The San Diego Insurance Blog: 10 Ways to Beat the High Cost of Auto Insurance (Part 2)

Part 1

We've been evaluating 10 Ways to Beat the High Cost of Auto Insurance. Part 1 included the introduction and Ways 1-3. We'll finish it up here.

4. EVALUATE YOUR MEDICAL COVERAGE -

Medical Payments coverage is designed to pay for injuries sustained by you and anyone else in your car. Particulars of this coverage vary so the details are best discussed with your agent. But, here's the basic idea.

If you have good medical insurance through your work or a private plan, it may be wise to minimize your medical payment coverage on your auto insurance. As far as the coverage applies to you, there is probably a lot of overlapping coverage. It is probably not a good idea to drop this coverage completely as you are never sure just what kind of health insurance others that ride in your car may have. Limits available on this coverage usually range from $1000 per person up to $100,000 per person. Driving around with $100,000 of coverage when you have adequate health insurance may be some overkill. A limit of $1000 or $5000 per person might make more sense. On the other hand, if you do not have adequate health insurance, then the premium for the $100,000 of coverage might be money well spent! Weigh the benefits and decide what is best for you.

Once again! This can be a very tricky area so the details are best discussed with your agent. A complete understanding of your health insurance coverage is necessary before making any decisions to cut out your auto medical coverage.

5. WEIGH THE VALUE OF "FRINGE" COVERAGES -

Insurance companies offer a variety of coverages other than the core coverages of Liability, Medical, Comprehensive, Collision and Uninsured Motorist Coverage. They offer these coverages because they are additional ways to generate premium dollars for the company. Generally, the company makes money on these coverages. Consider them carefully before buying them even if they are only a few dollars apiece. Some of them are very worthwhile and some are not. You need to make your own best decision.

***One of the coverages that you probably should at least strongly consider is Rental Reimbursement. This is the coverage that pays for the cost of a rental car while your car is being repaired in case of an accident. Most people think this is covered in their basic policy. IT IS NOT! Picture your life for 2 weeks without your car. Do you need to have one? Can you borrow one? Can you afford to rent a car yourself? If these answers are YES, NO, NO, then you need to have Rental Reimbursement Coverage. Cost is usually about $20 a year. Could save you humdreds of dollars if you have an accident.

One of the most commonly offered coverages is towing or emergency road service. The premium is usually nominal and lets face it, even the most well maintained cars occasionally break down. Towing coverage runs about $6 per year. The average tow can cost $30-$50 and more. That's one tow that can cost you seven years of premium. If you think the odds are pretty good that in the next seven years you will need some roadside service, then it might be a good idea to get the coverage.

Auto Death Indemnity is another coverage that is commonly offered. It provides coverage for death when caused by an automobile. It should never be used as a substitute for a good life insurance portfolio. Auto Death Indemnity can insure the principle operators of the vehicle and some companies also offer coverage for the children and other relatives of the insured that reside in the household. This coverage can also provide compensation for dismemberment; the loss of a hand or an arm as the result of an auto accident.

Some companies offer Auto Disability coverage. This is the coverage that is designed to replace part of your paycheck if your are disabled in an auto accident and are unable to perform your normal occupation. The limits of this coverage are usually very limited and again should not be used as a substitute for an adequate disability insurance program.

Remember, these life and disability benefits only pay for losses that are auto related. If you are killed or disabled because you fall from a tree or drown while swimming for instance, these benefits will not pay.

Some people are in either temporary or permanent situations that prevent them from buying basic life and disability coverage. These fringe coverages can offer some coverage but should be backed up with the more traditional forms of life, health and disability insurance whenever possible.

6. DOUBLE CHECK YOUR MILEAGE -

Most companies consider the mileage you drive quite heavily when computing your premium. Be sure to learn from your agent what the categories are and just where the markers are between short and long mileage. Become an expert in this area! It can put dollars in your pocket. Definitions may vary greatly between companies.

There may be categories for annual mileage, long and short mileage for commuting back and forth to work. Some companies may not place you in the commuting category if you drive less than 30 miles per week to and from work. If you car-pool, be sure to count only the miles that your car commutes. If you drive 60 miles per week to and from work but only drive one week out of three then your commuting average is 20 miles per week. If you have a spare car sitting around check to see that it is rated as pleasure only and short annual mileage. Consider alternating cars that drive the farthest to work to possibly get a short mileage rating on both cars. Ask you agent to work with you to find the best combination for your situation.

