How to Buy Auto Insurance Without Becoming
a Wreck
That means you have to buy it. Every six months. The information provided here can help you make better decisions.
But let's go out on a limb and say you're pressed for time. Or you have a normal 21st Century attention span and just reading to here has put you into a catatonic state. You only need to know one thing: Greta Stogner, (972) 686-4100. You'll get a moderately painless needs assessment and quotes from a number of companies. You're done.
Shopping for Auto Insurance
Texas law requires vehicle owners to carry $20,000 maximum compensation for an individual's bodily injury, $40,000 for all parties' injuries and $15,000 for property damage in a single accident. Based on your knowledge of expenses, it's clear that if you carry only the minimum: (1) don't hit anyone very hard, and (2) don't hit an expensive car.
A more realistic standard set by the Texas Department of Insurance recommends you add coverage to reach $100,000/$300,000/$100,000. Of course, that assumes you have assets to protect in a lawsuit. If you live in your car and don't own anything, you may be able to get by with the minimum
If you finance or lease your vehicle, the lender will probably require you to have collision (to protect their collateral) and comprehensive (similar to the amounts above) to keep them out of any court action. Collision replaces the present value of your car (less deductibles) if a wreck is your fault or if fault is undetermined (Dallas police won't even investigate a crash unless injuries are involved). Comprehensive protects your vehicle from damage by anything but running into another car.
Texas law also requires personal injury protection and medical payments for your own protection. You can waive these with a signature if you want. You probably should do that if you have adequate hospitalization and disability insurance from other sources.
You can add some very valuable features to your auto insurance policy that don't cost a lot. Considered essential by many are rental car reimbursement and towing. The first keeps you on the road if your vehicle isn't. The second gets your car off the road or out of a ditch without wrecking your billfold.
Control Your Costs
While some risk factors are beyond your control, there are some ways you can reduce your premiums and make your insurance adventure a little less painful. Some of these suggestions may tick you off because they oversimplify or don't fit your driving style, but look for things that apply.
Shop around. Get quotes from at least insurers. The shortcut here is "call Greta." She represents a number of companies and gets quotes from all of them. Let Greta wait on hold and answer questions about anti-lock brakes and your embarrassing driving record.
Remember, if you get quotes yourself, be sure you're comparing kumquats to kumquats. Liability, collision, comprehensive and other features should be identical for a fair contest.
Also remember that there are charlatans, scam artists and quacks out there and the very best rate might leave you permanently shattered when you need restoration. Consider the company´s financial rating and its complaint index. You can get the insurer's financial rating from A.M. Best or Standard & Poor's. Look up Texas complaints on the Texas Department of Insurance website or call them in Austin, 800-252-3439.
Accept higher deductibles. When you file a claim, the deductible is the scratch (US currency) you have to put in before the insurance company pays a dime. Generously, the insurance company will reduce your premiums in exchange for higher deductibles. The payoff can be substantial. Increasing your deductible from $200 to $500 on collision coverage could reduce your premium by as much as 30 percent.
If a higher deductible makes you uncomfortable, put the money you would have been paying in premiums in an interest-bearing savings account until you have the amount of the deductible and then when a wildebeest heard broadsides your Civic, you won't be out of pocket.
Drop collision and/or comprehensive coverage. If you drive a relatively new SUV with cheerleader and soccer stickers on the back that you've financed or leased for way more than it's now worth, this suggestion won't help you. You need the full coverage or risk taxiing the kids to ballet on your back.
However, if your ride is a moderately rusty '89 Ford Fiesta and it's most valuable option is the net that catches falling parts, you'd be nuts to carry anything but liability and towing. You'd pay far more for the insurance than you'd ever collect in damages, even with a total loss.
When your car is something in between, you need to think about what the bucket of bolts is worth. Insurance companies sometimes use their own mysterious sources to determine a car's resale value. Your best bets are the Kelley Blue Book and the NADA Guide. If you obsessively maintain the car or have added premium equipment and options, keep records to show in case of a claim.
When you've determined worth, compare the premium versus the settlement you'd likely receive, less any deductible. If the cost of insurance is more than the probable benefit, reduce coverage on the POS to "liability only" (with towing and rental car reimbursement - you'll likely need those). Then, don't have a wreck.
Buy a "low profile" car. Cars that are expensive to repair or that have a high theft rate (i.e., they're pretty cool) generally have higher insurance costs.
