Car Insurance Know-How, Part One:
How to Get the Best Deals
by Wendy Cholbi
Signing up for auto insurance can be daunting, but with a healthy dose
of common sense, a little patience, and a willingness to do some
comparison shopping, you'll be well on your way in no time.
| "It really does
pay to compare rates. You may receive quotes that
vary by thousands of dollars." |
First, let's go over some basic definitions. There are four basic
categories of car insurance:
Liability coverage. This type of insurance pays the costs when you are
legally liable for injury or damage to the property of others while
driving an insured vehicle.
Physical damage coverage. This pays for the damage to your own
(insured) car.
Collision coverage. This pays for the repair of your car or
replacement at its market value, regardless of who was at fault.
Comprehensive coverage. This pays for repair or replacement if the car
is stolen or falls victim to an event such as a fire, flood, or
hailstorm.
Now we're ready to talk strategy. One of the first things you should
do is find out what types and amounts of insurance are required in
your state. Your state's department of transportation or motor vehicle
division should be able to provide this information. Insurance
regulations do vary from state to state, and the regulations can
impact the cost of insurance.
You should also consider your reason for getting insurance. If you are
buying a new car and are planning to take out an auto loan, for
example, you may be required to take out more insurance. This is to
protect the loan company from the event of your nonpayment if your car
is totaled. If you are leasing a car, the insurance requirements may
be very stringent. In this case, since the automobile company is not
selling the car to you, it has a vested interest in seeing that the
car is undamaged when you bring it back at the end of the lease.
If you have a current policy and are simply rethinking it or it's time
to renew, take a good look at what you're paying for. You may be able
to save some money by deciding exactly what you need and what you
don't. If you aren't leasing or don't have a brand-new or extremely
valuable car, you may not need a high level of insurance. Consumer
Reports suggests buying collision and comprehensive coverage if
your car is less than four years old or is worth more than $4,000.
Otherwise, you may want to consider reducing or dropping such coverage.
If you do need comprehensive or collision insurance, be aware that the
higher the deductible you're willing to accept, the less your payments
will cost. The deductible is the amount of damage you pay for
out-of-pocket before the insurance kicks in. For example, if you have
a policy with a $500 deductible, and the damage to your car will cost
$1000 to fix, you'll pay the first $500 and the insurance company will
chip in the rest.
Now you're ready to comparison shop. In auto insurance, it really does
pay to compare. Insurance companies often target a certain segment of
the population, making policies less attractive to nonconforming
customers by charging more. That's why you may receive quotes that
vary by thousands of dollars.
Be patient and persistent. It's not always easy to compare rates.
Consumer Reports offers a rate comparison service for $12, but it only
compares policies in the following states: CA, CO, FL, GA, IL, NJ, NY,
OH, PA, TX, and WA. Visit the
Web site for details.
It's much easier to get rate quotes on the phone or from an agent if
you have the relevant details at hand. Besides the amount and type of
coverage you need, you'll need to know the make, model and year of all
the cars you want to insure; the annual mileage you put on the car or
expect to put on it, if it's a new purchase; the ages and driving
records of all drivers; and the expected use of the car. Don't be
surprised if you have to answer many questions before you can get a
quote. Make sure you get them in writing in order to compare
accurately.
The final money-saving step is to ask about every discount you may be
eligible for. An insurance company representative may ask you whether
you're eligible for discounts, but be ready to ask questions if he or
she does not. Discounts are offered for good driving records; good
academic records if you are still a student or recently graduated;
multiple vehicles or policies with the same company (this may apply to
boats, houses, or other property insurance policies as well — the
only way to find out is to ask); safety or anti-theft devices
installed in your car, including anti-lock brakes, daytime running
lights, alarms, or The Club; and having passed a defensive driving
course. If you are a member of the military, AAA, a credit union, or
any number of organizations, you may be eligible for special discounts.
Remember, information is your ally, and with its help you can save
yourself some cash while protecting your car.
Now, check out Part II of Car Insurance Know-How: How to Steer Clear of Weasely Agents.
Read more Tripod columns by Wendy Cholbi.
Wendy J. Cholbi is a writer who lives with her husband, a philosopher, in Boston,MA.
|
|
