Category Archives: car insurance

Young Drivers, Marijuana and Car Insurance

Marijuana, young drivers and serious car accidents are on a collision course. Fatal crashes involving drivers whose systems showed evidence of THC, the active ingredient in marijuana, nearly tripled in 10 years, rising from 4.2 percent in 1999 to 12.2 percent in 2010, according to a study released earlier this year by Columbia University’s Mailman School of Public Health. In another four-year study, 43 percent of fatally injured drivers under 24 tested positive for cannabinoids. The percentage was lower for older age groups.

Now that marijuana is legal in Colorado and Washington and widely tolerated elsewhere in the U.S., parents may be on their own collision course with pot: They face steep car insurance hikes and even cancellation if young drivers on their policies are convicted of a DUI stemming from marijuana use. Here’s what parents need to know about drugged driving and the effect it can have on insurance coverage.

Drugged Driving: A Growing Concern
Pot use behind the wheel is a subset of a category that law enforcement and the traffic safety community call drugged driving. Every state has laws addressing it. In many, the laws say if a driver is stopped and authorities can prove the individual drove under the influence of any substance that impairs driving ability, he or she could be convicted of a DUI. Nearly one-third of states feature “per se” laws. These more strict laws say that any amount of a controlled substance found in the driver’s body is evidence of impaired driving.

The hazards of drunken driving are well known. A growing concern among researchers, law enforcement and those in the traffic safety community is the destruction wreaked by individuals driving under the influence of drugs including marijuana, cocaine and prescription and over-the-counter drugs. Conservative estimates put the cost of these accidents at 6,700 deaths and nearly $60 billion in costs each year.

The effects of marijuana use on driving vary from one person to the next. In the words of the National Highway Traffic Safety Administration (NHTSA), “It is difficult to establish a relationship between a person’s THC blood or plasma concentration and performance impairing effects.” Concentrations of the drug are “very dependent on patterns of use as well as dose.”

Insurance Follows the Car
Driving while stoned is a serious matter for teen and twenty-something drivers, who risk death, injury, criminal prosecution and civil lawsuits. In addition to those outcomes, drugged driving also can have financial impacts on parents, who often own and insure the cars their adult children drive.

“Insurance follows the car, not the driver,” says Loretta Worters, vice president of communications for the Insurance Information Institute, a national insurance trade association. A young person’s drugged-driving conviction is likely to be treated like a drunk driving conviction, whether the recreational use of pot is legal in that state, says Bob Passmore, personal lines policy senior director with the Property Casualty Insurers Association of America.

“As with any DUI conviction, your insurance company could cancel your policy, ask you to take the individual off the policy, or keep him or her on at a much higher rate, depending on the rules in the state,” Passmore says. “The individual with the conviction might need to get their own policy.” That would come at a much higher rate than if the driver is on his parents’ policy, he says.

Worters agrees. If a young person is convicted of driving under the influence, “insurance rates will jump astronomically, because driving under the influence is illegal,” she says. “DUI convictions can result in multi-year jail terms. You’re also putting the parents’ assets at risk” if there are civil lawsuits in connection with the accident, she warns.

Not every teen uses pot, of course. In 2012, less than 8 percent of youths ages 12-17 had used marijuana in the past month, according to the 2012 National Survey on Drug Use & Health. And about 80 percent of teens say they disapprove of their friends using pot. Pot use increases markedly for young adults, however. In 2012, 18.7 percent of 18-to-25-year-olds had used marijuana in the past month.

If your child does use pot, you may need to take a tough stance when it comes to his or her use of your cars.

“Parents may want to consider either taking the car privileges away until they’ve cleaned up their act, or taking them off your insurance policy,” Worters says. An insurance company may not be comfortable with a young driver continuing to be on the policy if they’re “living in the same house, having possible access to the keys, even if they aren’t driving,” she says, “because that risk is always there.”

Talk to Your Insurance Agent
Parents should consider contacting their insurance agent to assess their coverage, preferably before a teen drives under their car insurance policy, experts says. Parents also might want to review their liability limits and consider an umbrella liability policy. This will provide protection in case their child causes a serious injury and is sued.

Why You Need to Buy Motor Insurance, Even if Your Car is Off-Road?