The Highway Loss Data Institute publishes a report listing average collision and theft losses for 297 car and truck models. A recent institute report shows theft losses for the 4-door Accura Integra (1999-2001 models) were a whopping 562% above the average for similar-sized cars. Collision losses were among the highest for the Mitsubishi Mirage, at 50% above average (the name "Mirage" suggests a cause and a cure).
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As a rule, the less expensive the car is to buy, the less expensive it is to insure. But there are exceptions. Domestic vehicles are often less expensive to insure as are 4-door cars, 4-cylinder motors. The hard thing is finding a credible source of information. The website carinsurance.com quotes "leading car retailers" (so you know it's true) as recommending the following vehicles as the least costly to insure in the first five years of ownership:
- Chrysler PT Cruiser 4dr Wagon
- GMC Safari SLE AWD 3dr Minivan
- Dodge Caravan SE 4dr Minivan
- Saturn ION 1 4dr Sedan
- Pontiac Sunfire 2dr Coupe
- Jeep Liberty Sport 4WD 4dr SUV
- Saturn L300 1 4dr Sedan
- Volvo S40 4dr Sedan
- Saab 38600 Linear 2.3t 4dr SportWagon
- Buick Century Special Edition 4dr Sedan
Live somewhere else. If you live in a highly populated county, it stands to reason there are more drivers, more traffic and a higher risk of fender benders or worse. You'll pay less for insurance if you're one of the few cars on the road.
Look for low-mileage discounts. If you drive less than average, your risk of highway carnage is lower. Some insurance companies offer discounts to drivers who put fewer than a predetermined number of miles on their vehicles in a year. Keep track and provide accurate mileage information annually. Take a bus to work.
Check your credit history. Many insurers figure your personal credit score as an element in the cost of your premium. Your score is based on information contained in your credit report. If your credit reports contain errors, you may end up paying more for insurance than you ought to. If you really are a deadbeat, tell the truth. Myth or misinformation could get your coverage denied or canceled.
Earn discounts for safety features. Many companies offer discounts for air bags, antilock brakes, passive restraint safety belts and daytime running lights. There are no discounts for rear-view mirrors, though some insurers probably charge more if you have those fuzzy dice. Greta can help you save by digging for safety-related special offers.
Earn "other" discounts. A plethora of companies offer discounts when you insure more than one car. It's fiscally smarter to cover your whole fleet under one policy. Insurers are especially generous with discounts if you insure both your cars and your home with them (called a multiline discount or "cha-ching" in the trade). You may be entitled to lower premiums if you are over age fifty, have taken driver training courses or are particularly attractive looking. (No, that last one is wrong. That one means you're less likely to get a ticket when stopped.)
If your car is equipped with antitheft devices you may qualify for a savings. If your car's license plate is personalized because "your dad made it," you may be a redneck. (Sorry, we digress.)
Finally, if you're buying insurance for a kid's car, many companies offer "good student" discounts for maintaining a certain grade average.
Drive better. Stay off the sidewalk. Put the cell phone away. Eat your burger at a table so when you look down to find the pickle you dropped, you don't meet head-on with a FedEx truck. Even minor accidents can raise your rates as much as 40% for up to three years.
Financing Your Auto Insurance
Texas Department of Insurance rules require all auto insurers to offer installment plans. Some companies only offer payment plans through premium finance companies. These companies inevitably charge high interest rates and sometimes have a collections agent named Guido.
Shopping smart for car insurance means you should seek not only low rates but also low-cost financing. Be sure you know who will provide your installment plan. Look for insurance companies that offer their own installment arrangements. Ask about the down payment, the number of installments, interest or service charges, and the amount of your total monthly payment. Greta can help you find the best rates and the best payment plan.
Insurers and premium finance companies must give you terms at least as good as these:
For a 12-month policy, a 16.67 percent down payment and 10 equal monthly installments. If the policy is written through the Texas Automobile Insurance Plan Association (TAIPA), the down payment is 20 percent. For a 6-month policy, you put 33.33 percent down and make four equal monthly payments.
Insurers and premium finance companies may offer smaller down payments and more time to pay. An insurance company can add a service charge to your payment. The basic service charge is $3 per month, but the company can add 50 cents for every $250 (or fraction) of premium over $500.
See also: Stuff that will affect your premium.
Auto Insurance Demystified | How to Buy Auto Insurance
Stuff that Affects Your Auto Rates | High Risk Driver Insurance
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