Monthly Archives: January 2017

10 Steps to Buying Auto Insurance

When it comes to auto insurance, you want to be adequately covered if you get in an accident, but you don’t want to pay more than you have to. Unfortunately many people are doing just that, simply because they don’t want to spend time shopping for car insurance. It’s not inherently enjoyable, after all, despite how it looks in commercials featuring disgruntled cavemen and joke-cracking spokespeople.

But by doing some comparison shopping, you could save hundreds of dollars a year. When one of our editors used a rate-comparison service, he got basic coverage quotes for his two old cars that ranged from $1,006 to $1,807 — a difference of $801 a year. If you’re paying thousands to your current insurance company because you have a couple tickets, an accident or an out-of-date and unfavorable credit rating, shopping your policy against others might be well worth the effort. Look at it this way: You can convert the money you save into buying something you’ve wanted or needed for a long time.

Step 1: Decide How Much Coverage You Need
To find the right auto insurance, start by figuring out the amount of coverage you need. This varies from state to state, so take a moment to find out what coverage is required where you live. You will find a list of each state’s requirements and an explanation of the various types of insurance in “How Much Car Insurance Do You Need?” Also, check out “Little-Known but Important Car Insurance Issues,”which has a glossary of basic insurance terminology. If you’re a first-time driver and need a comprehensive overview of car insurance before you go on, review this guide from the National Association of Insurance Commissioners. Now you’re ready to make a list of the different types of coverage you are considering.

Once you know what’s required, you can decide what you need. Some people are quite cautious. They base their lives on worst-case scenarios and insurance companies love that. Insurance companies are in the risk business, and they know a policyholder’s likelihood of being in an accident, as well as how likely it is for a car to be damaged or stolen. The insurance company crunches the information it has collected over decades into actuarial tables that give adjustors a quick look at the probability of just about any occurrence. You don’t have those tools at your disposal, so your decision will depend on your own degree of comfort in assuming a certain level of risk.

Experts recommend that if you have a lot of assets, you should get enough liability coverage to protect them. Let’s say you have $50,000 of bodily injury liability coverage but $100,000 in personal assets. If you’re at fault in an accident, attorneys for the other party could go after you for the $50,000 in medical bills that aren’t covered by your policy.

General recommendations for liability limits are $50,000 bodily injury liability for one person injured in an accident, $100,000 for all people injured in an accident and $25,000 property damage liability (usually expressed in insurance shorthand as 50/100/25). Here again, let your financial situation be your guide. If you have no assets that an attorney can seek, don’t buy coverage unnecessarily.

Your driving habits might also be a consideration in determining the coverage you need. If your past is filled with crumpled fenders, or if you have a lead foot, or if you make a long commute on a treacherous winding road every day, then you should get more complete coverage. Collision coverage pays for damage that your car experiences in an accident or damage from hitting an inanimate object (a tree, light post or fence, for example). Comprehensive coverage addresses damage that didn’t occur in a collision — such as from fire, theft or flood. It also covers damaged windshields.

Keep in mind that you don’t have to buy collision and comprehensive coverage. Let’s say your vehicle is older, you have a good driving record and there is little likelihood that your car would be totaled in an accident, but a high likelihood of it being stolen. Then you could buy comprehensive coverage and skip the collision insurance.

Step 2: Review Your Current Insurance Policy
Read through your current policy or contact your auto insurance company to get the information you need. Jot down the amount of coverage you have now and how much you are paying for it. Take note of the yearly and monthly cost of your insurance, since many of your quotes will be given both ways. Now you have a figure to beat.

Step 3: Check Your Driving Record
You should know how many tickets you have had recently. If you can’t remember how long that speeding ticket has been on your record, check with your state’s department of motor vehicles. If a ticket or points you earned are about to disappear, thus improving your driving record, wait until that happens before you get quotes. Nothing drives up the price of insurance like a bad driving record.

Step 4: Solicit Competitive Quotes
Now it’s time to start shopping. Set aside at least an hour for this task. Have at hand your current insurance policy, your driver license number and your vehicle registration. You can begin with online services. If you go to an online site to get a quote for an insurance rate, you can type in your information and begin to build a list of companies for comparative quotes. Keep in mind that not all insurance companies participate in these one-stop-shopping sites, however. If a recommendation from friends and family or other research points to a company that you think might be a winner, you can go directly to its Web site or call its toll-free number to get a quote.

