Car insurance

Car insurance buying guide

Last updated: October 2014

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Getting started

Getting started

Those quirky characters in auto-insurance TV ads might give you more laughs than actual savings, according to a 2014 survey by the Consumer Reports National Research Center. Only 10 percent of 19,000 ConsumerReports.org subscribers who compared premiums found that they would save money by switching insurers. See our Insurance Center for ways to save money on other types of insurance.

That doesn't mean shopping is a waste of time. But it's only one way to save on auto premiums, which these days are buffeted by a slew of variables, such as:

Rising costs

Auto-insurance premiums are up 4 percent since 2013, about twice the rate of overall inflation. So if your income is still treading water, car insurance is taking a bigger bite out of your household budget.

Credit-based insurance scores

Hard times have hurt many consumers' credit scores. That could result in rate increases, thanks to most carriers' use of credit-based insurance scores in setting premiums. Consumer advocates (including Consumer Reports) have long argued that credit-based scoring is unfair because scores are not related to accident risk. But legislative efforts to ban or restrict the practice in recent years have been unsuccessful.

Uninsured motorists

The stagnant economy has also prompted unemployed consumers to go without insurance, which could shift some or all of their liability costs to you.

Corner-cutting repairs

Some insurers push policyholders to get their cars fixed at specified repair shops, which left our readers less satisfied, so that the companies can cut costs, often through use of cheaper aftermarket replacement parts.

Some cost factors are beyond your control, but there's still plenty you can do to cut your premiums for the auto coverage you need.

Control insurer cost factors

Do an annual rate check

Check rates from other insurers annually to make sure you're getting the best deal. But if you've been with the same insurer a long time, it might be tough to beat its rates. That's one reason shopping around didn't pay off for our survey respondents: More than 60 percent have been with the same carrier for 10 or more years. "Insurers reward longevity, particularly loss-free longevity," says Bill Wilson, associate vice president for education and research at the Independent Insurance Agents and Brokers of America. Long-term policyholders get bumped up into better rate tiers.

But most consumers, 75 percent, haven't shopped for auto insurance in the previous year, and of those who did, most researched only one or two companies, according to one recent insurance-industry survey. By looking further afield, you'll have a better shot at savings.

For example, a San Diego couple in their 40s with a 17-year-old male driver on their policy, no violations or accidents, and a multi-policy discount might jump at Hartford's $4,943 annual premium if they were already paying $5,822 to Allstate. But they'd find even lower rates at State Farm ($4,174), Safeco ($3,851), Geico ($2,993), and Esurance ($2,729), according to rate comparisons published by the California Department of Insurance.

Check whether your state insurance department provides rate comparisons; go to www.naic.org/state_web_map.htm to find a link to your state's agency. You can also compare multiple insurers online at Answer Financial, Insure.com, Insweb.com, and NetQuote. You usually won't get an immediate quote online, but you will get e-mail messages from hungry agents.

Consider forming a relationship with an independent agent, who will check rates for you at a range of carriers.

Pick a top-rated insurer

Saving is not only a matter of finding the lowest premium. An insurer can charge less in premiums but cost you more overall by lowballing loss estimates, hassling the repair shop to cut corners, and forcing you to pay extra for the manufacturer's replacement parts if you choose them over cheaper knockoffs. It can also unfairly jack up your premiums after an accident.

We surveyed 64,872 ConsumerReports.org subscribers who filed a claim between 2011 and 2014. Eighty-eight percent of them were highly satisfied with the handling of their claims. Among the highest-rated groups were USAA, Amica, and NJM, with overall satisfaction scores of 90 or higher. Those three insurers have consistently earned positions at the top of our ratings at least since 1999. Availability for some insurers is limited by region or policyholder eligibility rules.

Set the deductible right

A higher deductible reduces your premium because you pay more out of pocket if you have a claim. Hiking your deductible from $200 to $500 can cut your premium on collision by 15 to 30 percent. Go to $1,000 and you could save 40 percent. If you have a good driving record and haven't had an at-fault accident in years, if ever, opting for a higher deductible on collision might be a good bet. Just make sure you can afford to pay it if your luck runs out.

