shopping situations, price checking is simple, "How much is your yellow widget with the brass doodad?" Not so with auto insurance. Everything varies for everyone. Two neighbors driving identical cars may well pay different rates for the exact same coverage from the same insurer!

Not only does the price quote depend on the car being insured, it depends on:

  • Where you live - Some states - Pennsylvania, for example - have much higher rates than others, and city dwellers can pay 30% or more than country folk.
  • How much you drive - A daily commute or lots of mileage in a year can add to the cost of your coverage, while very limited travel (under 7,500 miles a year) might get you a discount.
  • What your car is used for - Insurers prefer pleasure cars to those used for business travel.
  • How old you are - Drivers under 25 have the highest accident rates, followed by people 75 and over.
  • What your gender is - Young women traditionally have had fewer accidents than young men (though they're starting to gain equality in this area as well).
  • How good your driving record is - A clean record qualifies you for safe driver discounts. An accident, DWI arrest, or traffic tickets may mean that your premiums will shoot up, or that your insurer will choose not to renew your policy. (Of course, a DWI could cost you your license and your liberty as well.)
  • What your marital status is - Young couples - age 25-29 - get a better rate than singles that age, which may be due to being perceived as more stable ... or at least less likely to be tearing up the road in the middle of the night.
  • How good your credit report is - Bad credit may be a factor in getting turned down for coverage or being charged more for a policy, since there's a correlation between credit problems and claims experience.
  • How many other drivers are in your household - The more drivers you have, the more risk your insurer takes and the more you'll pay. (But at least you'll get a bigger exemption from the IRS.)
  • Whether you smoke or not - Nonsmokers get into fewer accidents - maybe because they're not spending time fiddling around with cigarettes when they should be watching the road.
  • "Etcetera, etcetera, etcetera," as Yul Brenner said in The King and I.

The Four Keys to Driving the Best Bargain on Car Insurance
We'll provide lots of details below, but in a nutshell, this is all you have to do to save a bundle on car insurance:

  1. Get competitive quotes.
  2. Go for the highest deductible you can afford.
  3. Drop coverage you don't need.
  4. Ask for discounts. Don't wait for your agent or insurer to tell you about them. Many don't. As a study done by the Pennsylvania Department of Insurance showed, some 70% of agents failed to volunteer information on discounts and deductibles. And it's reported that Americans overpay some $300 million annually by not taking advantage of discounts.
Here are some discounts you might be eligible for:
  • Model of car discounts (and surcharges). Insurance companies rate cars based on factors such as safety, repairability, and claims history for theft, fire, and vandalism.
  • Safe driver discounts can cut your premium by as much as 15%. Read "Radar Protectors & Surcharge Preventers" below, if you just got a ticket or had your first fender bender.
  • Multi-policy discounts (when your cars and home are insured by the same carrier). Ask your current insurer, and ask others what their multi-deal would be.
  • Automatic seat belt and airbag discounts.
  • Anti-lock brakes discounts.
  • Theft control device discounts.
  • Carpooling discounts.
  • Low mileage discounts.
  • Nonsmoker discounts.
  • Mature driver (from 50 to 65) discounts.
  • Young driver discounts. (Yes, there are actually ways to save on that expensive-to-insure teen, which we'll explain below.

Ways Folks of All Ages Can Save - Starting with Teen Drivers
First, here are some gruesome facts about teen drivers:

  1. Last year, over 6,000 teenagers died in motor vehicle accidents. (About one-third of all teen deaths are due to car accidents.)

  2. In more than 60% of these deaths, another teen was driving when the car crashed.

  3. Over 35% of young drivers have a police-reported accident during their first year of driving.

  4. Half of teen crashes occur at night.

Small wonder that premiums are so high for teens. Even though the statistics show clearly that many kids really aren't ready to drive when they pass the required tests, it's still tough for parents to say, "No!" to their kids' pleas for a license ... and for wheels ... the minute they hit the required age.

Before you say "Yes," read Beginning Teenage Drivers and a piece we wrote, Before You Hand Over the Keys, to learn what you can do to better prepare your teen to hit the road.

