How much you pay for
Car insurance
depends on several factors, including your age and marital status,
where you live, and what you drive. You can't do anything about your
age, and few people will move just to lower their insurance premium. You
can, however, choose a vehicle that costs less to insure.
In this article, we'll give you all of the helpful tips you need when getting
car insurance.
Know Your Coverage Types
What is your car insurance actually insuring? Although you're buying a
single insurance policy covering a specific vehicle, a number of
components make up the final cost:
- Bodily injury liability: Covers injury and death claims against you, and legal costs, if your car injures or kills someone.
- Property damage liability: Covers claims for property that your car damages in an accident. Because liability coverage protects the other party, it is required in all but three states.
- Medical payments:
Pays for injuries to yourself and to occupants of your car. This is
optional in some states. In "no-fault" states, personal injury
protection replaces medical payments as part of the basic coverage.
- Uninsured motorist protection:
Covers injuries caused to you or the occupants of your car by uninsured
or hit-and-run drivers. "Under-insured" coverage also is available, to
cover claims you may make against a driver who has inadequate insurance.
In some states, as many as 30 percent of drivers are uninsured.
- Collision coverage: Covers damage to your car up to its book value.
Collision coverage carries a deductible, which is the amount per claim
you have to pay before the insurance takes effect. The lower the
deductible, the higher the premium. While it is legally optional, a
lending institution or leasing company usually requires collision
coverage.
- Comprehensive (physical damage): Covers damage to your car from theft, vandalism, fire, wind, flood, and other non-accident causes. Comprehensive also carries a deductible.
Your Vehicle Affects Your Premium
You might want a sports car or a fancy SUV, but your insurance company may charge you more to protect you while driving it.
Insurance
premiums are based partly on the price of the vehicle, which affects
the replacement cost if it is stolen or "totaled" in an accident. How
expensive the vehicle is to repair -- including parts and labor -- can
also affect the cost. In addition, surcharges may apply to vehicles that
are frequently stolen or involved in accidents.
Industry-wide information on injury claims, collision repair costs, and theft rates by vehicle model is available from the Highway Loss Data Institute
(HLDI). You can write them at 1005 North Glebe Road, Arlington, VA
22201. HLDI is affiliated with the Insurance Institute for Highway
Safety (IIHS).
According to HLDI, the lowest injury claims are
from large vehicles -- cars, pickup trucks, and sport-utility vehicles.
Small 2- and 4-door cars have the highest injury claims. Small cars also
are among the highest in collision costs, along with sports cars.
If
you have your heart set on a sporty vehicle, you'll probably pay
dearly. Insuring a high-performance car can easily cost two or three
times the insurance amount for an ordinary model.
Sport-utility
vehicles, the hottest market segment, often have higher insurance rates
than mid- and full-size cars, but some SUV models are relatively cheap
to insure. SUVs are "hot" for other reasons: They are among the most
frequently stolen vehicles, and they are more expensive than most cars.
Cadillac's Escalade is currently the most popular model sought by
thieves, but it's followed by the Nissan Maxima sedan. SUVs also can
cost more to fix after an accident if the 4-wheel-drive system is damaged.
However,
insurance companies set rates based on their own experience. If Company
A has more collision and theft claims for a particular vehicle than
Company B, then A will charge more for the same coverage. It all boils
down to a company's actual experience with a particular vehicle or
category of drivers. That is why it pays to shop around for insurance.
Who You Are Affects Your Premium
Factors that you can least control may have the greatest impact on your insurance costs. Your age, gender, and driving record are key factors that affect your insurance premium.
Single
males under the age of 25 pay the highest rates. Statistics show they
are involved in the most accidents, so insurance companies charge young men higher premiums than women of the same age. Married
men, who statistically have fewer accidents, pay less than single men. A
handful of states do not allow rates based on sex or age, but that
prohibition has tended to result in higher rates for women, not lower
rates for men.
If you are convicted of moving traffic violations
or of causing an accident, your premiums will likely go up, no matter
what your age. Drivers with clean records -- no tickets, no accidents -- pay the lowest rates.
Where you live also plays a big role in how much you pay. Urban areas, with their greater population densities and heavier traffic, get higher rates than rural areas.
According to the Insurance Information Institute,
the average insurance expenditure in mainly urban New Jersey --
traditionally the most expensive state -- in 2002 was more than double
that of North Dakota, a rural state with the lowest average premiums.
High costs in states such as Florida, Massachusetts and New York are
attributed to growth in fraud and theft.
In most states, too,
insurers set rates by zip codes. If you live in a major city like
Chicago or Los Angeles, you will probably pay more than if you lived in a
nearby suburb.
