How to avoid sticker shock from rising auto insurance rates
The cost to insure your car jumped 33 percent from 2000 to 2010, according to the Insurance Information Institute. That means the average driver coughed up an extra $205 per vehicle for auto insurance during that 10-year span. By most accounts, auto insurance premiums will climb again in 2011.
“Auto rates look to be up an average 3 to 5 percent in 2011,” says Robert Hartwig, president of the Insurance Information Institute. Higher administrative costs and a higher number of claims lead the pack of reasons for the anticipated rise in rates.
“I wouldn’t be surprised if rates go up in 2011,” says Jack Taylor, professor of retail and insurance at Birmingham-Southern College in Alabama. ”Rates typically depend on the region where you live, so a carrier will have two different rates for those living in Chicago versus those living in Birmingham.”
|One expert predicts auto insurance premiums will rise 3 percent to 5 percent in 2011.|
Whether you’re in Chicago, Birmingham or some other locale, you can put the brakes on sticker shock from ever-increasing auto insurance premiums.
You better shop around
One way to rein in spiking premiums is comparison shopping.
“Too many consumers automatically pay a renewal without looking around to see if they can get a better deal for auto insurance,” says Eric Poe, chief operating officer of CURE Auto Insurance, a nonprofit insurance company based in Princeton, N.J.
To ensure successful comparison shopping, Poe suggests reviewing your current policy. Keep your policy on hand to compare “apples to apples” coverage. Then start shopping. Check with insurance websites and insurance agents or brokers for quotes.
Knowing the market value of your car helps when you’re shopping. “Auto insurers generally only pay claims equal to a car’s actual cash or market value,” Poe says. That means comprehensive and collision coverage may not be worth keeping on an older car that has declined in value. “But few agents will mention that,” he says.
Before committing to a carrier, obtain rate quotes from at least five insurance companies, experts say. “One major mistake people make is not exploring enough options,” Taylor says.
|Failing to shop around — online or elsewhere — for a better deal when your auto insurance policy is up for renewal can be a costly mistake, according to one insurance executive.|
One option you should explore, Poe says, is asking for several variations of an auto insurance quote based on a range of deductibles amounts for collision coverage. That’s because the lower your deductible, the more likely insurers think you’ll be to file a claim. So they hike up rates — in some cases as much as 15 percent to 30 percent — to reflect that increased likelihood.
Also, don’t be shy about asking for auto insurance discounts or telling your agent you’re looking at changing companies.
“If you have a good payment history and driving record, the carrier might maintain your 2010 rates to retain you as a customer,” says Ashley Hunter, an insurance broker and consultant in Austin, Texas, who was a claims supervisor at State Farm.
Size up your score
Your credit score could help you save money, too. If your credit score has gone up since you activated your auto insurance policy, you may be able to negotiate a discount. “Insurers check credit to determine the likelihood that you will file a claim,” Hunter says.
If you have a credit score of 650 or less, you’re viewed as a higher risk for filing an insurance claim. “Insurers equate financial stability with a reduced chance of traffic violations or accidents. If your score is low, you’re charged high premiums in anticipation of the violations, accidents or claims you may have in the future,” Hunter says.
If your credit score isn’t up to par, ask the carriers that you’re considering what factors they use when determining premiums. Try to get a quote from a carrier like Direct General that doesn’t use credit scores or doesn’t weigh it too heavily when setting premiums.
Update your lifestyle changes
Keep your agent up to date on information about your life because certain lifestyle changes — such as getting married, buying a home or changing jobs — can be reflected positively in your rate when your auto policy is renewed. “Lifestyles send signals about your level of responsibility behind the wheel and factors into the likelihood you’ll file a claim,” says Hunter, the insurance broker and consultant.
Bottom line: Taylor, the Alabama professor, says the least expensive premium isn’t always your best bet. Customer service and dependability when processing a claim are vital as well. He suggests talking to auto mechanics or other businesses that deal regularly with auto insurance agents and companies. “They’ll be able to tell you quickly which companies are good to work with and which ones are a hassle,” Taylor says.