Each quote form takes about 15 minutes each to complete. It might be well worth your time, since if the entire shopping process takes you two hours and you save $800, you’re effectively earning $400 an hour.

When you use these sites, you might not get instant quotes. Some companies may contact you later by e-mail. Some that are not “direct providers” might put you in touch with a local agent, who will then calculate a quote for you. (A direct provider like Geico sells insurance policies directly to consumers. Other companies, such as State Farm, sell insurance through local agents.) You can learn more about the various kinds of agents here.

Step 5: Gather Quotes and Company Information
While you’re researching companies, take careful notes so you can easily make price and coverage comparisons. Keep a list of:

    • Annual and monthly rates for the different types of coverage. Make sure to keep the coverage limits the same so you can make apples-to-apples comparisons for cost and coverage.
    • The insurance company’s 800 telephone number, so you can get answers to questions you couldn’t find online.
    • The insurance company’s payment policy. When is the payment due? What kinds of payment plans are available? What happens if you’re late in making a payment?

In later steps, you’ll add some more information to this list.

Step 6: Work the Phones
Once you have gathered information online, it’s time to work the phones. Contact those companies from which you haven’t been able to get an online quote. Doing the research by phone can actually be easier and faster than on the Internet, provided you have your driver license and vehicle registration close at hand. When you get a quote over the phone, be sure to confirm the price by asking the representative to e-mail the quote to you.

Step 7: Look for Discounts
When you’re making these calls and shopping online, make sure you explore all your options relating to discounts. Insurance companies give discounts for such things as a good driving record, your car’s safety or security equipment and certain occupations or professional affiliations. Some companies are now offering lower rates if you enroll in “pay as you drive” plans. Some will give substantial discounts for young drivers in the family who have high grade-point averages. (You can use this as an incentive to your teen drivers and offer to share the savings with them.) Also consider using the same insurance company for home and auto policies. That will usually get you a better price. For more guidance on discounts, check out “How to Save Money on Car Insurance” and “Top 10 Ways To Lower Your Car Insurance Bill.”

Step 8: Assess the Insurance Company’s Track Record
You now have most of the price and coverage information that you need to make a decision. You can see which company’s coverage is least expensive, but it’s important to keep in mind that cheap isn’t the only basis for choosing an insurer. How do you know which company is financially sound? How do you find out if an insurance company is going to treat you right — particularly in the event of a claim?

Here are some places to check to develop a clearer picture of an insurance company’s track record for fairness, financial stability and customer service.

1. Use the National Association of Insurance Commissioners’ Consumer Information Source to access information about insurance companies, including closed insurance complaints, licensing information and key financial data. You also can visit your state’s department of insurance to check consumer complaint ratios and basic rate comparison surveys.

2. Consider contacting an independent insurance agent for additional information about a company.

3. Check out the financial strength ratings for an insurance company by referring to the ratings from A.M. Best and Standard & Poor’s (registration may be required).

4. Review consumer satisfaction surveys from J.D. Power and Consumer Reports (subscription required).

5. Ask friends and family about their insurers and whether they’re satisfied with them. In particular, ask them how their insurance companies treated them if they had a claim. Did they get fair, straightforward service? Or was it a hassle to get the matter resolved?

Step 9: Review the Policy Before You Sign
When you’re done your research and zeroed in on a company, read over the main points of the policy. In addition to verifying that it contains the coverage you’ve requested and priced, it’s a good idea to find out if the policy states that “new factory,” “like kind and quality” or “aftermarket parts” may be used for body shop repairs, says Dennis Howard, director of the Insurance Consumer Advocate Network. If the policy has such a requirement, think hard about whether this is the company for you, particularly if you own a relatively new car that you plan to keep for a while. In this case, it’s best to know at the outset that the insurer will pay for original manufacturer parts, rather than try to fight later, when you have a claim.