7. DOUBLE CHECK YOUR TICKET AND ACCIDENT RECORD-

Insurance companies handle thousands of policies on a daily basis. They make mistakes on a daily basis! You may be being charged for tickets and accidents that are not yours! Check with your agent to see exactly what items show on your record that may be increasing your premium. If you are not sure what you should have, go to local motor vehicle office and ask for a print-out of your record and compare it with the insurance company records. Removing these errors can save you up to 30% and more on your premium.

8. GET ALL OF THE AVAILABLE DISCOUNTS -

Discounts offered by insurance companies are as varied as the cars they insure. Cross examine your agent to be sure that you are getting every possible savings opportunity that you can! Ask for a list. Check for the availability of the following discounts: Non-Smoker; Accident-Free; Citation-Free; Longevity with the company; Passive Restraint Devices (such as automatic seat belts and air bags); Car Alarm; Over 21; Over 50; Over 65; and Driving Safety Course Completion. Marketing conditions dictate that insurance companies constantly update their discount programs. Be watchful in your renewal notices for notification of new ways to save your premium dollars.

9. USE CARE IN RATING YOUR YOUTHFUL DRIVER -

Certainly one of the most expensive items for young people today is the cost of auto insurance. Because the inexperienced operators do cause a higher percentage of claim costs, they get to pay higher percentage of the premiums. Take heart! There are ways to effectively minimize the impact on your checkbook.

By far, the greatest savings on the insurance bill is wrapped up in the kind of car that the youthful operator drives. Almost 50% of your premium is shelled out to protect the more expensive car that is too valuable to withhold comprehensive and collision coverage. Consider buying a car that is within your "write-off" limit as defined in your Financial Picture. I fully realize that selling this idea to your 16 year-old may be much more of a challenge than just paying the higher premium! But, it will provide substantial premium savings.

Additional tricks for the youthful driver include the Good-Student Discount. The usual threshold is a 'B' average or better but some companies will accept statements from the school that the student is in the upper 20% of the class or similar alternative requirements. Some parents have made the 'B' average the requirement for the young person to drive. No B's- - -No Keys! Check out all of the rules of your company involving the rating of youthful operators. Some companies offer part-time driver rates that are substantially less than the full-time rates. This area can be very tricky! This is the time to get down and get serious with your agent. Also ask your agent when the company will start to charge you the increased rate. Some companies will not begin to charge you the increased rate until the first renewal after the addition of the youthful operator.

10. SHOP FOR SERVICE AND PRICE -

Managing your insurance is not an easy job. The more work that your agent does for you the less work you will have to do. It is important to have both the service you need and the price that you can afford. Some companies offer agent service and others do not. Some cost less, others more. As in each of the management decisions we discussed above, you must weigh the cost versus the benefit. First you must decide what kind of insurance buyer you are. Do you like to get into the nitty gritty yourself or do you prefer to have someone do all of that for you? Are you willing to follow-up on changes and claim activity yourself or do you just not have the time? Do you feel a certain security from being with one company for years or can you jump from carrier to carrier with each renewal notice?

Find out from your company what benefits you gain as you stay with the company over the years. Some companies offer increasingly larger claim-free discounts the longer you are with them. If you encounter some ticket or accident problems, some companies will even reconsider cancellation of your policy if you are a long-time, loyal policyholder. Remember when you shop for insurance to weigh the parameters of your longevity and familiarity with the company, their price, and their service. Consider also the relationship with the agent, his or her willingness and availability to assist you with these ongoing decisions or the availability of service personnel with a non-agent company. You are the consumer. There are companies to suit every style you can imagine. Find what is best for you!

HOW MUCH LIABILITY COVERAGE -

This is the part of your insurance that pays for the damage done to the other person or property when the accident is your fault. Cut, slice and trim as much as you like in the areas above but be wise here. This is the part that protects your home, your future earnings, and whatever other assets you have managed to accumulate thus far. Some state minimums are down in the $15,000 per person range. A seriously injured person can spend that money without ever leaving the emergency room! Don't be Penny-wise and Pound-foolish in this area. Consider as a minimum at least $50,000/100,000/25,000 or a single limit of $100,000. I would recommend buying more than that but at least start with those limits. This point may not save you a lot of money but it will save you a lot of sleepless nights wondering if that accident that you caused in that one moment of inattention will wipe-out your life savings and your future earnings.

IT'S YOUR MONEY !

Yes, the proper management of your insurance does take a little time, study, and effort. You can effectively manage those premium notices that previously seemed to be out of control. Learn to weigh the savings with the benefit and make decisions that are best for you. Stay within your Financial Picture and update your portfolio at least once per year. And remember: The money you save just might be your own!