A little comparison shopping can pay off with a policy that costs hundreds less.
Accidents happen. In cars, they happen nearly 100,000 times a day, and insurance can be the only thing standing between you and financial catastrophe. But you don't have to resign yourself to paying sky-high insurance premiums, even if you have a less-than-perfect driving record.
To find out just how much real people with real driving experiences could save, we picked a family and a single man and did the shopping for them. Among the startling results:
* The highest semiannual premium quoted for our single man's policy ($1,727) was more than triple the lowest premium ($533)--for exactly the same coverage.
* The highest six-month rate for our family's policy ($2,100) was more than double the lowest rate we found ($890).
* The companies with the best deals for our family quoted rates that were among the worst for our single man.
The enormous price differences and lack of consistency illustrate the most important point about searching for affordable auto insurance: You have to shop around. Every insurer has its own formula for setting premiums--a complex combination of variables including your age, sex, driving record, where you live and the kind of car you drive. You will be richly rewarded if you take the time to find the insurance company whose criteria shine the best light on you and your family.
Reality check #1
The family we shopped for includes a teenage son who started driving a couple of years ago--a notoriously expensive addition to any family's policy. When we priced policies last year, he had already received two speeding tickets, and Mom had also gotten pulled over for speeding. Such incidents aren't terribly out of the ordinary, but the combination made the family untouchables in the eyes of some insurers.
For the past few years, they had relied on an independent agent to get them the best deal on insurance for their 1989 Mazda MPV minivan and 1990 Toyota Celica. They were paying $1,061 every six months for car insurance, including:
* $100,000 liability coverage for bodily injury and property damage;
* $2,000-per-person medical payments coverage;
* $100 deductible on comprehensive coverage;
* $200 deductible on collision coverage; and
* $100,000 uninsured- and underinsured-motorist coverage.
Tweaking and shopping. Before setting off to find a better deal, review your insurance coverage in light of the recommendations in the box at left. The family we shopped for, for example, should hike their liability protection to $100,000 per person, $300,000 per accident and $50,000 for property damage. We made that change and upped the uninsured-motorist coverage to $100,000 per person, $300,000 per accident. We also boosted the deductibles to $250 (they didn't want to go much higher than that). The medical-payments coverage stayed the same.
The range of prices quoted by 17 agents and companies was startling. The lowest six-month premium was $890, almost $350 a year less--for more coverage--than the family had been paying.
Most of the companies that charged lower premiums paired the teenager with the Mazda, confirming the notion that assigning teenagers to an older car can save money. (A few companies wouldn't cover the family at all because of the speeding tickets.)
Although the chance to cut $350 a year off their premium gave the family plenty to smile about, they could easily save more. Raising the collision and comprehensive deductibles to $500, for example, would knock $73 off the premium from one insurer.
Reality check #2
The single man we shopped for is a 35-year-old assistant comptroller for a real estate investment firm, drives a 1993 Isuzu Rodeo and lives in the picturesque Marina district of San Francisco. But insurance companies don't care about nice views. Instead, his downtown address boosts his car insurance premiums in a state that's already more expensive to live in.
Some companies might goose his premiums even higher because he's single, rents his home, parks on the street and has one ticket for turning left from a no-left-turn lane. On the other hand, his round-trip commute is only six miles.
We shopped for the same amount of coverage as we had for the family (100/300/50 liability; 100/300 uninsured motorist; and $2,000 medical payments), but raised the comprehensive and collision deductibles to $500.
The lowest price among the 20 quotes we got: $533 for six months. The highest quote: $1,727 for six months.
Driving your premium down
The insurer that quoted the highest price for the family was one of the lowest-cost insurers for the single man. That's one reason it's tough to make nifty generalizations about auto insurance.
If you have a lot of accidents or get a lot of tickets for moving violations, you're going to pay more for auto insurance. Everyone knows that. But the means by which insurance companies sort out the good risks from the bad aren't always so obvious. The price you pay is determined by a complex process that begins long before you apply for a policy. When you apply, you are screened by a company underwriter who decides whether the company wants to insure you and if so, in what general category to fit you.
The insurance company starts with a set of base premiums for each of the coverages that make up its policy. Those base rates are set to cover a particular customer: an adult male with a standard car used only for pleasure (as opposed to business or commuting). Everyone else pays more or less, depending on the company's evaluation of his or her relative risk potential.
In effect, you are assigned to a group defined according to characteristics that are believed to predict the group's chances of creating insurance losses. Although classification plans differ, the companies employ for the most part these basic criteria: age, sex, marital status, accidents and traffic violations, whether a young driver has taken a driver-education course or is entitled to a good-student discount, the number of cars, the models, use of the cars (pleasure, commuting, business, farm) and the mileage. Some even take your credit record into account.
To find the best deal:
* Shop many sources. Survey after survey confirms that auto-insurance companies often charge greatly different premiums for the same coverage. Many state insurance offices distribute auto-insurance pricing guides (see the box below), and the Insurance News Network includes results at its Web site (www.insure.com). The categories they use may not match yours, but you can use such a guide to identify your state's most cost-effective insurers.
The odds are you will discover substantial differences if you take the time to get premium quotations from a number of companies. Begin with a market leader, such as State Farm or Allstate. Then use that quotation as a measure against which to judge identical coverage at other companies. (The worksheet on page 85 will help you compare quotes).
* Before you buy a new car, check the cost of insurance. Our tables beginning on page 18 list relative insurance costs for various new models. The box on pages 86 and 87 lists models that State Farm charges more or less than average to insure.
* Use your computer. InsWeb, at www.insweb.com, provides quotes from 13 insurance companies. Some companies, such as Progressive (www.autoinsurance.com) and 20th Century (www.20thcentins.com), let you request quotes online.
* Keep in mind that price isn't everything. Is it easy to collect on claims? Does your agent provide good service? Are you required to use an inconvenient body shop? Ask other policyholders about their experiences, and find out if your state's insurance department keeps a complaint record.
You can check out an unfamiliar company's stability in Best's Insurance Reports: Property-Casualty at your local library (or ask an agent how Best's rates his or her company). Insurers with the top two ratings can be considered solid.
Desperately seeking discounts
When it comes to shaving today's sky-high premiums, you need to cash in on every possible discount. As you shop, don't be shy about asking for breaks; you may not always be told which discounts you're eligible for.
Many insurers cut liability, medical and collision premiums if you're accident-free, meaning you've had your policy with the same company and you haven't been involved in an accident that was your fault for at least ten years. You'll usually get a smaller discount after three accident-free years. (Discounts vary by state.)
If your car has passive restraints, such as air bags, the medical-payments premium can be shaved by 10% to 60%. Antilock brakes could knock 5% off liability, medical and collision premiums, and anti-theft devices could cut 10% off the cost of comprehensive coverage.
