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, Hawaii or New Jersey, 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 California Low Cost Automobile Insurance Program, 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.