Review all of your coverage

Your liability coverage pays for bodily injury and property damage that you cause in accidents. Don't get caught short by reducing your liability limits to the state minimums. Buying more coverage might seem like an odd way to save, but the benefit comes if you have a costly claim, which can put your personal assets at risk. Buy standard 100/300/100 coverage, which pays for bodily injury up to $100,000 per person and $300,000 per accident, and property damage up to $100,000. If you have a high net worth, boost bodily injury to $250,000 per person and $500,000 per accident.

One of every eight drivers today may be uninsured, according to the Insurance Research Council. If you get hit by an uninsured at-fault driver, you'll have to pay for repairs out of your own pocket, and good luck suing the at-fault driver for damages. Protect yourself by buying uninsured/underinsured motorist protection with the same limits as your liability coverage.

You can probably cancel your collision and/or comprehensive coverage when the annual cost equals or exceeds 10 percent of your car's book value. Otherwise, you could end up paying more over time than you would recoup for repair or replacement of your damaged, stolen, or totaled vehicle.

If you have another car that you can use while your vehicle is being repaired, you don't need to pay for rental-reimbursement coverage. Dump roadside assistance if you have an auto-club membership that's a better deal. Think carefully about personal-injury protection and medical-payments coverage: Forget it if you have good health coverage; keep it if you don't or if your usual passengers might not be well insured.

Watch crash repairs closely

Claims payment is where the rubber hits the road. Your insurer might push you to use shops in a direct-repair program (DRP) or use cheaper replacement parts, rather than the original equipment manufacturer (OEM) parts. Tests have found that some non-OEM parts fit poorly, are more prone to rust and corrosion, don't always meet federal safety standards, and may not provide good protection in a crash.

In our survey, respondents' satisfaction with repairs was significantly lower among those who felt pressured to use DRP shops and non-OEM parts. And respondents who said they were pressured to use non-OEM parts had significantly more problems with their repairs.

Take advantage of discounts

Discounts are designed to attract the business of lower-risk drivers. Those drivers include students with good grades, new drivers who have taken a driver-training course, older drivers who have taken a refresher course, and members of affinity groups, such as college alumni and certain occupations and professions. Antitheft and safety equipment can also get you a discount.

Insurers also offer discounts if you buy your homeowners, renters, or life-insurance policy from them. But be sure you check out total costs both ways: premiums from different insurers combined compared with single-insurer packages.

Some insurers offer discounts based on electronic monitoring of your driving habits. With Progressive's "Snapshot" discount, eligible drivers in 45 states plug an electronic data recorder into their car's data port (available only for cars from model year 1996 or later). The device tracks miles and time of day the car is driven and how often you brake suddenly. If the device shows that you drive less than average, avoid operation from midnight to 4 a.m., and don't stomp on the brake pedal, you might get up to a 30 percent discount. If it shows that you're a riskier driver, you could see your rate go up by as much as 9 percent in some states. If you quit the program, Progressive won't use the data to set your premium, except in Alabama, where the insurer can use it for a year after you quit.

State Farm's "Drive Safe & Save" discount, available in all 50 states, similarly tracks your acceleration and braking, left and right turns, driving times of day, and speeds over 80 miles per hour.

Control your cost factors

Maintain a good credit score

For some consumers, the recession has dragged down credit scores and their close cousins, credit-based insurance scores, which most insurers use to set auto premiums. In general, lower scores produce higher premiums, but the impact varies unpredictably because insurers use various rate-setting formulas. So if your insurer hiked your rate based on your score, start shopping for a lower premium.

Most states allow insurance scoring, so take steps to protect yourself: Regularly check and correct credit-reporting errors; avoid department-store credit cards, which can hurt your score; pay bills on time; and keep your credit balances low in relation to your credit limits. If your finances have been adversely affected by the recession, military deployment, divorce, job loss, death of a family member, or medical problems, ask your insurer for an exception. You should also ask to be rescored once per year.

