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Finding the Best Price

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auto insurance buying guide

Comparison Shopping

Most people stick with their insurance company for long periods of time without checking to see if they can get the same (or even better) coverage from another company for a low cost.

Don’t be one of these people. At least once a year, get auto insurance quotes from several companies. Even if you don’t change insurers, this annual checking will make you better informed when it comes time to renew. You might even be able to negotiate a better deal from your insurance company if you can talk informedly about what their competitors are offering.

It used to be harder to get price quotations from various insurance companies. Now it’s incredibly simple to let the Internet do your shopping for you. (Personally, I like the auto insurance quote form at the Texas Department of Insurance Website. It took me about 2 minutes to fill out, and when I clicked the button it gave me quoted prices from 43 different insurers. — Wes Williams)

Be Someone Who’s a Safe Risk

In a lot of ways, insurance is like gambling. You pay those premiums so that you’ll have protection should you ever need it. The insurance company sets its rates based on the likelihood that you will or won’t need the coverage you’re paying for. If something bad happens and you file a claim that the insurance company has to pay, you win. If nothing bad ever happens, the insurance keeps all the money you paid for coverage, so it wins.

But like any casino, an insurance company has a team of math experts that calculate how much risk a person is to their profits. Your driving record, your car, your neighborhood, even your credit rating give away all kinds of information to the insurance company about the risk level you present.

Insurance companies sort customers by their likelihood of filing a claim, which is based on the data collected and numbers crunched by the company’s mathematicians. Those deemed least likely are labeled “top tier” and are charged the lowest premiums. The greater the likelihood of a claim, the lower the tier and the higher the costs. Here are some things you can do to make yourself less of a risk and, therefore, lower your insurance rates.

  • Keep your driving record clean. Every moving violation and especially every collision affects your driving record. Keeping a clean record over an extended period of time makes you a safer risk.
  • Move to a safer neighborhood. Insurance companies check the crime statistics on various ZIP codes, and this data is taken into account whenever a person asks for an insurance quote. If you live in a neighborhood with a higher crime rate, there is an increased risk of car theft, vandalism, or even collision. Next time you consider a move, check the crime statistics for your neighborhood with an online service like CrimeReports.
  • Make your car safer. Maintaining your vehicle and adding safety and anti-theft devices are just two ways show your insurance company that you’re working to be safe on the road. Not only will installing safety and anti-theft devices make you a safer risk, you may actually qualify for discounts on your insurance for having them.

Other Ways to Save

Get a Higher Deductible. The more you’re willing to pay out-of-pocket, the less your insurance will cost you.

Compare Insurance Costs BEFORE You Buy. The story about red cars costing more to insure is largely an old wive’s tale, but the make and model do affect the insurance price because they can affect driving behavior and the risk of theft. Before you buy a new car, check to see what kind of insurance costs each of the models you’re considering might cost you.

Get Multibple Policies with the Same Company. If your auto insurance comes from the same company that writes your life, renter’s, or homeowner’s policy, you’ll qualify for a discounted cost.

Check the Company’s Reliability.

This is a different aspect of getting a low price. It’s possible to get a really low price from a company that’s worthless. You may be paying them a smaller premium, but if they can’t or won’t do what you rely on an insurance company for, you’ve wasted your money. Reliability, in this case, is how well the customer is treated by the company. For example, how does the company react when a policy holder files a claim? Are claims paid promptly and in the full amount?

Fortunately, there are simple ways to check the reliability of a particular company.

First, visit your state’s department of insurance (You can get to the Texas Department of Insurance by clicking here.) and check the company’s rating. State insurance departments keep consumer complaint ratios on companies, which compare the total number of policy holders with the number of policy holders who’ve filed complaints. This will give you a good indication of how a company treats its customers.

Another source of information is JD Power and Associates Auto Insurance Ratings, which maintains and publishes ratings of auto insurance providers.

A less formal, but perhaps more practically useful, source of information is to contact auto repair shops in your area. After all, these are the kind of people you’d rely on to make any repairs that your auto insurance company would be paying for. They deal with many insurance providers on a daily basis and can tell you a lot about which companies pay fully and promptly, which companies are hard to deal with, and which pressure them to use inferior, after-market parts.

Be wary of affinity programs where an auto manufacture or dealership recommends one company or another. Sometimes these are totally legit, but sometimes they are the result of some deal. The companies in question may be thoroughly reliable, but that’s not guaranteed. In fact, that an insurance company felt the need to enter into some kind of partnership with a manufacturer could well indicate that the company has difficulties with customer service that they want to overcome. In general, treat any reduced rate like this as just another discount, then check out the company’s reliability before making a decision.

Insurance Agents

If you’re really worried about finding a reliable insurance company, consider working through an insurance agent. Years ago, virtually all insurance was sold through agents, who represented the company to the policy holder and the policy holder to the company. These agents have a vested interest in keeping both sides of the policy happy and work hard to do so. Having an insurance agent is a way of putting a recognizable human face on a process that is often anonymous and cold. If you’re life has been messed up by the chaos of a car crash, you’ll be glad you have a person representing your interests to your insurance company.

Be warned though. Companies that deal with agents have to pay them commission, which will certainly affect your premiums.

Next: Auto Insurance Discounts