Tuesday, June 12, 2007

Save money on auto insurance

The best ways to maximize your income is spend less of it, especially for a losing proposition like purchasing auto insurance. Why is this a losing proposition? Auto insurers have a goal to pay around 60 to 80 percent of all premium dollars received on claims. This is like investing $1 and getting an average return of negative 40%. No one would invest like that. So why buy insurance? To pay for REALLY big claims, the unexpected accident that totals your vehicle and causes serious injury. But in the meantime, let’s focus on saving premium dollars. Here are some steps you can take.

1. SHOP. Take advantage of a soft insurance market by shopping around. Times are good for insurance companies. Solid returns in equity markets and positive results in underwriting have company coffers flush with money. Some companies will take advantage of the good times to expand their customer base, and nothing attracts new customers like lower premiums. A particularly good time to investigate your alternatives is when your current policy is up for renewal. Most companies start renewal processing 45 – 60 days before your policy expires so look for your policy’s renewal declarations (Dec.) page in the mail. The Dec. page is particularly useful since it lists your vehicles with VIN numbers, drivers, coverages and rating address printed neatly on one sheet. When you ask insurance professionals to quote you, you can scan and fax the Dec. page around for a neat apples to apples comparison of rates. Independent agents have rating software to match you to the best companies. Single company agents only have one insurer to quote through, but still may be worth a look. Agents may even recommend coverage changes to improve your policy.
2. Increase your deductibles: For many people, raising the deductible on their auto insurance is a good way to cut the cost of the policy. Sometimes you can reduce your annual premium by 10 percent or more if you increase your deductible from, say, $250 to $500. If $500 is no stretch, move it to $1,000. If you do this, you’ll be your own insurance company for small claims, so make sure you have the financial resources to handle the larger deductible when the time comes.
3. Narrow the scope of your coverage: One seemingly obvious solution is to eliminate certain types of coverage from the policy. Most states require you to have liability coverage, but other non-mandatory coverages may be expendable. Be careful, though, because you don't want to be underinsured if you're in an accident. Even though medical payments, uninsured motorist, collision, and comprehensive coverages may be optional in some states, it's usually not advisable to get rid of them altogether. Be aware of your financial situation and get the right amount of coverage needed to protect your assets and get yourself back on track.
4. Drop Comp & Collision. If you drive an older car it's worth investigating the dropping of collision and comprehensive coverage. Ask yourself, if this car were totaled, would I want or need the insurer to fix it? Is there a loan on the vehicle? If the answer is no, drop the coverage. Be mindful of what this does to your other coverages as some companies will not offer their best programs to policies with liability-only vehicles. If you drop collision, consider adding UMPD or Uninsured Motorist Property Damage (if available); this will cover your vehicle (up to ACV or policy limits) if you’re damaged is not-at-fault and caused by an uninsured driver.
5. Drop what you can live without: Consider dropping any options you may have added to your policy like towing and labor, replacement car rental, accidental death or any other loss of income coverage. Removal of these items will reduce your premium somewhat, but will also expose you to the costs in question. So ask yourself: Can you afford the occasional tow? Do you have a spare vehicle if yours is in the shop for 30 days? If the answer is yes, live without the coverage.
6. Evaluate your coverage amounts: You can also reduce the amounts of certain coverages. Again, be careful. You don't want to be inadequately insured, especially in the area of liability. You should almost always keep your liability coverage at as high a level as possible because this is where you can have the greatest losses. You may be able to lower your coverage amounts in other areas (such as collision and comprehensive). Do you park a vehicle in the winter? Drop coverage to Comp. only. Now don't rush into a decision just to save a few bucks. Talk it over with your agent first.
7. Drive less: If you drive less than a certain number of miles in a year (say, 7,500), you may qualify for a low-mileage or pleasure use discount. If your insurer offers this discount, try to limit your driving as much as possible. If you commute to work, try telecommuting, four day work weeks or use public transportation instead of driving. When you go away on vacation, fly, take the train or rent a larger vehicle for your trip. Be careful not to lie or even stretch the truth with your insurer; if you commute 5 days a week, don’t tell them it’s for pleasure use; you’re setting yourself up for a denial of coverage confrontation.
8. Don't use your car for business purposes: Since work-related driving generally subjects you to a higher premium than pleasure driving, it may be in your best interest to stop using your car for business purposes.
9. Drive more safely: You may be eligible for a price break on your policy if you maintain a clean driving record for a specified period (usually three years). Some companies offer claims free discounts so review # 5 and ask is the coverage worth losing discounts in the future. A clean driving record generally means no accidents, serious moving violations, drunk driving convictions, etc., during that period. The best way to qualify for the applicable discount is to drive carefully and defensively at all times.
10. Buy a low-profile car: Drive your fathers Oldsmobile. Cars are rated on a risk scale for auto insurance purposes. In general, sports cars and other high-performance, flashy vehicles are classified as higher risks because they are common targets for thieves and vandals, and because statistically, the people who own them tend to drive more recklessly. If you own such a vehicle, you will likely pay a higher premium than if you owned a station wagon, sedan, or other low-risk vehicle.

11. Move: Insurance companies rate everything by territory. If you live in a rural community with little crime and traffic congestion, your premium will generally be lower than if you live in an urban area where your car is more likely to be stolen, vandalized, or involved in an accident. Granted, you shouldn't move just to cut your auto insurance costs. However, one community may be in a lower rated territory than another. This may be one of many factors in your decision if you're thinking about relocating.
12. Keep your car in a garage or at least off street. : Cars parked in garages are less likely to be stolen, vandalized, or struck by other vehicles. Using a garage to store your car may entitle you to a slight premium reduction.
13. Inquire about multifamily/multipolicy discounts: You may receive a discount from your insurance company if you buy more than one type of insurance through that same company (e.g., auto and homeowners). A discount may also apply to your auto insurance if you insure multiple cars under the same policy or with the same company.
14. Ask you agent about other discounts: Other discounts may be available if you meet certain criteria, so ask. Examples include discounts for not smoking, participating in a car pool, staying with the same company for a number of years, being over 50 years of age, and having a covered child who attends school at least 100 miles away or paying automatically by bank draft.
15. Beware of fees: Policy fees, reinstatement fees, bounced check fees, SR22 fees, billing & installment fees, stop payment fees. The list is long and insurance companies love to get extra money with no risk to them. Ask yourself what can you do to get your own financial house in order and stop paying money for nothing. Can you use bank draft and make payments automatically? Doing so will eliminate half the fees listed and could save you $60 to $100 per year.

Pay some attention to your auto policy. The savings ideas listed may take several years to accomplish but will save you big bucks in the long run.

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