The Motor Vehicles Act of 1988 requires all vehicles used for either social, domestic or pleasure purposes to be covered by valid insurance. Under the provisions of Chapter 11 (Section 145 to 164) of this Act, driving motor vehicles in public places without third party insurance is a punishable offence. Hence, Third Party Motor Insurance for vehicles is a statutory requirement.

Insurance is a contract whereby the insurer undertakes to pay the insured person a sum of money in the event of a happening or in the event of specific events. Motor Insurance protects the owner of the vehicle against damages to the vehicle and also pays for any liabilities owed by the vehicle owner as per law. The owner of the vehicle is legally liable for any injury or damage to life or property caused by used of the insured vehicle.

What does Motor Insurance Cover?

Motor insurance can be of two types. It can either cover only liability, as is the statutory requirement. Or it can cover liability and a variety of damage to the insured person’s vehicle. This is called as OD (Own Damage) cover and comprises the following types of damages.

  • Fire, Self- Ignition, Explosion, Lightning
  • Burglary, Housebreaking, Theft
  • Riots, Strikes
  • Earthquakes, floods, storms, tempest, inundation, hailstorm, frost, cyclones, hurricanes, landslides, rock slides
  • Accidental external means
  • Malicious Acts
  • Terrorism act
  • While in transit

If you are not using your car for a prolonged period of time, and it just lies in your garage or in a parking facility, paying for car insurance may seem a bother. However, it is still better to pay for third party motor insurance for your car for the protection and coverage offered.

Thievery

Although the common belief is that only new and fancy cars are targeted by thieves, there are no such rules. Parts of older, difficult to find cars, are usually costlier in the market than any of the newer cars available. Thieves may earn more for older unavailable parts. Hence the number of old cars getting stolen is increasing. Whether it is a new car or an old one, it is beneficial to insure it.

Physical Damage

Even in storage, cars may get damaged for a number of reasons, such as floods, fire, earthquake, rain water, and force majeure or due to infrequent use. For example, a car’s engine may get damaged due to flooding or due to rain water entering the engine. Part of the cost incurred for reparation may be covered by some insurers. Similarly, damage caused by some natural calamities such as fire, earthquakes, storms, floods, etc. are covered. Damage caused by strikes, riots, terrorism, burglary, theft, malicious acts and other manmade calamities are also covered.

Use by Others

If you are not using your car, and have rented it to another party for use, the Motor Insurance would provide protection against any liability arising as a result of injury or death caused by the vehicle to the occupants.

Ideally it would be beneficial to the car owner to insure the vehicle, be it in use or out of circulation. Insurance protects the car owner in a number of situations, and provides financial relief in the event of damage caused by or to the vehicle.

Over to You!

Now that you know how important it is to ensure car insurance even if your vehicle is off-road, it makes sense to carefully choose a car insurance that fits well within your budget and matches your preferences and requisites.

So, if you haven’t insured your car yet, go for it now! Remember, your car is where you spend most of your time, after your office and home and that’s why it makes sense to ensure proper cover for your cover.

Car Insurance for Teenage Drivers

The statistics about teenage drivers aren’t good. According to the Insurance Institute for Highway Safety (IIHS), 16-year-olds get into accidents almost six times more often than drivers between the age of 30 and 59. No wonder car insurance premiums are so high for this age group.

However, not all car insurance companies take the same dim view of young drivers. And some discounts are available to help you cut costs. Remember, the higher the risk, the higher the cost of insurance premiums. Let this be your guiding principle as you shop for insurance.

Here are 10 suggestions to help lower premiums and keep your teenager’s license free of violations:

1. Help your teen learn the laws and follow them to the letter. By far, the best way to lower car insurance costs for teens is for them to keep their driving record clean. Make safe driving a family project. In some states, restrictions apply to new drivers. Parents should know what the laws are and insist that their sons and daughters follow them.

2. Set a good example. Do you break the speed limit and tailgate? Do you yell at other drivers when you’re behind the wheel? If you do these things, how can you expect your children to act differently? Start watching your own driving long before they get their license and you’ll have a much easier time convincing them to be safe drivers. Remember, actions speak louder than words.

3. Put your teenager on your policy. Rather than setting up an independent policy for your teen driver, put them on your auto insurance policy as an additional driver. In this way, all the discounts applied to your policies will be passed on to them.

