Beating High Insurance Costs

By Luigi Fraschini

There is no getting around it. As we told you in our last feature, the rising costs of medical care, vehicle repair, jury awards, automobile theft, and fraud are expected to drive up auto insurance rates by six percent in 2004, according to an analysis by the Insurance Information Institute (III). This comes on top of an 8.5 percent rise in insurance costs in 2003. The average driver will pay just under $900 for auto insurance next year, and that high figure has left many people wondering if there are ways to save money on auto coverage.

The good news is, there are, but first it is helpful to understand the factors that go into determining your individual car insurance rate. One thing is certain: car insurance isn't a one-size-fits-all purchase. Instead, what individual drivers actually pay varies by state, by insurance company, and by motorist.

Underwriting factors that influence the cost of coverage often include such obvious items as type of car and specific safety features, the number of miles driven and type of driving; driving record, including speeding tickets; and the age, sex and experience of the driver. But frequently such non-obvious factors as the claim records of all the members of your family, including the number and severity of accidents, plus your credit score also figure in prominently.

What can you do to lower your overall cost while maintaining reasonable amounts of coverage? Here are some methods you should think about, according to the III:

• Raise your deductible. Higher deductibles on your auto could produce savings of 15-30 percent or more, although should you be involved in a collision you will be required to pay that higher deductible out of your own pocket before insurance payments come into effect. These days, though, a low deductible like, say, $500 could end up costing you much more than it is worth.
  
  
• Reduce coverage on older cars. Consider dropping collision and/or comprehensive coverages on older cars, because when you analyze it, it is rarely cost-effective to continue to buy these coverages on cars worth less than 10 times the amount you would pay for the coverage.
  
  
• Buy home and auto policies from the same insurer. Some companies that sell homeowners, auto, and liability coverage will take five to 15 percent off your premium if you buy two or more policies from them. That can result in serious savings with no loss in coverage amounts.
  
  
• Maintain good credit. While this seems irrelevant, insurers are increasingly using credit-based insurance scores to determine auto coverage premiums. Why? Because they have found statistically that people with good credit tend to file fewer claims. All else being equal, a person with a good insurance score will pay much less for insurance than someone with a poor score.
  
  
• Shop around. This only stands to reason but when it comes to car insurance many people don't do it. Before you fall in that trap, you should know prices vary from company to company, so it could well pay to surf the Net or make a few phone calls. Your state insurance department may also provide comparisons of prices charged by major insurers. To do a thorough job, get at least three price quotes so you'll know where you stand.

Finally, compare insurance costs before buying a car. As with shopping around for insurance itself, this is a step many don't take, but it can pay great dividends. Your premium is based in part on the car's sticker price, the cost to repair it, its overall safety record and the likelihood of theft. Because several factors are involved, two vehicles that are similar in price might cost widely different amounts to insure. Many insurers also offer discounts for features that reduce the risk of injuries or theft -- things like air bags, anti-lock brakes, daytime running lights and anti-theft devices. At the same time, cars that are favorite targets for thieves cost more to insure. To help with this determination, you can access information from the Insurance Institute for Highway Safety Web site.

So while auto insurance continues to get more expensive, you do have some weapons in your arsenal to help mitigate the increase and keep more money in your pocket. For additional information on auto insurance, visit the III Web site.


Auto journalist Luigi Fraschini pays more than he'd like in automobile insurance... but he's convinced it's worth it. Next Feature>>