Excerpts taken from Gina Roberts-Grey - walletpop.com
Most consumers shop around for the best deal when they're buying a car, and that's an effective strategy. Yet not many car buyers apply the same tactics when they look for car insurance. Comparison shopping can save a driver hundreds of dollars a year in premiums, but many consumers sign with the same carrier that their friends or family members use "just because."
That's a mistake, because comparison shopping for auto insurance -- not gathering referrals -- is the single most important thing drivers can do to get the best possible car insurance rate," says Eric Poe, chief operating officer of CURE Auto Insurance, a not-for-profit reciprocal exchange-based company in Princeton, N.J.
The first stop in comparison shopping, Poe says, is to review the insurance you already have. "Keep your policy on hand to make fair comparisons to your current coverage," he says. Then start shopping. Visit a blend of insurance Web sites and insurance agents and brokers for quotes.
Knowing your car's market value will also help you select the right policy. "Auto insurers generally only pay claims equal to a car's actual cash value or market value," says Leah Knapp, a Progressive Insurance representative. Buying comprehensive and collision coverage may not be worth the price for an older car whose value has depreciated, Progressive sources say. But few agents mention that.
One major mistake people make is not exploring enough options. Before committing to a carrier, get rate quotes from at least five companies, she advises. "When you're shopping around, make sure to ask for several variations of the quote based on a range of deductibles for collision coverage," a Progressive representative advises.
Getting a policy with a relatively high deductible will keep your rates down. The lower your deductible, the more likely you are to file a claim -- or so insurers believe -- and if the insurer thinks you're likely to file, it will hike up the rates to reflect that, as high as 30% in some cases. According to Progressive sources, it's generally a good idea to have a deductible of $500 or higher.
Poe suggests comparing similar coverages and limits from each company to get the most accurate picture. "You may discover that the company with the lowest rate also offers the lowest amount of coverage," he says.
Quiz Your Agent
All auto-insurance companies offer different money-saving discounts to their customers. But it's important to ask your agent about the terms of those discounts; in most cases, discounts usually don't pertain to the life of the policy. "When the policy is renewed, rates can fluctuate" based on life changes, including marriage, Knapp says. Rates may be further discounted or hiked, based on factors like driving habits and credit score.
All insurance companies use seven general factors to determine rates: your age; your gender; how long you've been driving; your driving record; how much your car cost; and how you use your car, in terms of whether you commute to work, or in annual mileage; and where you live. Living in a large city generally raises premiums. Four of the six most expensive states for car insurance are in New England.
"Credit score, your highest level of education completed, and your occupation are also routinely used to determine whether you're eligible to receive a carrier's lowest rates," notes Poe.
Studies have shown that variations in your credit score, your level of education, and your occupation can alter your premium by as much as 200%, even within a single insurance carrier. Blue-collar jobs and careers that don't require college degrees are often charged higher rates, says Poe, who suggests asking carriers which factors they use to determine premiums. "If you have less-than-perfect credit, you should try to get a quote from a carrier who doesn't use credit, or that doesn't weigh credit too heavily when setting premiums," he says.
Some other things to keep in mind:
- Avoid excess. Do an informal audit to determine exactly which coverages you need, and get rid of those you don't. The more liability insurance you carry, the higher your premiums will be.
- Stay current. Make sure your car-insurance policy accurately reflects you and your lifestyle. Update your agent when you have a job promotion, get married, or if you move.
- Size up your score. Check your credit every six to 12 months. Make sure to inform your agent of any increases in your score. And challenge any errors that may be lowering your score and contributing to higher premiums, such as a payment reported late that wasn't or collection account posted as "open" after it's been long resolved.
Bottom line: Regardless of which carrier is giving you your rate quote, make sure to ask about any and all discounts that you might be eligible for. New discounts are introduced regularly.
Gina Roberts-Grey is a freelance writer specializing in consumer issues.