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All Contents © 2020The Kiplinger Washington Editors
By Miriam Cross, Associate Editor
| From Kiplinger's Personal Finance, May 2017
Shopping around for auto insurance may not be your idea of fun, but comparing prices for a new policy every few years—or even more often—can pay off big. Premiums for two people in the same zip code with the same driving record can differ by a thousand dollars or more. The reason: Companies weigh risk factors or black marks on your record differently. For example, adding a teen driver or moving to a new part of the city can cause your premiums to spike, and some insurers penalize you after a single accident or speeding ticket. But other companies may raise rates more gently when your teen starts to drive, or they may overlook that accident.
Follow these six steps to save money on your insurance without compromising valuable coverage. Keep in mind that insurers typically cut you a break of 5% to 20% for bundling your auto policy with homeowners or other types of coverage, so get quotes for separate policies as well as for your whole panoply of insurance.
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Before you start shopping, study your renewal notice to find out how much coverage you already have so you can compare new policies with the same limits. Also make sure you have the right amount of insurance. “The biggest mistake I see is underpaying for uninsured motorist coverage,” says Spencer Houldin, president of Ericson Insurance Advisors, in Washington Depot, Conn. He usually recommends a half-million dollars in coverage—far more than many states’ minimums. For a more accurate quote, know your vehicle’s safety features, how many miles you drive each year, your claims history, and information about accidents or moving violations you’ve had within the past five years. You can find a checklist of details needed to finalize a quote at a www.insurance.com .
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Begin at your state insurance department’s website via NAIC.org. Most states have consumer guides with general advice on how to shop for policies and trim premiums, and some states have a pricing report or rate-comparison table. Find the driver profile that is most like you, and choose the six or so companies with the lowest prices, says Bob Hunter, director of insurance for the Consumer Federation of America, who follows this method himself when reshopping his auto coverage. Before you start calling insurers, look up the complaint ratio for each company (see step 3) and discard the two with the highest complaint ratios. Call the remaining four, and request quotes for identical coverage.
Cover your bases by comparing rates from insurers at Insurance.com or at InsuranceQuotes. Enter a few details about yourself and your car into the search tool and you’ll receive two to five quotes online or from the insurance companies via phone or e-mail. If you are eligible for a USAA policy because you or a relative has served in the military, you may need to look up its policies separately, says Hunter. For some companies, such as Allstate and State Farm, it may be better to work with a local agent, which you can find through their websites.
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A low rate isn’t worth it if your insurance company has poor customer service or is stingy with payouts. Look up the insurer’s complaint record at the National Association of Insurance Commissioners’ Consumer Information Source. Type the company’s name and choose “property/casualty” in the drop-down menu, then click on “closed complaints.” (To see the actual number of complaints in your state, click on “closed complaint counts by state.”) Select “closed complaint ratio report” and then “private passenger.” You’ll see a ratio of the insurer’s market share of resolved complaints to the company’s market share of auto premiums. The national median is 1.00; companies with ratios below the median have a better track record than those with ratios above the median.
You can also review the insurer’s financial strength by searching for the company at A.M. Best’s or Standard & Poor’s website (you will need to register). Insure.com surveys customers about their experience with insurance companies, including claims service (see Best Car Insurance Companies). J.D. Power also rates firms on the shopping process and on claims satisfaction (go to J.D. Power.com ratings and look under “Automotive”).
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You might be able to lower your premium by locking in more discounts. For example, if your child is getting good grades, you could get a break of up to 25%. Or your rates could drop if your teenager moves away to college and doesn’t take a car. You could also earn discounts for getting married, reducing your commute or improving your credit score. Some states even allow you to take a defensive-driving course in exchange for a rate reduction. (Look for a list of discounts on your insurer’s website, the buyer’s guide on your state insurance website, or at CarInsurance.com).
You could also trim premiums by raising your deductible or dropping collision coverage altogether on an older car.
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You might or might not be able to persuade your current insurer to lower your premium because you found a better deal elsewhere. But it doesn’t hurt to ask. If nothing else, you may uncover new discounts that lower your premiums. Plus, your insurer may actually bump up your rate if you appear to be a customer who doesn’t shop around. This practice, known as price optimization, uses personal consumer data to gauge your likelihood of shopping around for policies. If you are on record complaining about your rate or have recently switched insurers, you may look like a more active shopper. (Note that price optimization is illegal in 19 states and the District of Columbia.)
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A “pay as you drive” program, such as Allstate’s Drivewise, Progressive’s Snapshot or State Farm’s Drive Safe & Save, is ideal for those who drive sedately. Plug a monitoring device into your car or allow a smartphone app to track your driving habits and you can earn discounts of up to 50%, depending on mileage, the times of day you drive, your speed, your braking habits and other factors. You may also get a small discount for signing up.
If you’re willing to go through the hassle of installing the device and sending it back, be sure to ask about the data your insurer is collecting. Most programs promise not to raise rates using collected data (and instead simply withhold any discount). But Progressive, for example, cautions that in certain states, risky driving behavior may result in higher rates.
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An independent agent who works with multiple insurers can help you compare policies—including those from under-the-radar but reputable companies too small to place ads on sports broadcasts. More importantly, the agent will recommend limits based on your situation, highlight nuances in policies that you might have glossed over and be your advocate in the event of a claim. An agent can also find a policy that will pay for replacement “OEM” parts (equipment made by the original manufacturer, rather than a third party) or cover repairs at your body shop of choice.
To find an independent agent, ask friends and family for recommendations, or search by ZIP code at TrustedChoice.com. Ask prospective agents how many companies they represent, why they represent those companies and how they will help during a claim, suggests Rebecca Korach Woan, CEO of Chartwell Insurance Services, in Chicago. You want someone who will actively reach out to you at renewal time, too, to review coverage. Feel free to tell an agent you want to save money on your policy, but remember that you are getting expertise and hand-holding, so you shouldn’t expect rock-bottom rates. As compensation, agents receive a commission of 10% to 12% paid by the insurer you choose.
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