Decide How Much Coverage You Need
While it is dangerous to be underinsured, having too much insurance
can be an expensive mistake as well. Without insurance, your property is
put at risk in an accident that is your fault. The minimum amount of
insurance required in your state is seldom enough.
State law may
require as little liability coverage as $15,000 per person, $30,000 per
accident, and $5000 property damage. About half of the states require
$25,000 per person and $50,000 per accident. Half of them require
$10,000 in property damage coverage. If you can afford it, buy more than
the minimum. After all, $10,000 for property damage may not be enough
if you hit a $100,000 Mercedes-Benz.
The more assets
and income you have, the more insurance you need. Most insurers
recommend liability coverage of at least $100,000 per person, $300,000
per accident, and $50,000 property damage if you have assets to protect,
such as a house. Some insurers also recommend a $1 million "personal
liability umbrella" policy issued in conjunction with homeowner's coverage. State Farm
reports that such coverage averages $270 a year, but the amount varies
significantly depending on location and other factors. An "umbrella"
policy could protect a family from financial ruin in a major lawsuit.
Like buying a car,
there is no single best solution when it comes to buying insurance.
Rates vary widely. Surveys suggest that you could pay anywhere from $500
to $2000 annually for the same coverage from different companies. Shop
for insurance by consulting two or three of the largest insurers, such
as State Farm and Allstate. Then,
contact one or two independent agents who can quote premiums from more
than one company. In addition, there are direct-marketing companies,
such as GEICO and Progressive,
which do business over the phone rather than through agents and offer
some of the lowest rates. Ask for an itemized list of coverages and
costs.
"We're price-competitive," said spokesperson Dick Luedke of
State Farm, whose rates dropped somewhat during 2004. But with so many
factors involved in setting rates, it's wise to check several prospects.
In
2004, the average price of auto insurance nationwide was $871,
according to the Insurance Information Institute. They expected that the
cost of auto insurance would rise by 3.5 percent in 2004, which would
be the smallest increase in four years.
Don't forget the Internet.
Many companies now offer online quotes, and insurance shopping on the
Web allows you to compare rates from multiple providers in the comfort
of your own home.
You Can Reduce Your Premiums
The biggest difference you can make is to buy a vehicle that
qualifies for a discount or at least doesn't carry a surcharge. Ask your
insurance agent about the cost of insuring vehicles you are interested
in before you make your purchase decision. Here are several other ways
that you can save money on your car insurance:
- Most companies
give a break to those who drive less than 7500 miles a year. If you
take public transportation instead of driving to work, your premium will
go down. Out of the question? Try carpooling.
- Make sure you get
all the discounts you are entitled to. You might qualify if your
vehicle has an alarm, for example. Discounts used to be given for such
safety features as airbags,
but they're fading away as those items become more commonplace.
Discounts might also be available if you insure your vehicles and your
home with the same company. People who pass a defensive-driving course
or don't smoke or drink often get discounts.
- Review the status
of all the drivers in your family with your agent. Most discounts apply
only to one portion of the policy, so don't expect dramatic savings.
- Increase
your deductible for collision and comprehensive. Switching from a $100
deductible to $1000 can reduce the collision portion of your premium by
30 percent, said Luedke. You'll still be covered for catastrophes, but
you foot the bill for fender-benders. Also, think twice about filing
small claims with your insurance: Why risk a premium increase?
- Shop
around. Instead of just renewing, study the fine print of your policy
to see if its terms -- or your situation -- have changed. Another
company might have better rates, but you won't know unless you shop.
Most insurers give rates over the phone and many via online computer
services, making it easy to compare premiums.
- Drop collision
coverage on older cars. Claims are limited to "book" value, so you're
not likely to get much anyway if you car is more than seven years old. A
good rule of thumb is to drop collision when the annual premium reaches
10 percent of your car's value.
- Be a good driver. Avoid
accidents and traffic violations and you will be rewarded with
good-driver discounts. Bad driving is expensive. The "safer you can be"
on the road, Luedke said, "the lower your premiums."
- Drop coverage for such extras as towing
costs or the expense of renting a car while yours is in the shop. The
savings are probably small, but your new-car warranty's roadside
assistance provision may provide them at no cost.
- Have your teenager
share the family car instead of owning his or her own. Be sure to tell
your agent if your son or daughter makes the honor roll or moves away to
college. Both qualify for discounts with most companies.
- If your group health insurance provides generous coverage, consider dropping the medical-payments portion of your policy.
- Keep your credit rating healthy. A growing number of insurers are considering a person's credit score when setting rates.
Now, you know
tips before buying car insurance, good luck!
Src :
http://auto.howstuffworks.com/buying-selling/cg-car-insurance-tips.htm