Step 10: Cancel Your Old Policy; Carry Your Proof
After you have secured the auto insurance policy you want, cancel coverage with your existing insurance company. If your state requires you to carry proof of insurance, make sure you put the card in your wallet or the glove compartment of your car.

Finally, here’s a quick checklist to keep you on track:

    • Determine your state’s minimum insurance requirements.
    • Consider your own financial situation in relation to the required insurance and consider whether you need to increase your limits to protect your assets.
    • Review the status of your driving record — do you have any outstanding tickets or points on your driver license?
    • Check your current coverage to find out how much you are paying.
    • Get competing quotes from Internet insurance Web sites and individual companies of interest to you.
    • Make follow-up phone calls to insurance companies to get additional information about coverage.
    • Inquire about discounts.
    • Evaluate the reliability of the insurance companies you’re considering by visiting your state’s insurance department Web site, reviewing consumer surveys and talking to family and friends.
    • Review the policy before finalizing it. Remember to cancel your old policy.

How Much Car Insurance Do You Need?

The next time you’re on the freeway, think about this: Approximately one of every seven U.S. drivers on the road has no automobile insurance. That’s the most recent estimate from the Insurance Research Council, which noted that the five states with the highest percentage of uninsured drivers were Florida, Mississippi, New Mexico, Oklahoma and Tennessee. With that many people driving without coverage, it’s more important than ever for you to be insured. But how much car insurance do you need to have?

If you’re like many people, you might be in an economic pinch these days. Your inclination might be to get the minimum insurance coverage required by law in your state. The trouble with minimum coverage is that it might not fully protect you — or your assets — if you’re at fault in an accident. It’s a better idea to carry more than the minimum coverage unless you are driving an older car with little value and have no assets to protect.

Every state in the nation except for New Hampshire requires you to have liability insurance. That mandatory coverage varies according to state.

The chart below shows minimum liability limits (in thousands of dollars):

    • Bodily injury liability for one person in an accident
    • Bodily injury liability for all people injured in an accident
    • Property damage liability for one accident

In Alabama, for example, the minimum requirements are $25,000 of bodily injury liability for one person, $50,000 bodily injury liability for all people in an accident and $25,000 property damage liability. Another type of coverage, personal injury protection (PIP), or a system called medical payments (MedPay) in some states, pays for your own medical expenses, any lost wages and whatever other costs may arise when you’re injured in an accident. It usually pays about 80 percent of your losses, and it also pays a death benefit. PIP is required in Delaware, Florida, Hawaii, Kansas, Kentucky, Massachusetts, Michigan, Minnesota, New Jersey, New York, North Dakota, Oregon, Pennsylvania and Utah. In Arkansas and Maryland, the coverage is not required, but drivers must reject it in writing if they choose not to purchase it.

Some states also require you to purchase car insurance that will cover your medical expenses, pain and suffering losses and, in some states, car damage, in the event that the other motorist is at fault and is either uninsured or underinsured. The chart below also lists the states that require this uninsured or underinsured motorist coverage.

Even though each state, except for New Hampshire, has minimum requirements for bodily injury liability, it is probably in your best interest to purchase higher limits. If someone else is injured and you’re at fault, the minimum liability coverage may not cover the other motorist’s medical expenses, in which case he or she will most likely come after your assets. Insurance experts generally recommended that you purchase 100/300 limits of bodily injury liability (meaning $100,000 for one person in an accident and $300,000 for all people injured in one accident). On the other hand, if your personal assets don’t amount to much, there’s little for another driver to get if he were to sue you. The minimum requirements might actually suit you and will save you some much-needed cash.

Besides various forms of liability insurance, there is collision and comprehensive auto insurance coverage to consider. Collision insurance covers damage to the policyholder’s car resulting from running into anything, be it another car, a fire hydrant or a light post. Comprehensive coverage takes care of your car in the case of theft, fire, falling objects, explosions or other unexpected problems.

Collision and comprehensive coverage are required in most lease contracts, and are essential if you own an expensive car. If you’re driving a rattletrap, on the other hand, and the sum of your premium and your deductible are close to the value of your vehicle — or if they exceed it — you might want to consider doing without this coverage.

