How to cut insurance costs

Kiplinger's New Cars & Trucks, Annual, 1999 by Kimberly Lankford

A little comparison shopping can pay off with a policy that costs hundreds less.

Accidents happen. In cars, they happen nearly 100,000 times a day, and insurance can be the only thing standing between you and financial catastrophe. But you don't have to resign yourself to paying sky-high insurance premiums, even if you have a less-than-perfect driving record.

To find out just how much real people with real driving experiences could save, we picked a family and a single man and did the shopping for them. Among the startling results:

* The highest semiannual premium quoted for our single man's policy ($1,727) was more than triple the lowest premium ($533)--for exactly the same coverage.

* The highest six-month rate for our family's policy ($2,100) was more than double the lowest rate we found ($890).

* The companies with the best deals for our family quoted rates that were among the worst for our single man.

The enormous price differences and lack of consistency illustrate the most important point about searching for affordable auto insurance: You have to shop around. Every insurer has its own formula for setting premiums--a complex combination of variables including your age, sex, driving record, where you live and the kind of car you drive. You will be richly rewarded if you take the time to find the insurance company whose criteria shine the best light on you and your family.

Reality check #1

The family we shopped for includes a teenage son who started driving a couple of years ago--a notoriously expensive addition to any family's policy. When we priced policies last year, he had already received two speeding tickets, and Mom had also gotten pulled over for speeding. Such incidents aren't terribly out of the ordinary, but the combination made the family untouchables in the eyes of some insurers.

For the past few years, they had relied on an independent agent to get them the best deal on insurance for their 1989 Mazda MPV minivan and 1990 Toyota Celica. They were paying $1,061 every six months for car insurance, including:

* $100,000 liability coverage for bodily injury and property damage;

* $2,000-per-person medical payments coverage;

* $100 deductible on comprehensive coverage;

* $200 deductible on collision coverage; and

* $100,000 uninsured- and underinsured-motorist coverage.

Tweaking and shopping. Before setting off to find a better deal, review your insurance coverage in light of the recommendations in the box at left. The family we shopped for, for example, should hike their liability protection to $100,000 per person, $300,000 per accident and $50,000 for property damage. We made that change and upped the uninsured-motorist coverage to $100,000 per person, $300,000 per accident. We also boosted the deductibles to $250 (they didn't want to go much higher than that). The medical-payments coverage stayed the same.

The range of prices quoted by 17 agents and companies was startling. The lowest six-month premium was $890, almost $350 a year less--for more coverage--than the family had been paying.

Most of the companies that charged lower premiums paired the teenager with the Mazda, confirming the notion that assigning teenagers to an older car can save money. (A few companies wouldn't cover the family at all because of the speeding tickets.)

Although the chance to cut $350 a year off their premium gave the family plenty to smile about, they could easily save more. Raising the collision and comprehensive deductibles to $500, for example, would knock $73 off the premium from one insurer.

Reality check #2

The single man we shopped for is a 35-year-old assistant comptroller for a real estate investment firm, drives a 1993 Isuzu Rodeo and lives in the picturesque Marina district of San Francisco. But insurance companies don't care about nice views. Instead, his downtown address boosts his car insurance premiums in a state that's already more expensive to live in.

Some companies might goose his premiums even higher because he's single, rents his home, parks on the street and has one ticket for turning left from a no-left-turn lane. On the other hand, his round-trip commute is only six miles.

We shopped for the same amount of coverage as we had for the family (100/300/50 liability; 100/300 uninsured motorist; and $2,000 medical payments), but raised the comprehensive and collision deductibles to $500.

The lowest price among the 20 quotes we got: $533 for six months. The highest quote: $1,727 for six months.

Driving your premium down

The insurer that quoted the highest price for the family was one of the lowest-cost insurers for the single man. That's one reason it's tough to make nifty generalizations about auto insurance.

If you have a lot of accidents or get a lot of tickets for moving violations, you're going to pay more for auto insurance. Everyone knows that. But the means by which insurance companies sort out the good risks from the bad aren't always so obvious. The price you pay is determined by a complex process that begins long before you apply for a policy. When you apply, you are screened by a company underwriter who decides whether the company wants to insure you and if so, in what general category to fit you.