A Guide To Car Insurance

Many people stick with the same insurance carrier year after year without ever shopping for a better deal. Blind loyalty to one insurer can cost you dearly. In a recent survey, Consumer Reports found that some drivers were paying twice as much for a policy than they would have with another insurer.


FINDING THE BEST RATES

Comparing premiums is easier than ever, thanks to online services such as Quicken Insurance (www.quicken.com/insurance) and InsWeb (www.insweb.com). While you can also use the Yellow Pages to canvass local insurance agents for quotes, online services let you compare multiple price quotes in minutes.

You should make this price comparison at least once a year. Still, it may not be a good idea to switch companies too often or arbitrarily. Sometimes loyalty pays. For instance, if you've been with one company several years and maintained a clean driving record, you may qualify for a safe-driver discount, which substantially lowers your premium. But if you're contemplating a switch, the new company may be willing to classify you as a safe driver. In addition, you can often get a discount for insuring more than one vehicle--or your home--with the same company.

To get an accurate quote, you'll need to provide information on the car or cars that you intend to insure: the make, model, year, trim line, and the vehicle identification number (VIN). You'll also need to give the age, sex, and recent driving record of all potential drivers. Some companies may also ask where you normally park your car, and inquire about any aftermarket accessories you may have installed to prevent theft. The insurer may independently check your driving history using public documents such as police records, and your insurance history through your current and former insurers.


BUY THE RIGHT AMOUNT

Car insurance is meant to protect you against catastrophic losses, such as a major accident or the theft of your car. Be prepared to absorb minor losses yourself, and you'll save a lot. Here are tips on separating the essentials from coverage you can probably live without.

Coverage you must have

Bodily injury liability. Should you cause an accident, the "liability" part of your insurance coverage pays the medical, rehabilitation, and, if necessary, funeral bills of your passengers, the other driver, his or her passengers, and any pedestrians involved. It also covers pain and suffering awards as well as legal costs.

Buy coverage that will pay at least $100,000 per person and $300,000 per accident. If you have sizable assets, consider increasing those limits to $250,000 per person and $500,000 per accident. Such added coverage will raise your premium at least 10 percent. We recommend that people with a high net worth have a separate "umbrella" policy to insure against a lawsuit seeking an amount beyond their auto policy's limits. You may need to buy higher insurance limits to qualify for an umbrella policy.

Property damage. This coverage pays to repair or replace another person's vehicle or other property damaged by your car. States typically require only $10,000 to $25,000. We suggest buying coverage of $100,000.

Uninsured and underinsured motorist coverage. This covers medical bills, rehabilitation, and funeral costs, as well as losses for pain and suffering for you or the passengers in your car when an accident is caused by a hit-and-run driver or someone who has little or no insurance. Get the same amount of this coverage as you do bodily injury coverage. That way, if someone who has no insurance hits you, your medical costs will be covered.

Coverage you'll probably need

Collision and comprehensive. Collision coverage pays to repair or replace your car no matter who or what caused the accident. Comprehensive pays to repair or replace your car if it's stolen or damaged as a result of a storm or other natural event. Coverage kicks in for the amount above your deductible. Choose the highest deductible you can afford to pay out of pocket--at least $500. Once the cost of this coverage equals 10 percent of your vehicle's book value, you might want to cancel it, since you will collect no more than your vehicle's market worth. Antique vehicles or cars with collector value sometimes are insured through a separate rider; or you may have to find a separate, specialty insurer.

Personal-injury protection. PIP reimburses you for lost wages and in-home care needed as a result of an accident. If you have separate health and disability policies, you can buy just the state-required minimum for PIP. The other policies should cover the balance of your needs.

Medical-payments coverage. Sometimes called med-pay, this covers medical bills for you and your passengers, regardless of who's at fault. When this coverage isn't automatically included in your policy, its costs are minimal. You may not require any if you have good health insurance. To protect passengers who may not have their own health coverage, you may want to carry at least $5,000 of this coverage.

Additional types of coverage

Roadside assistance. This coverage pays to have your vehicle towed. If you already have an auto-club membership or your car's manufacturer provides this service for free, don't buy this extra coverage.

Rental reimbursement. This coverage typically costs $30 per year and pays for a rental car--usually for up to 30 days--if your vehicle is stolen or is in the shop for repairs sustained in an accident. There's usually a cap on the amount you're reimbursed per day and per occurrence.


MONEY-SAVING TIPS

Ask for the top tier. Insurers sort customers according to their likelihood of filing a claim, then assign them to one of several categories commonly referred to as tiers. Top-tier customers who have had few or no claims in the past several years and live in neighborhoods where auto-theft rates are low, for example, can easily save 15 percent or more off the standard rate. But simply because you qualify initially or improve your driving record doesn't mean you automatically get top-tier status.

Check rates before you buy a car. The difference in premiums between one car or truck and another can be substantial. Much of that has to do with the cost of repairing collision damage, which can vary greatly even among seemingly similar vehicles.

Get equipment discounts. You may qualify for extra discounts if your car has current safety equipment such as air bags or antilock brakes. Also check about anti-theft equipment such as an alarm system, which can get you a break on the comprehensive part of your coverage.

Group your policies. Most insurers will give you a multiple-policy price break if you let them write your auto, home, and personal-liability coverage.

Improve your driving skills. Completing a certified defensive-driving course can reduce your premium in some states.

Kid factors. If you have children who drive, you'll save if they get good grades or if they attend a school located more than 100 miles from your home and don't use the car there.

Group discounts. Insurers award discounts to low-risk consumers who share a common affiliation such as a membership in an employee group, a company pension fund, or an alumni association. These so-called affinity discounts can be sizable, so if they apply to you, it pays to take advantage of them. Ask your insurer if any groups to which you belong qualify for such a discount. Alternatively, ask representatives of the groups if they work with any insurance companies.

Keep repair options open. Some insurers insist you use generic replacement parts or encourage you to bring your vehicle to certain body shops in an effort to cut claims costs. While this arrangement may lower your premium, you may want to preserve your flexibility by insuring with a company that lets you decide which parts are used (original equipment or aftermarket copies), and who does the repairs. In tests a few years ago, we found none of the aftermarket replacement bumpers tested fit as well as factory-original bumpers or stood up as well to low-speed impacts. We also had trouble making generic fenders fit properly.