Before you purchase any type of auto insurance coverage, be sure to study your other insurance policies so you don’t end up paying for something you don’t need. If you have a decent health insurance plan, you might get away with purchasing the bare minimum personal injury protection coverage — or none at all if your state doesn’t require it. However, you might end up paying a co-pay and deductible that wouldn’t apply if you have PIP or MedPay.

Uninsured or underinsured motorist coverage also might be a wise buy, even if you have full medical coverage, since it can pay for your pain and suffering damages. If you’re offered roadside assistance coverage by your insurer, you might not need it if you already belong to an organization such as AAA that offers it. The same thing applies for mechanical breakdown insurance. If you own a newly financed or leased vehicle that’s still covered under warranty, such coverage is unnecessary.

It’s easy to resent having to spend money on insurance. But keep in mind that auto insurance will most likely come to your rescue at some point, so it’s imperative to purchase a worthwhile policy. Know what coverage you must have and know what additional coverage fits your lifestyle. Then if trouble strikes, you’ll be ready.

Use-Based Insurance Shifts Into High Gear

If you’re finally ready to think about pay-as-you-drive car insurance, it’s ready for you.

Over the past couple years, a majority of the country’s largest auto insurance carriers and many smaller ones have begun offering pay-as-you-drive and other forms of use-based insurance or have pilot projects in the works. During the same time, every state insurance regulator in the country has approved at least a handful of the policies, and some many more.

Auto insurers set rates for use-based insurance (UBI) by monitoring your mileage, driving speed or related activities through electronic devices or smartphones and apps connected to your car’s diagnostics port. That’s different from traditional policies, whose rates are based on actuarial studies of historical data on demographics and risk factors such as driving records.

First offered more than a decade ago, UBI policies today cover as many as 3 million U.S. cars and trucks, according to insurance industry analysts. Progressive, which sells more UBI policies than any other auto insurer, says its Snapshot plan accounts for 30 percent of customers who buy its policies directly. From 2012-’13, Snapshot premium revenue grew 50 percent, to $1.5 billion, according to the company.

Policies are expected to become even more popular in the near future. Within five years, 20 percent of all U.S. vehicle insurance is expected to incorporate some form of UBI, according to a January 2014 report from the National Association of Insurance Commissioners’ Center for Insurance Policy and Research. Forty-two percent of a representative sample of 1,046 U.S. drivers were “interested” or “very interested” in UBI plans, according to a February 2013 poll from market researcher Strategy Analytics.

“Marketing and discounts are two main reasons why it’s growing,” says Greg Basich, a senior analyst with Strategy Analytics’ automotive practice.

Roadblocks
UBI hasn’t fully arrived, however. While all signs point to more consumers giving the plans a spin, UBI policies still represent a tiny portion of the overall auto insurance market. Policies from Progressive, State Farm, Allstate, Esurance and others cover less than 2 percent of all vehicles on the road, according to industry watchers.

Privacy concerns are one of the biggest roadblocks. Drivers have been reluctant to let insurers place devices in their cars to track their mileage, says Michael Barry, a spokesman for the Insurance Information Institute, an industry group. Instances of credit card data breaches and government spy agencies monitoring cell phone communications have only added to people’s sensitivities about what might become of their personal data.

“Every person has a different degree of how much privacy they want,” says J. Robert Hunter, insurance director for the Consumer Federation of America. “Personally, I would want hard-braking data collected on me because I drive safely. But other people might not. Of course you have to trust [insurers] when they tell you what they’re collecting.”

Sharing Driving Info To Save
A major impetus pushing drivers to explore UBI is money. Specifically, they’re interested in the chance to save by paying based on how much (or little) they drive. Typical rates are predicated on people driving 12,000 miles a year. Prove you only drive 6,000 or 7,000 and you may be in line for a premium rate reduction, says Barry, the Insurance Information Institute spokesman.

At Progressive, the average Snapshot customer receives a discount of 10-15 percent, a savings of about $150 a year, says Dave Pratt, the company’s UBI general manager.

It’s not a given that UBI policies cause anyone to drive less. Instead, insurance company representatives and industry analysts believe people who already drive under the annual average are most apt to switch. “People who have bad driving records aren’t going to participate,” says Strategy Analytics’ Basich.