4. Pay your teenager to get good grades. Here’s a creative tip — find out how much you save if your teenager gets a good grade point average and pass it on to them. Usually, having a 3.0 or higher GPA will reduce your car insurance premium by 10 percent. Figure out exactly how much this saves you and give that money to your teenager. This accomplishes two things. First, it provides a direct reward for academic performance. Secondly, it motivates them to continue getting good grades.

5. Enroll them in driver education courses. Discounts are available for teens who take recognized driving classes. But call your car insurance company to find out which schools are covered before paying big bucks.

6. Steer clear of sports cars. Don’t try to live vicariously through your teenager by giving them the hot car you couldn’t get in high school. Getting your teenager a safe car to drive, with the latest safety equipment, will lower your premiums. Not only will you save money on car insurance, but fast driving will be less of a temptation.

7. Get their support. Don’t assume that your teenager wants to vacuum clean your wallet. Ask them for help cutting costs and point out that you will share in the savings (see rule #4). Tell them how much car insurance costs and show them how this fits into the family budget. If nothing else, you will score points for treating them as adults.

8. Talk to your kids about drugs and alcohol. This is a tough subject to broach with teenagers, who think they have everything under control. But the consequences of saying nothing can be catastrophic. Take the time to lay down some guidelines in this important area.

9. Take traffic school to beat tickets. Once a ticket is on your teen’s license, it takes months to get the violation removed. Instead, encourage them to take traffic school if the judge allows it. A day spent thinking about the consequences of unsafe driving can bring rewards for years to come.

10. Ride with your teenager. Your teenager was a safe driver last year when he or she got a license. But what’s happened since then? Let your son or daughter take the wheel while you sit back and relax in the passenger seat. If you see them doing something that breaks rules or seems unsafe, point this out in a diplomatic way. If they are doing a good job driving, praise them for their efforts.

If you follow the above suggestions, you will find that you can make it through the teenage years safely — and without paying an arm and a leg for car insurance. It just takes cooperation and understanding from both sides of the generation gap.

Tips Avoiding Auto Theft and Insurance Problems

What’s worse than experiencing auto theft? Finding out your car insurance policy doesn’t fully cover your loss or out-of-pocket expenses.

A vehicle theft occurs at least twice each minute in the United States, at an estimated cost of $6.4 billion last year. Fewer vehicles are stolen by that legendary joy-riding teen than by pros who drive your car onto a freighter heading overseas, or to a chop shop to cannibalize it for parts.

To help consumers avoid getting burned not just once, but twice, the Council of Better Business Bureaus and the Insurance Information Institute have teamed up with a program called Wiser Drivers Wise Up to address both vehicle theft prevention and what to do if your car is stolen or in an accident. Here are some of their tips:

  • Don’t think manufacturer-installed vehicle theft protection is enough. It can be disabled by experienced and determined thieves, who also know how to unlock a Club and similar devices. Even Steve Cox, a BBB vice president, was the victim of car theft. In fact, he lost two vehicles in three years with these protections; his Pontiac Firebird was stolen in daylight, and his Nissan 300ZX at night. Aftermarket vehicle anti-theft systems are usually more sophisticated and are worth paying a professional to install.
  • Don’t think your old clunker is safer than a shiny new model, or that a luxury sedan is more attractive to thieves than a less expensive model. Older vehicles are usually stolen for their parts, which are no longer being manufactured; newer cars are stolen for their popularity. In 2008, the top five model years stolen were 1995, 1991, 1989, 1997 and 1994, respectively, according to the National Insurance Crime Bureau (NICB). In recent years, cars that have been glamorized in pop culture, like the Cadillac Escalade , have put it on many “most stolen” lists.
  • Contact police immediately, preferably while still at the scene of the crime. Speed is essential to recovering stolen cars, since any delay means your car is more likely to be in a chop shop or driven out of town. Of course you know the make, color and model of your car, but you also should know the license plate number and vehicle identification number (VIN). Keep a copy of those identifying numbers and your insurance card in your wallet, and keep a photocopy of your registration and insurance card at home, so you can provide information quickly to both law enforcement and insurance claims agents.
  • Don’t assume your insurance covers you. Take a close look at your policy to see if you are covered for a replacement rental car if your car is stolen, and if there’s a waiting period before you’re allowed to rent a car. Many people don’t elect the rental car coverage, but it costs only a few dollars a month. A year’s worth of replacement rental coverage usually costs less than renting a car for a day or two, so it’s a good deal.
  • Make sure you have roadside assistance. Your insurance company will likely offer this for a few dollars per term, or you can go through an outside company such as AAA or even your automaker. Be sure to research the details of the coverage. For example, if your car is broken into and disabled, are you covered for a tow to any mechanic, or only a dealer’s service shop? Are both towing and labor costs covered?
  • Despite the bells, whistles and computer chips of today’s technological vehicle theft-prevention devices, the most important theft deterrents are simple ones. Park in well-lit areas. If you park in a lot, resist the temptation to park near the exit, because it makes your vehicle a more likely target for thieves. According to the FBI, more than one-third of all vehicle thefts occur at a home or residence. So always lock your car, even in your own driveway.