When it comes time to insure your teens, you can reduce the hefty premiums by:

  • Having them drive your car, only as an "occasional" driver. Once teens have their own car, or drive yours more than half the time, they cost a lot more to insure.
  • Keeping them on your policy even after they have their own car. (Premiums are much higher when teens have their own policies.)
  • Getting a "good student" discount, if your child's grade average is B or better.
  • Asking for a discount if your child goes away to school (more than 100 miles away), and doesn't have a car.
  • Making sure your teens take Driver's Ed. The good news is that the course should be good for a 5 to 15% discount. The bad news is that these courses have little or no effect on the number of accidents teens have, perhaps because driver's ed tends to get them behind the wheel at a younger age.

What's far more effective is "graduated licensing," where kids have a curfew on night driving when they first get their licenses. Click here for ammo (um ... so you can constructively respond) when your kid says, "It's not fair! You got to drive at 16!"

When They Move Out (Finally!) or Something Else Changes
When the kids leave home for good or when you get a job closer to home, your car insurance rates can probably be lowered. Let your insurer know! Other changes that might cut the rate include when you retire, when you install an anti-theft device, or when you start carpooling.

Hi-Ho, Hi-Ho, It's Off to School the Rest of Us Go!
Want to cut the cost of your premium by about 10% for 3 years ... and/or to reduce the number of traffic violation points you have on your license? Take a traffic safety course. Often offered through local adult ed programs, they can be life ... as well as money savers.

We highly recommend the course - at least once - especially if you have young people on your policy who you can convince (bribe?) to come along. Visit the National Safety Council to find one of these defensive driving courses near you.

Drive Safely to Lower Your Rates ... and Maybe Safe Your Life
There are over 6.7 million traffic crashes annually, injuring over 3 million of us, and killing almost 42,000. That's an accident every 5 seconds and a death every 13 minutes.

The key advice is easy - keep your eyes and your sober mind on the road, don't speed, tailgate, or talk on your cell phone while you drive, and always, always buckle up. Seat belts save nearly 11,000 lives each year, and sadly, about 9,600 more lives would be spared if all passengers in crashes had been belted in.

No matter how many safety features your car has, it needs a safe driver behind the wheel. If it's been a while since you brushed up on the basics, click here for our top tips on safe driving.

State Farm notes that some 4 million crashes happen at intersections, and offers advice on approaching and crossing an intersection.

Don't Risk Being Talked to Death
On the cell phone question, here's what happened when Tom and Ray Magliozzi (aka "Click and Clack, The Tappet Brothers"), who do the popular NPR show and syndicated column, Car Talk, announced their opposition to the use of cell phones in cars for anything other than emergencies. "Of course, after we said that, we braced ourselves for the onslaught of vitriolic hate mail from all those cell-phone-talkin', Lexus-driving, Type-A morons. Instead, we got heaps of mail in support of our humble opinion."

Winter driving poses special challenges for those of us who live where snow and ice are likely. But bad weather happens everywhere. Click here for our best ideas on how to cope, and here for Travelers' useful advice on preparing for and handling winter driving.

Radar Protectors & Surcharge Preventers
A speeding ticket or two can wipe out safe driver discounts or even add a surcharge to your premium. So if you think you've gotten a traffic ticket unfairly, it pays to consider fighting it.

Just had your first fender-bender? Find out whether your carrier (or one you're considering) will forgive your first accident. Otherwise, your rates can skyrocket by 40% or more.

Not renewed for coverage by your carrier? It happens, folks, more often than you probably think - possibly when you have just a few minor traffic violations. You always have the option of going into your state's "assigned-risk" pool. But this can be a very pricey way to go - so it pays to check with a number of commercial carriers and agents to find coverage that's cheaper than the state pool. Progressive (800-AUTO PRO) gets high marks for the low prices it offers people with spotty driving records.

Even if you're not dropped, you could be put into a less favorable classification (from preferred to standard, standard to substandard). Shop around! One company's substandard class could be another's standard (and cheaper) policy. And whatever class you wind up in, be sure to keep asking about when you'll qualify for the next better classification (3 years with no violations is the norm).

