The business section of the Dallas Morning News recently featured an article on saving money by making changes in your automobile insurance coverage. I recommend reading the full article, but here are a few excerpts:
The ideal way to save money is to exert effort once and automatically reap savings over and over again, every month. That’s why examining your car insurance makes a lot of sense.
Auto insurance prices vary widely. On average, car insurance cost Americans $789 per vehicle annually in 2008, the most recent year of data provided by the National Association of Insurance Commissioners.
But your costs could be far higher or lower because of the state you live in. For example, Florida, New Jersey and New York were among states where the average was more than $1,000 annually. North Dakota’s average expenditure was the lowest at $503. Texas fell in between with an $854 average.
Here are ways to save on car insurance:
If you think all auto insurance rates within a state are about the same, you’re wrong. Premiums can be different for the exact same policies, depending on what factors an insurer chooses to emphasize in its rate formula.
For the youngest drivers, comparison-shopping could save about $1,100 a year, according to a study by CarInsurance.com. You might think you get better service from higher-priced insurers, but there seems to be no correlation, according to a study by the Consumer Federation of America.
“Many people stick with the same insurance carrier year after year without ever shopping for a better deal,” Consumer Reports says in its guide to car insurance. “Blind loyalty to one insurer can cost you dearly.”
Choosing an auto insurer is important, too, because you might want to get your home insurance through the same carrier. Auto rates vary more and probably are more expensive, so let that be the insurance that, well, drives your decision.
Like bundling your pay TV, phone and Internet access with one company, you can get discounts for bundling your insurance with a single insurer, said Jim Fults, associate vice president of auto and personal insurance at Fireman’s Fund Insurance. At Fireman’s, he said, customers can save $400 to $600 a year by bundling auto and home insurance.
A deductible is the part of the bill you pay out-of-pocket before insurance kicks in. The higher the deductible you’re willing to accept, the lower your premiums will be. Changing from a $200 deductible to $1,000 could save you 40 percent, says the Insurance Information Institute.
Fults suggests examining several deductibles to see how they affect premiums.
“I think people would be really surprised, when they looked at changing a deductible of just $500 or $1,000, by what that does to the price [of premiums],” he said. “For some vehicles, it might move it considerably. In other cases, it might not.”
Personal finance experts typically advise choosing the highest deductible you can financially stomach if it will give you big price breaks on premiums.
Make sure you’re getting all the discounts you’re entitled to — for driving low miles every year, for example. A teen driver, who can raise rates 50 percent, can get a discount for good grades, typically at least a B average, Toups said.
Taking time annually to review your coverages with your insurer will make sure you’re getting those discounts, Fults said. You’ll not only incorporate your life changes into your auto insurance, but you’ll also learn about the insurer’s new products and pricing, which change often.
It might be worth dropping collision coverage on older cars that aren’t worth much.
Consumer advocate Clark Howard said the time to consider dropping collision is when cars get to be about 8 years old. His rule of thumb: If your annual, not monthly, premium for collision and comprehensive is more than 10 percent of your car’s value, remove collision coverage and just pay the liability premium.
Texans can check companies, compare rates and file complaints with the Texas Department of Insurance: www.tdi.texas.gov.