Telematics and Smartphones Ease the Way
The driving public’s growing comfort level with onboard telematics systems for GPS, entertainment, safety and maintenance may help ease the way for UBI policies, according to industry experts.

Pay-as-you-drive plans also are benefiting from consumers’ love affairs with smartphones and apps. First-generation UBI policies use pocket-size electronic meters plugged into a car’s diagnostics port to collect and store data or transmit it in real time back to the insurer through telematics such as OnStar or Ford’s Sync system. Newer offerings work with smartphone apps, sending the data to the insurer through Wifi connections. One of them is Drive Safe & Save with In-Drive, one of three UBI plans that State Farm offers.

Drivers in the market for UBI policies can research what’s available on insurers’ Web sites or by getting the data from state insurance regulators. States such as California strictly prohibit insurers from tracking anything but miles driven, while other states allow insurers to measure such activities as speed and braking. Some insurers offer introductory discounts on UBI plans to drivers who aren’t already customers, adjusting them accordingly after a trial period.

Tips To Cut Teen Insurance Rates

Teens ages 16-19 are three times more likely than drivers older than 20 to be involved in a fatal crash (or any crash, for that matter) according to the Insurance Institute for Highway Safety. It’s not too surprising, then, that teen drivers tend to have high insurance premiums. For parents, this can mean a big jump in insurance premiums once you add your teen driver to your policy. However, there are ways to reduce your costs right out of the gate, even for very inexperienced drivers. Here are some ways to keep policy costs at a minimum.

Choose the Right Car
It’s simply a matter of economics. There are some cars that cost more to repair and replace than others. There are also some cars that are more likely to be stolen and others that protect passengers better in a crash. Combined, these three characteristics have a lot to do with how much you’ll pay for the collision and theft portions of your policy, says David Goldstein, the author of Insure Your Car for Less: A Practical Guide to Saving Money on Automobile Insurance.

There are several ways to choose the least expensive car to drive. First, check the Insurance Institute for Highway Safety’s Top Safety Pick awards and the National Highway Traffic Safety Administration’s5-Star Safety Ratings to see which cars scored the best in crashworthiness. You’ll also want to check the National Insurance Crime Bureau’s list of Hot Wheels: cars that are most commonly stolen.

Your insurance broker or company can also help you find the best rate for the cars you’re considering, says Goldstein, who has worked as an insurance and claims adjuster. “If you’re considering several cars, call and ask for a rate quote on each,” he suggests.

Midsize family cars are generally the cheapest to insure, says Jeanne Salvatore, senior vice president and chief communications officer at the Insurance Information Institute, a nonprofit information service. “You want a car that’s easy to drive and highly protective. Those are the cars that are going to keep your teen safe and cost the least to insure,” she says.

You may also want to consider a car that doesn’t need collision insurance, which will cut your rates considerably, says Salvatore, and either way, the age of your car may lead to more discounts.

“Some companies offer a utility discount for cars older than a 2002 model year,” she says. That said, make sure any older car you purchase has a solid crash rating and all of the safety features that a newer car might have including airbags, an antilock braking system (ABS), daytime running lights and (for SUVs) electronic stability control.

Adjust Driver Assignments
When you call the insurance company to add your child to a policy, the representative will ask you to designate which car will be driven by each member of your family most often.

You can save money by designating and having your child drive the car that’s the least expensive to insure. The trick is finding out which car that is, says Goldstein. “Driver assignment can really affect your rates,” he agrees.

If you get someone on the phone who is willing to work with you, he or she can take you through all the different scenarios. “Occasionally, I’d quote rates for four people and four different cars: two parents and two kids. If we played around with it, we could often save money,” Goldstein says.

Look for Alumni Discounts or Resident-Student Discounts
One of the perks of going to college is that many schools ink alumni deals with large organizations, such as insurance companies. While the discount is usually around 5 or 10 percent, it’s still worth looking into. Geico, for instance, offers an 8 percent discount for DePaul University students and alumni. Liberty Mutual offers special rates to those who attend Arizona State University.

If your child goes away to college and doesn’t take a car along, you can save a lot on your premium. Allstate, for example, offers a 35 percent discount off premiums for students who live at a school that is more than 100 miles from where their car is garaged. “There’s an assumption that they are only going to be driving on weekends and school vacations,” says Salvatore.