Personal Factors That Affect Insurance Rates

A reporter recently asked Edmunds about the kinds of personal information that can affect the cost of car insurance. She also wanted to know whether people could do anything to address personal factors that were keeping their car insurance rates high.

They’re good questions, and Edmunds was happy to help answer them. During the research it became clear that when it comes to car insurance, there’s hardly anything that isn’t personal. Here are five all-about-you factors that can affect your car insurance premium:

1) Your driving profile. Such factors as the number of miles you drive annually and your accident and ticket history are major elements in setting your insurance rate. The less you drive, the less risk of an accident and a claim. Safer driving — meaning a history free of accidents and moving violations — also points to someone who’s less likely to file a claim.

2) The car you drive. Car insurance premiums are based in part on the car’s sticker price, the cost to repair it, its overall safety record and the likelihood of theft, according to the Insurance Information Institute. The cost of fixing a brand-new $225,000 2010 Ferrari 458 Italia is going to be a lot more than the repair costs for a used $17,000 Nissan Altima. The premium will reflect this.

3) Your essential personal information, including your age, occupation and where you live. Each of these things factors into the process of setting your insurance rate because insurance companies base their premiums on actuarial information about drivers. They look for patterns of claims activity among people like you. A teenage boy is likely to have a higher insurance rate than a middle-aged driver, because statistically, teenage boys have more accidents than do 40-year-olds.

Your occupation can play a role if it affects how much driving you do. Work that involves lots of miles on the road, such as an outside sales job, can affect rates. From the insurance company’s point of view, the more miles you drive means more risk of an accident.

Insurance companies also look at where you live. They track local trends of accidents, car thefts, lawsuits and the cost of medical care and car repair, according to the Insurance Information Institute.

4) The coverage you choose. The more coverage you elect and the lower the deductible you set, the more you’ll pay.

5) Your credit score. Some insurance companies use credit scores as a factor in setting rates. This practice is coming under attack, however, with seven states in 2010 passing regulations regarding the use of credit information in insurance. In 2011, several other state legislatures introduced bills to regulate the practice.

Actuarial studies show that how a person manages his or her financial affairs is an accurate predictor of the number and size of insurance claims he or she might file, according to the Insurance Information Institute.

If you want to lower your insurance costs, you can’t change your age, or easily change your job or hometown. But there are some personal changes you can make:

1) Consider pay-as-you-drive insurance. It’s a paradox, but the more personal you get, the better your rates might be. Pay-as-you-drive programs offer better rates because they’re tailored to how you personally drive — as opposed to the people who are similar to you in terms of age or other unchangeable factors.

This means that a teenager who is an excellent driver — who doesn’t speed, doesn’t drive at night and doesn’t drive many miles — can get a better rate than the average teenager, whose actuarial profile pegs him as a greater risk, based on the accident history for people his age.

Pay-as-you-drive plans have different configurations, depending on the insurance company and state. Some require that you install a telematics device that transmits information about your actual driving (such as speed, mileage and braking patterns) to the insurance company. Others, such as plans permitted in California, only are based on the number of miles you drive, not how you drive.

2) Be a calmer, more careful driver. If you’ve had speeding tickets in the past, resolve to change from being a speedy, aggressive driver to a calm one. A side benefit is that you’ll save money on gasoline. Edmunds testing has also shown that a calm driving style gets you 35 percent better fuel economy.

