When it comes to auto insurance, you want to be adequately
covered if you get in an accident, but you don't want to pay more than you have
to. Unfortunately many people are doing just that, simply because they don't
want to spend time shopping for car insurance. It's not inherently enjoyable,
after all, despite how it looks in commercials featuring disgruntled cavemen
and joke-cracking spokespeople.
But by doing some comparison shopping, you could save
hundreds of dollars a year. When one of our editors used a rate-comparison
service, he got basic coverage quotes for his two old cars that ranged from
$1,006 to $1,807 — a difference of $801 a year. If you're paying thousands to
your current insurance company because you have a couple tickets, an accident
or an out-of-date and unfavorable credit rating, shopping your policy against
others might be well worth the effort. Look at it this way: You can convert the
money you save into buying something you've wanted or needed for a long time.
Step 1: Decide How
Much Coverage You Need
To find the right auto insurance, start by figuring out the
amount of coverage you need. This varies from state to state, so take a moment
to find out what coverage is required where you live. You will find a list of
each state's requirements and an explanation of the various types of insurance
in "How Much Car Insurance Do You Need?" Also, check out
"Little-Known but Important Car Insurance Issues," which has a
glossary of basic insurance terminology. If you're a first-time driver
go and compare car insurance, review this guide from the National Association of
Insurance Commissioners. Now you're ready to make a list of the different types
of coverage you are considering.
Once you know what's required, you can decide what you need.
Some people are quite cautious. They base their lives on worst-case scenarios
and insurance companies love that. Insurance companies are in the risk business,
and they know a policyholder's likelihood of being in an accident, as well as
how likely it is for a car to be damaged or stolen. The insurance company
crunches the information it has collected over decades into actuarial tables
that give adjustors a quick look at the probability of just about any
occurrence. You don't have those tools at your disposal, so your decision will
depend on your own degree of comfort in assuming a certain level of risk.
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Experts recommend that if you have a lot of assets, you should
get enough liability coverage to protect them. Let's say you have $50,000 of
bodily injury liability coverage but $100,000 in personal assets. If you're at
fault in an accident, attorneys for the other party could go after you for the
$50,000 in medical bills that aren't covered by your policy.
General recommendations for liability limits are $50,000
bodily injury liability for one person injured in an accident, $100,000 for all
people injured in an accident and $25,000 property damage liability (usually
expressed in insurance shorthand as 50/100/25). Here again, let your financial
situation be your guide. If you have no assets that an attorney can seek, don't
buy coverage unnecessarily.
Your driving habits might also be a consideration in
determining the coverage you need. If your past is filled with crumpled
fenders, or if you have a lead foot, or if you make a long commute on a
treacherous winding road every day, then you should get more complete coverage.
Collision coverage pays for damage that your car experiences in an accident or
damage from hitting an inanimate object (a tree, light post or fence, for
example). Comprehensive coverage addresses damage that didn't occur in a
collision — such as from fire, theft or flood. It also covers damaged windshields.
Keep in mind that you don't have to buy collision and
comprehensive coverage. Let's say your vehicle is older, you have a good
driving record and there is little likelihood that your car would be totaled in
an accident, but a high likelihood of it being stolen. Then you could buy
comprehensive coverage and skip the collision insurance.
Step 2: Review Your
Current Insurance Policy
Read through your current policy or contact your auto
insurance company to get the information you need. Jot down the amount of
coverage you have now and how much you are paying for it. Take note of the
yearly and monthly cost of your insurance, since many of your quotes will be
given both ways. Now you have a figure to beat.
Step 3: Check Your
Driving Record
You should know how many tickets you have had recently. If
you can't remember how long that speeding ticket has been on your record, check
with your state's department of motor vehicles. If a ticket or points you
earned are about to disappear, thus improving your driving record, wait until
that happens before you get quotes. Nothing drives up the price of insurance
like a bad driving record.
Step 4: Solicit
Competitive Quotes
Now it's time to start shopping. Set aside at least an hour
for this task. Have at hand your current insurance policy, your driver license
number and your vehicle registration. You can begin with online services. If
you go to an online site to get a quote for an insurance rate, you can type in
your information and begin to build a list of companies for comparative quotes.
Keep in mind that not all insurance companies participate in these
one-stop-shopping sites, however. If a recommendation from friends and family
or other research points to a company that you think might be a winner, you can
go directly to its Web site or call its toll-free number to get a quote.
Each quote form takes about 15 minutes each to complete. It
might be well worth your time, since if the entire shopping process takes you
two hours and you save $800, you're effectively earning $400 an hour.
When you use these sites, you might not get instant quotes.