Foil Those Thieves
There's a vehicle stolen in the U.S. every 25 seconds or so. At the moment, the national favorites among crooks seem to be: Toyota Camry, Honda Accord, Honda Civic, Oldsmobile Cutlass/Supreme/Ciera, Jeep Cherokee/Grand Cherokee, Chevrolet Full-Size Pickup, Toyota Corolla, Ford Taurus, Chevrolet Caprice, and Ford F150 Pickup. Got an SUV? Watch out! Sport utility vehicles are inching up on the list.

Chances are 1 in 42 that you'll have your vehicle or its contents stolen this year, and 10% of us report that we've already been victims of vehicle theft. Yet almost a third of us say we don't always lock our car doors.

To get the lowdown on everything you can do to keep your car from being stolen - starting with removing your keys from the ignition (which over 10% of us sometimes forget to do) - visit the National Insurance Crime Bureau (NICB), and read its "Layered Approach to Protection." The NICB also lets you find out how your car ranks among the most commonly stolen cars - and how your area rates in terms of thefts.

Note: Stolen car statistics lag behind by at least a year, so you might want to check in with local law enforcement folks for their take on up-to-the-minute trends.

Should You Drop It?
When your car is well past its prime, you might want to save some money by dropping the collision and comprehensive portion of your coverage. Some experts say to drop it when a car is 5-7 years old, or if the premium represents more than 10% of the value of the car.

Important: Keep in mind that it's the Kelley's Blue Book Value that's paid out, which may be much less than what you think you car is worth. Your bank's loan department or your insurance broker can quote you the current value of your car.

We've seen recommendations that you drop coverage when a car's book value is less than $4,000, and still others say $2,500 or even $1,000. If the experts can't agree, how are you supposed to decide? In the end, it's your comfort level that should determine whether you pay for this coverage on your aging car.

Let's assume that Kelley's Blue Book lists the value of your car at $3,500, and you're currently paying $300 a year for collision/comprehensive, with a deductible of $500. Every year that you don't total your car, you'll save $800.

If it were our car, we'd drop the coverage and continue to drive as safely as we could. We'd keep in mind that insurance is designed to protect us from unaffordable losses - not all losses. And while we'd be taking a small risk, it wouldn't be a bank-breaking one, especially since the car's value will continue to drop every year.

In the Market for a New Car?
Investing in the safest car you can afford is one of the best investments you can make. Not only may your choice save your life or the life of a loved one, you may also get better insurance rates. Start by reading Shopping for a Safer Car from the Insurance Institute for Highway Safety (IIHA).

IIHA can also tell you the driver death rates for 156 models. And its affiliate, the Highway Loss Data Institute, can tell you how 315 vehicles rate in terms of injury, collision, and theft losses.

To check out how any car you're considering fared in the National Highway Traffic Safety Administration's crash testing, click here.

How Mature Is Too Mature?
While some companies will give you a break on the rates when you're in the 50 to 65 age range, drivers start to lose their favorable rates after that. As vision, hearing, and reaction time start to fade, a once-fine driver may start to have near misses. And sometimes, they won't miss - fatal crash rates rise dramatically at age 70 and above.

AARP offers helpful "Driving Safely" tips. Also visit 55 Alive for informative quizzes that can serve as a wake-up call to seniors who may not be admitting to having trouble behind the wheel. Once they 'fess up, they'll be able to find 55 Alive driver improvement classes nearby.

How to Shop for Car Insurance
For starters, check out whether your state insurance department has made it easy for you, by offering a comparison pricing guide for car insurance. While you're there, see what complaint ratios your state offers. You want a great price, from an insurer that'll be easy to deal with if you have an accident.

Then, get a variety of quotes from:

  • Direct writers such as GEICO 800-841-7968 and Amica - 800-242-6422.
  • Large companies with their own agents like State Farm and Allstate
  • Independent agents in your town. Ask friends, neighbors, and co-workers for leads. Whether they use an independent agent or not, ask them about their experiences with their insurer.
  • You can also get multiple quotes from Progressive - 800-AUTO PRO, which provides its own rates along with those from several competitors, and from Insweb.
Now that you're thinking about it - call for quotes today - even if your policy isn't due to expire soon. The more time you have to shop - and to think - the more you'll save. We promise.

