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February 4, 2013

5 tips for buying cheap car insurance

By Robert DiGiacomo, InsWeb.com

When auto insurance is advertised as being “cheap,” do you get what you pay for? Or is it possible to find quality coverage for less?

The answer to these questions, experts say, is both yes and no –– you can trim car insurance costs by picking the lowest level of liability protection, which is $15,000 in many states. You can further cut costs by skipping “comprehensive” coverage for damage to or theft of your own vehicle, but you must weigh whether this risk is worth the cost savings.

At the same time, the high level of competition among car insurance companies means you’re likely to find competitive rates for whatever level of coverage you’re seeking. The key is to shop around at least once every few years, says Robert Hunter, director of insurance for the nonprofit Consumer Federation of America.

“If you do a careful job of shopping, you can get both –– a high-quality company with low rates,” Hunter says.

Here are five things to consider when shopping for the best car insurance deal.

1. Look for warning signs.Cheap car insurance

If a rate seems too good to be true, check with your state insurance department to ensure the company you’re considering is licensed to sell policies in your state, according to Michael Barry, a spokesman for the nonprofit Insurance Information Institute.

Beware of any company that doesn’t use an electronic or online system to accept premium payments, and beware of any insurers that insist on your claims being paid in cash, Barry says.

With so many insurers vying for auto business, there’s a “reputable company” for everyone, according to Amy Bach, executive director of the nonprofit consumer group United Policyholders.

“Because there’s so much competition among auto insurers, you should not need to patronize a company whose finances are not solid, nor a company that isn’t going to provide you with decent claims service,” Bach says.

2. Consider more than just your assets.

Although it may seem more practical for those who aren’t homeowners or who lack major assets to carry the lowest amount of coverage, there are consequences of such actions – costs of paying claims for underinsured motorists ultimately are passed along to all consumers in the form of higher premiums, according to Bach.

But rather than being underinsured, it’s better to go beyond the minimum coverage and offset the additional cost by raising your deductibles, Bach says.

“If you’re underinsured, you’re basically shifting responsibility to someone else for your own conduct,” Bach says.

3. Check into ‘pay as you drive’ programs.

Another way to potentially get cheaper coverage is to pick “pay as you drive” insurance. There are two types: One is based on miles driven, which are verified by an odometer check or a device installed in your car, according to the Insurance Information Institute.

“You may assume you’re doing 12,000 miles a year,” Barry says. “You put the device in your car, and realize it’s 6,000. That will almost always result in premium rate savings.”

The second type of “pay as you drive” policy involves the use of a device that monitors driving habits – such as speeding or sudden braking – to set rates. Such technology can change bad driving behavior and can lead to premium discounts.

4. Be smart and be safe.

Typically, the best car insurance rates go to drivers with good credit scores and good driving records, experts say. So if you want to lower your insurance premium, pay your bills on time and don’t overspend on your credit cards, and make sure you don’t get into any wrecks or get any traffic tickets.

Aside from your credit score and your driving record, other factors that go into setting your rates are how much you use your car, the type of vehicle you drive, where you park the vehicle at night, your age and your gender.

5. Weigh collision coverage.

If your car, truck or SUV is worth less than $4,000 because of its age or condition, you might want to consider dropping collision coverage. This coverage pays for damage that you cause to other cars or objects.

Comprehensive, which covers theft, usually is worth the relatively small additional cost, experts say. As its name implies, comprehensive also covers other kinds of trouble, such as a car being damaged in a major storm or a tree falling on it.

“Don’t ever get rid of comprehensive,” Barry says. “Some people cutting costs opt out of comprehensive. It’s almost always a mistake.”


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