3) Choose a car with a lower cost of ownership. Edmunds has a True Cost to Own ® (TCO) tool that lets you size up cars when you’re shopping. It takes into account eight components — depreciation, interest on financing, taxes and fees, insurance premiums, fuel, maintenance, repairs and any federal tax credit that may be available — and tells you what your cost would be over five years. It’s a way to get a preview of what your insurance premiums might be. Also, talk to your insurance company when you’re car shopping to get a quote on how your choice will affect your insurance. If you wait until the deal is done, you’ve lost a chance to manage your costs.

4) Change your coverage. Don’t go for every bell and whistle in an auto insurance policy. If you’re willing to pay a slightly higher deductible, you can wind up saving big on your rates. Going from a $250 to a $1,000 deductible could save you 25-40 percent on your policy. Set aside a portion of these funds to cover your costs in the event of a claim.

If you have an older car with comprehensive and collision coverage, you might find yourself paying more in insurance than the car is worth. One tip: Take your comprehensive and collision premiums and add those up. Multiply by 10. If your car is worth less than that amount, don’t buy the coverage. If you’re worried about being left overexposed, consider this: The typical policyholder makes a claim only once every 11 years, and reports a total loss only once every 50 years.

5) Explore discounts for which you might be qualified. The options available include discounts for low-mileage drivers, for seniors and for cars with anti-theft devices and certain safety devices. It’s a lengthy list — just ask your insurer about any discounts, and go from there.

6) Clean up your credit. Keep it in good shape by paying bills on time and by regularly checking that there are no items on your history that do not belong to you.

Is there personal information that doesn’t matter? Gender, one expert told us. Insurance companies don’t care if you’re female or male as long as you’re a safe driver. And it’s a myth that red cars have higher insurance rates than those sporting more sedate shades, according to the Insurance Information Institute. Ultimately, insurance companies care about how likely it is that a particular driver would end up making or causing a pricey claim against them. Green is the only color that matters.

Protect Yourself From Auto Insurance Fraud

There are various ways consumers can fall victim to auto insurance fraud, including accident scams,insurer tricks and referral fraud. Whether you’re buying auto insurance or on the road, it’s important to know how to protect yourself. To keep you out of trouble, we’ve compiled the most important tips from the National Insurance Crime Bureau (NICB), the North Dakota Department of Insurance, FraudGuides.com and Edmunds.com.

When Buying Auto Insurance

  • Be wary of insurance offers from door-to-door salespeople, telephone callers or unsolicited Internet advertisements.
  • Be suspicious if the price of insurance seems much lower than the competition’s. It could be a scam, or the coverage might be full of exclusions that are only discovered when you need the coverage.
  • Contact your state’s insurance department to make sure the agent and company are licensed.
  • Check the company’s rating at the Better Business Bureau.
  • Make sure “free services” aren’t actually hidden in your insurance bill.
  • Ask if the insurance company has purchased or invested in vehicle repair shops; this is a red flag. You are not required to use them, and they will not give you better service or prices — in fact, they could be worse.
  • Guard your insurance identification number the same way you would your social security number, because once it’s stolen, criminals can use it in a scam.

While Driving

  • Be wary if a car pulls in front of you, forcing you to follow dangerously close. You may be set up for a staged accident.
  • Trust your instincts. If someone seems to be tailing you or otherwise behaving suspiciously, pull into the nearest gas, fire or police station, or other “safe spot” that you see.
  • Carry an accident emergency kit, or at least a disposable camera, in your car.

After a Two-Car Crash

  • Exchange information with the person driving the vehicle, including driver license, vehicle registration and proof of insurance. Take pictures of all damage to both cars.
  • Count the number of people in the car. Get a name, address and telephone number for each one, not just the driver.
  • Call the police, and if possible, have them come to the scene. Get a police report with the officer’s name, even if the damage is minimal. This makes it more difficult for a criminal to damage the car later and try to collect a larger claim. Note that in cities where police are stretched thin, the police may not come to an accident scene unless there are injuries reported.
  • Avoid people who suddenly appear at an accident scene and try to direct you to specific doctors or attorneys.
  • Avoid people who offer you quick cash to fix your car.
  • Be wary of tow truck drivers who recommend a specific auto repair facility without being asked.
  • Demand detailed bills for any repairs or medical services. Keep all your receipts related to the accident.
  • Make sure you get Original Equipment Manufacturer (OEM) parts at the repair shop.
  • Be wary of physicians who insist that you file a personal injury claim after an accident, especially if you are not hurt.
  • Never sign blank insurance claim forms.