Details, Details, Details, or in Other Words, "What's It All About Alfie?"
Sorry, folks, but you knew sooner or later we'd have to delve into the jargon. To get accurate quotes, you've got to have a sense of what the agents are talking about, so here's a quick car insurance glossary for your confusion and reading pleasure:

* Bodily-injury liability - covers you for the medical expenses, lost wages, pain and suffering, or funeral expenses of the occupants of the other car. In a "no-fault" state (see below), it would also cover the passengers in your car.
* Property-damage liability - pays for damages to other people's cars or property.
Important: State minimum mandated coverage for liability is often notoriously low. Especially if you have significant savings or assets like a home to protect, you'll want more ... just in case there's a lawsuit.

Experts recommend that most people carry a 100/300/50 liability split. That means $100,000 of coverage for each injured passenger, up to a $300,000 limit for each accident, plus $50,000 in property damage coverage. But in these litigious times, more and more people who have substantial assets that could be at risk in a lawsuit are getting much more substantial liability protection via $1 million ... even $5 million umbrella policies, which cover their cars and homes.

* Collision and Comprehensive - Collision covers the repair or replacement of your car, no matter who caused the damage. Comprehensive covers the repair or replacement of your car if it's stolen, or damaged by such events as fire, flood, or wind. Wondering if it pays to keep collision on your clunker? (See "Should You Drop It?" above).
* Deductible - The amount of any loss that you're responsible for, before the insurance kicks in. Most experts agree that it's wise to go for the highest deductible you can manage. Over the years, your savings on premiums will probably more than cover the deductible, if you ever make a claim.
* Medical payments coverage - Your health insurance covers this same ground, but this might help out any passengers who are poorly insured.
* Personal-Injury protection (PIP) - Also covers medical payments and funeral costs, along with some protection for lost wages. Some no-fault states require it, in other states, it's optional. When it's not required by law, consider skipping it if you have good medical and disability coverage.
* Uninsured and underinsured-motorist coverage - This pays if you're hurt in a hit-and-run accident or injured by a driver who has minimal or no coverage. This rider is a good idea if, like so many of us, you have good health coverage, but not such good disability and life coverage. Also, you want to protect the other passengers in your car should you be hit by an uninsured driver in a "fault" state. Even in a "no-fault" state, having good uninsured motorist coverage will come into play if you're hurt badly enough to sue.

We come out on the side of the pros who worry about the "worst case scenarios," and suggest the same 100,000/300,000 limits here that they recommend for liability coverage.

* Glass breakage - This may already be part of your comp/collision coverage ... or it may cost a few extra dollars. Broken windows and windshields are easy to get ... but expensive to replace. We've found this coverage to be a great bargain. And our couple of claims for it have not raised our premium. :~)
* Rental reimbursement and towing - These are two other low cost options you can add. We recommend you pass if it's unlikely you'll need them - for example, if you belong to an auto club with a tow service ... or if you could make due, say, with one car for a while.

For more on de-mystifying these different types of coverage, click here.

Better Safe than Sorry
Before you pick an insurance company, check its safety rating. Several companies, including the ones listed here, give insurance companies grades for overall financial strength. The first three offer their ratings service online for free, once you register.
Standard & Poor's
A.M. Best
Weiss, which charges $7.95 for a report, offers its take on the strongest and weakest auto insurers online for free.

Look for a company that has a strong rating from more than one service. When looking at a rating service, be sure you know exactly what its ratings mean, which will be explained by each service on its Web site. For example, an A rating by Moody's means "Good," but an A from Weiss signifies "Excellent." (Weiss is generally thought to be the toughest in its assessments.)

Tell the Truth!
Insurers will pull your department of motor vehicles record and your claims history. If you lie about your driving record and/or your claims history, you very well could be turned down for coverage. And if you're misleading about how your car is used, who drives it, and where your car is garaged, and the company finds out, it could reject your claim and/or refuse to renew your policy.

Important: Since even garden variety clerical errors could cause you to over-pay or to not have the coverage you wanted, look over quotes (which should be made in writing) and your policy carefully.

If You Have an Accident
The Insurance Information Institute offers helpful guidance on what to do at the scene, and when filing your claim.

If you have to use your insurer's repair shop to get your car fixed, have your own mechanic check the car out first to make sure the estimate covers all the damage. Then have your mechanic check it afterward to make sure that the repair has been done properly.