Finally, all full-time high school and college students who get good grades can benefit from their diligence. Most companies offer up to 25 percent discounts for good report cards. You’ll also see rates drop as your child advances in school. Seniors in college have better rates than freshman, so if your child takes college credits over the summer or in high school, let your insurance company know when he or she reaches the next college milestone, says Goldstein.

Wait an Extra Year Before Licensing
Some teens may not like this idea, but you can save a lot of money simply by having your son or daughter wait an extra year to get a driving permit.

“Wait until they are as old as possible before they get their permit,” says Goldstein. “For instance, in some states you can get your learner’s permit as early as 16 but you’re probably not going to be driving [without restrictions] until you’re 18. Why pay for insurance those two years unless you have to?”

Delaying the process is more common than you may think, according to several recent studies. The AAA Foundation for Traffic Safety reports that just 44 percent of teens get their licenses within 12 months of the minimum age and only 54 percent get their licenses before they turn 18.

However, if you go this route, make sure teens know that they’ll still need the practice and supervision that a graduated driver licensing program affords.

Tracking for Discounts and Better Driving Habits
In recent years new devices that connect to a car’s computer and use GPS technology to track driving habits and routes have flooded the market. While they can be very useful for parents who want to make sure that their teen isn’t speeding or driving outside an approved area, they’re also being used by insurance companies to help set rates for drivers of all ages in an approach called use-based insurance.

Snapshot, a program by Progressive Insurance, is one such option that uses a pocket-size telematics device that transmits car data using cell-phone technology. The device plugs into a car’s onboard diagnostic port and measures driving habits such as how and when someone drives, tracking behaviors like mileage, time of day and if the person performs hard braking maneuvers.

“Our Snapshot program gives all consumers, including teens, more control over their car insurance costs by offering personalized discounts based on their actual driving behavior,” explains Jeff Sibel, a spokesman for Progressive Insurance. “People who drive less, in safer ways and during safer times of day are most likely to receive a discount.”

Some companies are offering the device for parental tracking, but without an immediate insurance discount. Its use could result in lower rates going forward, says Rebecca Hirsch, a spokeswoman for insurer USAA. “We’re offering the device for free and parents get the monitoring for a year free,” she says. “Parents can get text messages if their teens are doing things like hard braking. It enables the parent and the teen to have a conversation around safe driving habits. The first few years are so critical. Anecdotally, we’ve seen that the devices help build better driving behaviors.”

Take a Class
Adults and teens alike can save money by taking a six-hour driving safety course either online or in person. Some insurance companies are offering teen-specific courses that can help reduce the number of crashes that involve teens by providing realistic driving simulations.

Liberty Mutual, for example, offers something it calls teenSMART, a program that focuses on the six factors that most commonly cause teen car accidents. The company says teens who complete the program may get “special savings” on their auto policies, but doesn’t offer any examples of what those savings might be.

State Farm offers a program called Steer Clear for drivers under the age of 25 or new drivers with less than three years of driving experience. It requires drivers to watch a video, sign a safe driving parent/driver agreement and complete a certain number of supervised trips of 15-30 minutes over the course of a month, filling out a log after each trip. By completing the program, drivers can get a discount of up to 15 percent on their coverage, says State Farm spokeswoman Rachael Risinger.

Finally, driver-training classes — so-called driver’s ed — can also help lower your premiums by up to 10 percent, depending on your insurer.

Make Smart Choices
Even if they apply every discount imaginable, most people will find there’s no getting around the fact that rates will go up with a teen driver on the policy — at least for a little while. And while it might be tempting to simply “forget” to inform your insurance company that Junior has his license, take note: Doing so can have serious consequences if your child is in an accident.

You’ll also want to make sure you have enough insurance coverage. “Don’t go for the minimum limits,” suggests Burl Daniel, a former insurance agent and corporate risk manager who testifies as an expert witness in insurance cases. “You’re exposing yourself to potential problems, if your kid does have a wreck and seriously injures someone. Don’t take the bait now just to save a few hundred dollars when it could end up costing you a lot down the road.”