Tips to Shop for Car Insurance

The word shopping brings a feeling of immediate excitement to most people. But if you combine the word shopping with car insurance — as in “shopping for car insurance” — it produces the opposite effect. The thought of shopping for auto insurance makes the eyes glaze over and the heart rate drop to the pace of a slumbering couch potato. Couch potato? Indeed. Doug Heller, a consumer advocate atThe Foundation for Taxpayer & Consumer Rights (a California-based consumer advocacy group) and a recognized insurance issues specialist, told us that too often “people purchase insurance by calling the number on the screen.”

But wait, this is important stuff! You want to be adequately covered if you get in an accident. And you certainly don’t want to pay more for car insurance than you should. Maybe waiting for a solution to be beamed into your living room is not the best idea.

How can you stay awake while navigating through this murky subject? Just remember: There is money to be saved. How much? Hundreds, even thousands, per year. For example, one of the authors typed all of his insurance information into a comparative insurance service. The quotes (for very basic coverage on two old cars) ranged from $1,006 to $1,807 — a difference of $801 a year. If you’re currently dumping thousands into your insurance company’s coffers because of a couple of tickets, an accident or a questionable credit rating, shopping your policy against others may be well worth the effort.

Look at it this way — you can convert the money you save into the purchase of something you’ve lusted after for a long time. Hold that goal in your mind. Now, let’s begin.

Before you can shop for something, you have to decide what you need. The first step in finding the right auto insurance for you is to figure 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. Make a list of the different types of coverage and then return for the next step. (You will find a list of each state’s requirements and an explanation of the various types of insurance in “How Much Auto Insurance Do You Really Need?”. Also, check out “Little-Known But Important Insurance Issues” as it has a glossary of basic insurance terminology.)

Now that you know what is required, you can decide what — if anything — you need in addition to that. Some people are quite cautious. They base their lives on worst-case scenarios. Insurance companies love these people. That’s because insurance companies know what your chances are of being killed or maimed, and how likely it is for your car to be damaged or stolen. The information the insurance company has collected over previous decades is crunched into “actuarial tables” that give insurance adjustors a quick look at the probability of just about any occurrence.

It is important to keep in mind that the basis of insurance is a difference of opinion between you (the insured) and them (the insurance company). You believe you will, at some point, probably get in an auto accident. The car insurance company believes you probably won’t. And the insurance company is willing to take your money to prove you wrong.

Another issue Howard mentioned is that the limits of any uninsured and/or underinsured motorist coverage that you purchase cannot exceed the limits of your liability coverage. Such coverage, he said, can be valuable, as it will cover lost income if you’re out of work for several months after being injured in a major accident.

Your driving habits may also be a consideration. If your past is filled with crumpled fenders, if you have a lead foot or a long commute on a treacherous winding road, then you should get more comprehensive coverage.

“Consumers should also be aware that they don’t have to buy the package [of collision and comprehensive coverage],” Howard said. “If your vehicle is older, if you have a good driving record and if there is a low likelihood that it would be totaled in an accident, but a high likelihood of it being stolen, you could buy comprehensive but not collision.” Seems like good advice for all of the 1989 Toyota Camry owners reading this article — this has been the most stolen car in the nation for several years (it’s often stolen for parts). But we would expect that most of them on the road have well over 100,000 miles.

At this time, a rather sobering point needs to be interjected. Just having car insurance doesn’t protect you from absolutely anything bad that might happen. First, the insurance company needs to back up the claims that they make in the fine details of the contract. TV ads show folksy adjustors at the scenes of natural disasters passing out claims checks like coupons for cocktail wieners at a supermarket. But, in case you haven’t noticed, real life is a bit different from TV ads. If you have an accident, your car insurance company will take a close look at your claim before mailing you a check. And the check may be written for an amount much smaller than you had hoped. For this reason, you should be intimately familiar with the terms of your policy and call the company with any questions you might have.

Now that you have made several practical and philosophical decisions, it’s time to start shopping. Begin by setting aside about an hour for this task. Bring all your records — your current insurance policy, your driver license number and your vehicle registration. Drink plenty of coffee. Have a phone at your elbow. And, of course, power up your computer.

Begin with the online services. If you go to Netquote.com or other insurance quote sites, you can type in your information and get a list of comparative quotes. The form takes about 15 minutes to complete. If this bores you, just remind yourself that you are saving money and you can use that money to buy something nice for yourself. If the entire shopping process takes you two hours to complete, and you save $800, you’re effectively earning $400 an hour.

