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Car Insurance: Shop Around - Please!

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On: Thu, Sep 8, 2011 at 12:17PM | By: Peter C Sessler

Car Insurance: Shop Around - Please!

If you have a car, then you have to have car insurance, and for many car owners, the insurance premium can be the deciding factor in what type of car they drive. In some cases, the monthly insurance premium can be as much as the car payment itself. Insurance premiums can vary widely between companies, and if you think getting insurance from a big company guarantees you lower premiums, you’re wrong. You have to shop around.

The premium a driver pays is based on a number of variables. Most people think that their driving record is a factor. Obviously, someone who has accumulated speeding tickets will pay more, and so will someone who owns a sports or high performance car. Putting a lot of miles on your car is another factor, and having a young driver in the household will run up insurance costs.

However, there are other variables that insurance companies use that aren’t generally known. These include credit history, what a person does for a living, if the person owns or rents, if the person is an American citizen or not (and if not, what country they are from), and marital status. All these factors are taken into account when the insurance company computes the premium—and make no mistake, the goal is the higher the premium the better. And, of course, the insurance companies won’t tell you how they determine rates, especially in light of the many coverage options that are available. Shopping for insurance is, therefore, difficult—so many people don’t even try.

In a recent insurance industry study, it was found that one-third of all drivers haven’t shopped for car insurance for six years or more, and that another one-fifth haven’t bothered to shop at all.

There are several ways to save. The first, as I’ve said, is to shop around. Most policies today renew every six months. Start looking around a month before the renewal date. If you let your policy lapse, even for a few days before you get another insurance company, the new company will charge you higher premiums because they’ll consider you to be a "new" insurance customer. You’ll then have to wait for another six months before their better rates come into effect.

Also, consider shopping from the several "direct writer" insurance companies. These companies do not use insurance agents and sell directly to the public. These include GEICO, Colonial Penn, and USAA.

There’s no point in getting more insurance than you need. If you don’t own a house, have lots of assets, and a fat bank account, you don’t need lots of insurance. If you get into a bad accident, you will most likely be sued for all you’ve got and lots more—more than a typical policy would cover you for anyway. Now if you do have a lot of assets, you may want to get an umbrella policy. The cost isn’t much, about $300 for $1 million per year.

Take a close look at the deductibles you’re paying, especially when it comes to collision and comprehensive coverage. If you’ve got a car loan, then you’re obligated to carry collision with the typical deductible of $500. There are higher deductibles, too, but think carefully and decide what you can afford in case of an accident. If your car isn’t worth more than $4,000 or so, having collision coverage is probably a waste.

Compare what the car insurance medical payments benefits pay with those from any health insurance benefits you may have. Your health benefits plan may already cover you and your family. Glass breakage and rental reimbursement coverage may also not be worth it if they cost too much.

And there are some common sense things you can do. Keep your driving record clean and look carefully at what car you’re looking to buy, if you are in the market for a new car. A BMW is going to cost a lot more than a Fusion. On the other hand, a less expensive car, such as the Honda Accord, is particularly popular among car thieves, so it has higher premiums.

A word about young drivers: Typically, a young driver is added to the family policy. If the young driver gets into a bad accident, they’ll take your house. Some families have gotten separate policies for their young drivers thinking that this will protect them. This does help, but the household owner is still liable. The only time they are not is when the young driver is over 21. So it might be wise to place any young driver, over the age of 21, in a separate policy. It might cost more, but it does offer protection for the family, especially as many "young" drivers are now staying home longer and longer.

Finally, ask for any discounts that you may qualify for. Companies won’t give them to you unless you ask. A study has shown that Americans are paying $300 million more in insurance premiums than they need to simply because they haven’t asked for discounts.


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