If your car is totaled, and you don't agree with the company's offer, get some appraisals from area dealers to make your case. Click here for strategies to get the most for your totaled car.

If you're unsatisfied with your insurer's payments or your dealings with the company, we agree with personal finance writer and expert Jane Bryant Quinn, who advises you to complain to your agent, the state insurance department, and the local consumer protection office. Also consider having a lawyer write a letter to the insurance company president - and don't hesitate to tell your agent you're pulling all your coverage from the company.

If you can cover some claims that don't involve other people or property (such as when you scrape your car getting out of your garage), consider paying the repair cost yourself to keep your rates from shooting up. But when an accident involves another car, it's wise to report it to your insurer, even if you plan to pay for the damages yourself. If the other driver decides to sue, your company could refuse to cover your legal costs if it wasn't informed of the accident.

On the other hand, some claims don't necessarily cause your rates to increase - a damaged windshield or an accident caused by an animal - so ask your insurer or agent before assuming it's smarter to pay for the repair yourself.

Warning: Normally, you should stay at the scene of an accident, but if you fear that another driver bumped or sideswiped you just to get you over to the side of the road and rob you, head straight for the nearest police station and report the incident.

When states began to adopt no-fault insurance in the early 1970s, the hope was that accident victims would get their bills paid more quickly, and because litigation was restricted, drivers would pay lower premiums.

As of now, 13 states operate under no-fault laws: Colorado, Florida, Hawaii, Kansas, Kentucky, Massachusetts, Michigan, Minnesota, New Jersey, New York, North Dakota, Pennsylvania, and Utah. If you live in one of these states, your medical bills and lost wages - as well as those of your passengers - are covered by your insurance company up to a specified limit, no matter who caused the accident.

In certain no-fault states, you can only sue for serious injuries. In others, you're allowed to sue if your bills go beyond a specified dollar amount. And in three of them - Kentucky, Pennsylvania, and New Jersey - you can choose between a no-fault policy and one that gives you broader rights to sue. (If you choose the right to sue, you'll pay a higher premium.).

Some consumer advocates oppose no-fault. For example, Ralph Nader's Public Citizen watchdog group claims that insurance companies, not consumers, are the ones who really benefit from no-fault. Nader's raiders have reported that the majority of the top 10 list of states with the most expensive liability are no-fault states, and that premiums in no-fault states rise faster than in states without no-fault. Meanwhile, insurance company profits are higher in no-fault states. Public Citizen also feels that no-fault limits the consumer's right to sue for severe losses.

Before Your Next Trip
The car rental agent will no doubt ask if you want to purchase an assortment of insurance products they just so happen to offer. In addition to collision/loss damage coverage, you might be pitched a liability policy, a personal accident death policy for you and your passengers, as well as personal effects coverage.

Before you agree, check your own auto and homeowners policies, and the collision/loss damage coverage on your credit cards (specifically, any Gold and Platinum MC and Visa and all AMEX cards you may have). You may well be sufficiently covered. So be sure to ask your insurer and credit card company exactly what protection you already have before you pick up the car.

Otherwise, you may fork over an unnecessary wad of cash (a rental insurance package for a week can run from $130 to $225) - or you may fail to purchase coverage you actually need.

Financial planner and author Jonathan Pond recommends you take a copy of your policy with you when you travel - to bolster your resolve, just in case the rental agent gives you a "hard sell."

International travelers note: Pond believes that you could be subject to so many hassles, you're better off accepting the collision-damage coverage. (We trust his judgment ... as we don't travel abroad all that often.)

Red Flagging the Cops
Is it true that red cars and sports type cars are stopped more often than the less flashy ones? We don't know the statistics ... if any exist ... but a police sergeant we know, Annmarie Spiciarich, says:

"I think using the common sense guide of bright things and noisy things tend to catch our attention more makes sense. Therefore, a loud car (noisy muffler, etc.) would catch my attention quicker and make me watch what it is doing (speeding,) etc. more. The same with a bright red or fancy car."

P.S. When Sergeant Spiciarich herself bought a bright red Toyota, the salesman warned her that she'd get pulled over a lot by the police in a red car. Her reply, "I AM the police!" certainly got her a chuckle at the car dealership!

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