A few things to keep in mind: (1) When you use quote sites, you may not get instant insurance quotes. Some companies may contact you later by e-mail, and some that are not “direct providers” may put you in touch with a local agent, who will then calculate a quote for you. (A “direct provider,” like Geico, sells an insurance policy to you directly; other companies like State Farm sell insurance through local agents. We’ll discuss the pros and cons of each later.) (2) It’s not easy to get quotes from these sites in all states — if you live in New Jersey, for instance, you’ll probably find it faster to pick up the phone, since most insurers currently don’t provide online quotes for this state.

You can also try getting insurance quotes from some of the insurance companies listed on the Edmunds.com Web site — Geico, InsWeb, or Insurance.com. The forms will take about 10 minutes each to complete.

Of course, there are many other insurers that you can contact online. But remember, while you’re researching companies, make notes in a separate computer file or on a piece of paper divided into categories. This will keep you from duplicating your efforts. When you visit the different online insurance sites you should take note of several things:

  • Annual and monthly rates for the different types of coverage — make sure to keep the coverage limits the same so that you can make “apples-to-apples” comparisons
  • An 800 number to call for questions you can’t get answered online
  • The insurance company’s payment policy (When is your payment due? What happens if you’re late in making a payment?)
  • Discounts offered by the insurance company that pertain to you
  • The insurance company’s consumer complaint ratio from your state’s department of insurance Web site (more on this below)
  • The insurance company’s A.M. Best and Standard & Poor’s ratings (more on this below)

Once you have exhausted your online options, it’s time to work the phones. Those companies you haven’t been able to get an online quote from should be contacted. Surprisingly, doing this process verbally can actually go faster than the online counterpart, providing you have all the information regarding your driver license and vehicle registration close at hand. When you get a quote, be sure to confirm the price. Also, ask them to fax or e-mail the quote to you as a record.

We can all find the lowest premium, but it may not be immediately obvious how to determine whether a company is reliable. When we say “reliable,” we’re talking about how the insurer treats you, the customer. Particularly, how will the company deal with you when you file a claim? Will you be paid the full amount to which you are entitled? And will you be paid promptly?

How To Get Affordable Car Insurance

If you lose your job, take a pay cut or encounter another kind of financial hardship, affordable auto insurance quickly turns from nice to necessity. While it’s easy enough to find companies offering cut-rate car insurance, is that the best way to go?

Not really, according to consumer watchdogs and insurance experts. To find the lowest possible rates from an insurer that’ll be there when you need it, learn what type of coverage you must carry, research the reputations of insurance companies and take advantage of every possible discount for which you’re eligible, experts say. They also recommend checking out pay-as-you-drive policies that peg premiums to how many miles you put on your car each year. Finally, if you’re eligible, look into low-cost auto insurance programs that such states as California, Hawaii and New Jersey offer to people with very low incomes.

When it comes to buying affordable car insurance, you’re your own best advocate. At the same time, it’s not always easy to take on that role, says J. Robert Hunter, a former Texas insurance commissioner and insurance director at the nonprofit Consumer Federation of America in Washington. Don’t settle for the first insurance company or agent you find, Hunter says. Shop around. “That’s how big buyers of insurance do it,” he says. “They put it out for competitive bids. That’s what you should do, too.”

Here’s a step-by-step guide to finding the lowest rates without getting ripped off:

1. Start with the car. What you pay for comprehensive and collision coverage depends on the year, make and model of the car you drive. Generally speaking, the newer, more expensive the vehicle, the higher the premium. Rates for comprehensive and collision coverage don’t vary much, so if you can’t afford to pay a lot for insurance and you’re in the market for a car, buy one that’s inexpensive.

2. Know your limits. Most states have set minimums for liability insurance coverage, both for bodily injury and property damage. Look up coverage minimums here or on your state insurance commission’s Web site. The National Association of Insurance Commissioners lists insurance commissions in all 50 states and U.S. territories. If you’re taking out a loan to purchase a new or used car, the lender will likely require you to carry a certain level of comprehensive and collision coverage, according to the NAIC.