Some companies may contact you later by e-mail. Some that are not "direct
providers" might put you in touch with a local agent, who will then
calculate a quote for you. (A direct provider like Geico sells insurance
policies directly to consumers. Other companies, such as State Farm, sell
insurance through local agents.) You can learn more about the various kinds of
agents here.
Step 5: Gather Quotes
and Company Information
While you're researching companies, take careful notes so
you can easily make price and coverage comparisons. Keep a list of:
• Annual
and monthly rates for the different types of coverage. Make sure to keep the
coverage limits the same so you can make apples-to-apples comparisons for cost
and coverage.
• The
insurance company's 800 telephone number, so you can get answers to questions
you couldn't find online.
• The
insurance company's payment policy. When is the payment due? What kinds of
payment plans are available? What happens if you're late in making a payment?
In later steps, you'll add some more information to this
list.
Step 6: Work the Phones
Once you have gathered information online, it's time to work
the phones. Contact those companies from which you haven't been able to get an
online quote. Doing the research by phone can actually be easier and faster
than on the Internet, provided you have your driver license and vehicle
registration close at hand. When you get a quote over the phone, be sure to
confirm the price by asking the representative to e-mail the quote to you.
Step 7: Look for
Discounts
When you're making these calls and shopping online, make
sure you explore all your options relating to discounts. Insurance companies
give discounts for such things as a good driving record, your car's safety or
security equipment and certain occupations or professional affiliations. Some
companies are now offering lower rates if you enroll in "pay as you
drive" plans. Some will give substantial discounts for young drivers in
the family who have high grade-point averages. (You can use this as an
incentive to your teen drivers and offer to share the savings with them.) Also
consider using the same insurance company for home and auto policies. That will
usually get you a better price. For more guidance on discounts, check out
"How to Save Money on Car Insurance" and "Top 10 Ways To Lower
Your Car Insurance Bill."
Step 8: Assess the
Insurance Company's Track Record
You now have most of the price and coverage information that
you need to make a decision. You can see which company's coverage is least
expensive, but it's important to keep in mind that cheap isn't the only basis
for choosing an insurer. How do you know which company is financially sound?
How do you find out if an insurance company is going to treat you right —
particularly in the event of a claim?
Here are some places to check to develop a clearer picture
of an insurance company's track record for fairness, financial stability and
customer service.
1. Use the National Association of Insurance Commissioners'
Consumer Information Source to access information about insurance companies,
including closed insurance complaints, licensing information and key financial
data. You also can visit your state's department of insurance to check consumer
complaint ratios and basic rate comparison surveys.
2. Consider contacting an independent insurance agent for
additional information about a company.
3. Check out the financial strength ratings for an insurance
company by referring to the ratings from A.M. Best and Standard & Poor's
(registration may be required).
4. Review consumer satisfaction surveys from J.D. Power and
Consumer Reports (subscription required).
5. Ask friends and family about their insurers and whether
they're satisfied with them. In particular, ask them how their insurance
companies treated them if they had a claim. Did they get fair, straightforward
service? Or was it a hassle to get the matter resolved?
Step 9: Review the
Policy Before You Sign
When you're done your research and zeroed in on a company,
read over the main points of the policy. In addition to verifying that it
contains the coverage you've requested and priced, it's a good idea to find out
if the policy states that "new factory," "like kind and
quality" or "aftermarket parts" may be used for body shop
repairs, says Dennis Howard, director of the Insurance Consumer Advocate
Network. If the policy has such a requirement, think hard about whether this is
the company for you, particularly if you own a relatively new car that you plan
to keep for a while. In this case, it's best to know at the outset that the
insurer will pay for original manufacturer parts, rather than try to fight
later, when you have a claim.
Step 10: Cancel Your
Old Policy; Carry Your Proof
After you have secured the auto insurance policy you want,
cancel coverage with your existing insurance company. If your state requires
you to carry proof of insurance, make sure you put the card in your wallet or
the glove compartment of your car.
Finally, here's a quick checklist to keep you on track:
• Determine
your state's minimum insurance requirements.
• Consider
your own financial situation in relation to the required insurance and consider
whether you need to increase your limits to protect your assets.
• Review
the status of your driving record — do you have any outstanding tickets or
points on your driver license?
• Check
your current coverage to find out how much you are paying.
• Get
competing quotes from Internet insurance Web sites and individual companies of
interest to you.
• Make
follow-up phone calls to insurance companies to get additional information
about coverage.
• Inquire
about discounts.
• Evaluate
the reliability of the insurance companies you're considering by visiting your
state's insurance department Web site, reviewing consumer surveys and talking
to family and friends.
• Review
the policy before finalizing it. Remember to cancel your old policy.
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