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Affordable car insurance in 5 steps



Computer key that says save moneyWho wants to save money on car insurance? You can almost hear the affirming cheers echoing from the bikini beaches of Malibu to the skyscraper canyons of Manhattan.

Here are five ways to pull it off, if you're willing to do a little work beyond wincing at your current premium by researching the types of car insurance you need and the car insurance discounts that apply to you.

1. My mama told me, you'd better shop around

Comparing car insurance quotes online or calling several agents for quotes takes time, but the savings can be worth it. The Insurance Information Institute (III) says the prices offered from one insurer to the next can be "dramatic." But be sure to have the quotes face off with the exact same coverage to get accurate numbers.

Penny Gusner, consumer analyst for Insure.com, suggests having your old policy and other information related to the driver and vehicle you'll be insuring available at the start. Also, be sure to know your state's minimum coverage requirements. You can find that at your state's department of insurance or on this site.

Once you've found a policy fitting your protection and price needs, check the financial strength of the insurer through ratings provided by Standard & Poor's and A.M. Best. The money you save here comes with filing a claim after an accident or theft. Both grading firms evaluate an insurer's ability to pay out all claims. For A.M. Best, only consider companies with at least a B+ rating; don't go below a BBB for Standard & Poor's.

2. Stroll through the car insurance discounts aisle

There are several discounts -- from those tied to safety (insurers love this because it lowers underwriting risks) to bundling vehicle insurance with homeowners coverage. Knowing which discounts are available, and which ones you qualify for, can drop premiums by a few percent to significantly more.

Here's a rundown of what's offered by most companies:

  • Drive safely: A clean driving record for a certain number of years -- typically three -- can mean lower premiums.
  • Smart student: Full-time students with at least a "B" average usually qualify.
  • Driving classes: Young and more mature drivers who pass accredited courses can qualify. Many insurers accept online classes as well as those in the classroom.
  • Low mileage: A discount is usually provided for those who drive less than 10,000 miles a year. The threshold may vary with insurers.
  • Anti-theft: You'll probably get a rate break if your vehicle has anti-theft or vehicle recovery devices.
  • Safety features: Safety features, such as air bags or antilock brakes, will probably get you a discount.
  • Multi-car: Lower premiums typically come if you have more than one vehicle on the policy.

The III, however, warns that discounts shouldn't be the final say when searching for a cheaper rate. "Keep in mind that the key to savings is not necessarily getting a discount, rather the final price of the policy," the III points out. "A company that offers few discounts may still have a lower overall price."

3. Raise the roof on the deductible

The idea of raising your deductible may provoke an anxiety attack -- nobody likes the idea of a bigger out-of-pocket expense following a claim. But the savings can be large if you weigh the odds of a mishap and decide you can handle the cost if they turn against you.

Loretta Worters, the III's vice president of communications, says policyholders can save as much as 15 to 30 percent on their collision and comprehensive coverage by raising the deductible from $250 to $500. She adds that going even higher, up to a $1,000 deductible, may raise savings up to 40 percent.

4. Older ride? Put some coverage out to pasture

Comprehensive and collision coverage protects you if the car is damaged or stolen. The payout from the insurer is usually the cash value of the vehicle at the time of the loss, minus the deductible. This is especially important if your car is valuable and you want it replaced or repaired to a pristine condition.

But if your vehicle is older and not worth much, comprehensive and collision protection may be costing too much. Consider the insurance premium compared to the value of the car, says Worters, who has a suggestion:

"If your car is worth less than 10 times the premium, purchasing these coverages may not be cost-effective," she says.

Many drivers apparently follow this advice. About 63 percent of vehicles 10 years or older in 2010 did not have comprehensive and collision coverage, according to Quality Planning, an insurance analyst.

5. Be the boss of your credit

Good credit means your walk through life will be much easier. From qualifying for loans to renting an apartment, good credit ensures that doors open instead of slamming in your face. It's the same with auto insurance. Those with strong credit ratings are likely to snag lower premiums because the insurer will assume they're less of a risk and can pay their bills on time.

"Most insurers use credit information to price policies," notes the III. "Research shows that people who effectively manage their credit have fewer claims."

On that point, don't let the payment deadline for your insurance lapse. Besides harming your good standing with the insurer, you'll probably have to pay a late fee.

Boring cars can also reduce car insurance premiums

Beyond these five steps, you can also save on your rates by opting for a vehicle that may not be as sexy as a high-end sports car but relatively risk-free. Lynne McChristian, a spokesperson for the Florida branch of the III, says insurers are likely to be influenced by the vehicle's stability and overall safety profile when determining a base coverage rate during underwriting.




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