3. Take the highest possible deductible. Want an easy way to lower your premium? Take a high deductible. By opting for an annual deductible of $1,000 instead of $250, you’ll pay less up front, but should you be responsible for an accident, you’ll foot more of the bill before insurance payments kick in.

4. Check your credit score. Some states allow insurers to take your credit history into account when compiling what’s called an insurance credit score, which they use to calculate your premium. Bad credit because of overdue bills or a personal bankruptcy means you could end up paying more for auto coverage. To improve your insurance credit score, pay your bills on time, monitor your credit report and do anything you can to fix problems that could be lowering your score.

5. Narrow the field. Use the process of elimination to come up with three or four reputable insurance companies or agents to approach for quotes. Start at your state insurance commission’s Web site, which usually lists several dozen of the area’s top insurers. Choose the half dozen or so companies with the lowest prices for coverage that’s closest to what you need. Next, check the reputations of insurers by going to the NAIC’s Consumer Information Source Web site to find the “complaint ratios” for each. Complaint ratios show the number of complaints that consumers filed against a company in a given year and then compare this to the company’s share of all premiums for a specific type of auto policy during that period. The national median is 1.0, and highly rated companies can score well below that.

Here’s exactly how to see where your candidate companies stand. In the search box on the right side of the Consumer Information Source page, type in the name of the insurance company you want to research, your state and “Property/Casualty” for the statement type. From the results page, click on “Closed Complaints.” To see complaint ratios for the company’s auto insurance policies, choose “Closed Complaint Ratio Report” and “Private Passenger.”

If a company’s ratio is substantially higher than the median, go back to your state insurance commission’s Web site to see if regulators have taken action against them. With that information, whittle your list down to the three or four insurers with the lowest complaints. Then contact them directly. Consumers who are really financially strapped — to the extent of not having Web access at home for this research — can ask a friend or relative with Internet access for help, or use free Internet service at a public library.

6. Find an agent. If the insurance companies you’ve identified as possibilities sell directly to customers, you can plug information into a form on their Web sites, get a quote and have someone contact you. If the companies sell through an agent network, ask friends or family who they use, or go back to your state insurance commissioner’s Web site to look up agents in your area. Give anyone you contact specific details about the coverage you want and let them know you’re comparison shopping. “Say, ‘I’ve talked to this company and got a quote for $480. Can you beat it?'” says Hunter, with the Consumer Federation of America. “Then you’ve put them to the test.”

7. Grab those discounts. Insurers offer a multitude of discounts, including lower rates for drivers with short commutes, retirees, students with good grades or vehicles with safety devices such as car alarms or motorized seatbelts. If you’re over 55, you could lower your premium by 10 percent by passing a defensive driving course, according to the Insurance Information Institute. When you’re talking to agents, don’t forget to inquire about the group discounts that some insurers offer to members of professional organizations or other groups. Companies including State Farm, Auto Club of Southern California and Progressive have begun offering pay-as-you drive discounts, with premiums tied to your annual mileage, with a cap at approximately 19,000 miles. In many of these programs, you report your mileage online or to your agent when your policy’s up for renewal.

8. Consider opting out of some — but not all — coverage. If you drive an older car and own it outright, consider dropping comprehensive and collision coverage. If the vehicle is really old, you could be paying more in insurance than what it’s worth. But hold onto that liability insurance. It’s illegal in most states to drive without it, and insurers in some states charge significantly higher premiums if you let coverage lapse, even if you haven’t been driving.

9. Investigate state-run low-cost insurance programs. If you live in California, Hawaii or New Jersey, and if your household income is close to or less than the poverty level, you may qualify for state-run low-cost or no-cost insurance programs. Policies under the California Low Cost Automobile Insurance Program, for example, cost less than $400 a year and cover about 12,000 low-income drivers at any given time, according to Doug Heller, executive director of Consumer Watchdog, an advocacy group in Santa Monica, California. He expects more people to sign up as a new state law takes effect that lets agents sell the program online for the first time. “That’s important not just for people who can get online from their homes, but for agencies that provide resources for low-income families,” Heller says. Lawmakers in Nevada and Michigan recently proposed or approved pilots for similar programs.

10. Assess insurance needs and premium costs annually. Life isn’t static, and your auto insurance premiums shouldn’t be either. Review your policy once a year, especially if you’ve moved or switched to a job that has you driving more or less. A review is also a good time to check on whether you’re eligible for additional discounts.

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.