(Photo illustration by Sara Kennedy / NWautos staff)
The ideal way to save money is to exert effort once and automatically reap savings over and over again, every month. That's why examining your car insurance makes a lot of sense.
Auto insurance prices vary widely. On average, car insurance cost Americans $789 per vehicle annually in 2008, the most recent year of data provided by the National Association of Insurance Commissioners.
"In an age when people are cutting out cable television, it pays to look at car insurance," says Des Toups, managing editor of CarInsurance.com.
Here are ways to save on car insurance:
Compare
If you think all auto insurance rates within a state are about the same, you're wrong. Premiums can be very different for the exact same policies, depending on what factors an insurer chooses to emphasize in its rate formula.
"It's a calculated bet," Toups says. "The insurer asks, 'What's the least amount of risk we can take to make the most amount of money?' That's why the numbers are so different."
For the youngest drivers, comparison-shopping could save about $1,100 a year, according to a study by CarInsurance.com. You might think you get better service from higher-priced insurers, but there seems to be no correlation, according to a study by the Consumer Federation of America.
"Many people stick with the same insurance carrier year after year without ever shopping for a better deal," Consumer Reports says in its guide to car insurance. "Blind loyalty to one insurer can cost you dearly."
You can request quotes by phone or online. For online quotes, you might want to set up a separate, free email account at Hotmail, Gmail or Yahoo to receive them so they don't litter your regular email inbox.
Bundling
Like bundling your cable, phone and Internet access with one company, you can get discounts for bundling your insurance with a single insurer, says Jim Fults, associate vice president of auto and personal insurance at Fireman's Fund Insurance. At Fireman's, he says, customers can save $400 to $600 a year by bundling auto and home insurance.
If you have multiple vehicles with the same company, your most expensive driver will be assigned, by default, to the most expensive car. So if your teenager will drive the Honda far more than the Lexus, make sure the teen is listed as primary driver of the cheaper vehicle, Toups says.
Deductibles
A deductible is the part of the bill you pay out-of-pocket before insurance kicks in. The higher the deductible you're willing to accept, the lower your premiums will be. Changing from a $200 deductible to $1,000 could save you 40 percent, says the Insurance Information Institute.
"I think people would be really surprised, when they looked at changing a deductible of just $500 or $1,000, by what that does to the price [of premiums]," Fults says. "For some vehicles, it might move it considerably. In other cases, it might not."
Personal-finance experts typically advise choosing the highest deductible you can financially stomach if it will give you big price breaks on premiums.
Big-brother devices
There are some new high-tech devices that insurers are starting to offer. For example, some devices will block the use of cellphones in a moving car, often used for teenage drivers, Fults says.
Insurers are also starting to introduce optional "telematic" devices, which, once installed on a vehicle, collect data about your driving habits for the insurance company. You get a discount for agreeing to use one, and your rates are based on your driving habits.
Such devices are available from several insurers and are allowed in most states. Insurance companies say the devices are used only for discounts, not for raising premiums, Toups says.
"From the insurer's point of view, these things are meant to reward and isolate those low-risk drivers," he says. "You're signing up for the prospect of a discount."
Credit
You wouldn't think your proficiency at paying bills would have anything to do with whether you'll crash your car, but auto insurers insist there's a link. Drivers with problems on their credit reports are more likely to file claims, they say, and are charged higher insurance rates in states that allow tying rates to credit.
"Credit has become, in the last 10 years, a very widely used and fairly significant part of the calculation of what your final price will be for auto insurance and home insurance," Fults says. "It was introduced in the 1990s and has slowly been incorporated into every carrier now."
A CarInsurance.com study showed that drivers with credit scores over 750 save an average of $783 a year compared with drivers in the same age bracket with average scores.
Check your credit report once a year for free from each of the three major credit bureaus at AnnualCreditReport.com.
Discounts
Make sure you're getting all the discounts you're entitled to — for driving low miles every year, for example. A teen driver, who can raise rates 50 percent, can get a discount if he or she has good grades, typically at least a B average, Toups says.
Taking time annually to review your coverage with your insurer will ensure you're getting those discounts, Fults says. You'll not only incorporate your life changes into your auto insurance, but you'll learn about the insurer's new products and pricing, which change often.
Drop collision
It might be worth dropping collision coverage on older cars that aren't worth much. Consumer advocate Clark Howard says the time to consider dropping collision is when cars get to be about eight years old. His rule of thumb: If your annual premium for collision and comprehensive is more than 10 percent of your car's value, remove collision coverage and just pay the liability premium. Find your vehicle's private-party sale value at such websites as KBB.com and NADAGuides.com.
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