Report reduced mileage

A major cost component in auto insurance is miles driven per year. The average is about 12,000. But if you've changed jobs and commute fewer miles, the lower mileage might translate into lower premiums. A new job that's only 6 miles closer than your old one could reduce your annual commuting miles by 3,000 and cut your annual premium by $50. Let your insurer know if you've retired or lost your job; your reduced driving could cut 5 to 10 percent off your premiums.

Your insurer usually won't contact you to ask whether you're driving fewer miles, but it might find out if you're driving more. Twenty-eight of the 30 largest auto insurers have worked with Quality Planning Corp., a California company, to investigate whether their policyholders deserve rate increases.

For example, QPC compares individual policy information--say, coverage for a Ford F-250 pickup used for pleasure, not business--with hundreds of millions of records from numerous public and proprietary databases. If QPC finds the driver's name on, say, a database of licensed contractors, that raises a red flag. If your 16-year-old son buys electronics and mails in a warranty card including his name and address, that information can be cross-checked to see whether you've listed the teenager on your policy. If you listed yourself as married and pay a lower rate than you would if you were single, QPC might be able to check up on you.

When a red flag is raised, QPC calls the policyholder to ask questions about it, according to Bob U'Ren, senior vice president at QPC. The company reports the information to the insurer only if it's verified by the customer, U'Ren says.

Choose your car wisely

Vehicle damage is the biggest cost component for auto insurers. So your premiums will vary by auto model. When comparing models, ask your car dealer to show you the "Relative Collision Insurance Cost Information Booklet," produced annually by the National Highway Traffic Safety Administration. The Highway Loss Data Institute also posts data on collision, bodily injury and property-damage liability, and other types of losses by vehicle model at hldi.org/research/hldi/composite_intro.html. Or ask your insurer for premium quotes on the different models under consideration.

Beware of scams

Plenty of crooks rip off drivers with staged accidents. Fraud investigators describe a scam in which a driver swoops in front of your car, then slams the brakes, forcing you to rear-end him. The result can be an at-fault accident claim against you, fake injuries, and exaggerated damage costs. You get the stress of a crash and legal claims, a bad mark on your driving record, and higher premiums for three years.

Avoid that by always following good driving practices, including maintaining a safe distance from other vehicles, not speeding, remaining alert at all times, and never tailgating. Use your smart phone camera to photograph a crash scene. Always call police to file an official report.

Manage teenage-driver risk

Teenage drivers have higher accident rates, so adding a teenager to your policy can hike your costs by 50 to 100 percent. Immaturity and lack of driving experience help make motor-vehicle crashes the leading cause of death for U.S. teenagers. You can protect your child and cut your rates.

Make your child take a driving course before getting a license. Then make sure he or she complies with all laws and drives in a safe manner, with loss of driving privileges as the punishment for violations.

Consider having your teenager wait until age 18 or 19 to get a license, instead of the usual 16 in most states or as young as 14 in some. Inform your insurer if the child isn't licensed or is away at college without a car.

Beware of hidden cost factors

Are low-cost replacement bumpers safe?

A number of auto insurers have recommended or required use of aftermarket crash parts, which are often produced in overseas factories and can be significantly cheaper than the parts from original equipment manufacturers. Unfortunately, the parts might also be cheaper in quality.

Some safety experts are concerned about the internal bumper parts: a bumper beam, bumper isolators, foam, crush cans, brackets, and radiator supports. In a frontal crash, those pieces work together to properly transmit the crash pulse, or vibrations from impact energy that moves through the vehicle, to air-bag sensors and away from the passenger compartment to reduce or prevent injury.

"There's a lot of engineering that goes into making a crash-protection system," says David Zuby, chief research officer for the Insurance Institute for Highway Safety. "You can't willy-nilly change those parts because the system may not work the way it was designed."

Automakers have found alarming quality differences when they checked aftermarket parts that are sold cheaply to replace the typically more costly original manufacturer replacement parts. Ford, for example, reported that its engineers had found that one bumper bar was made of mild steel, instead of the ultra-high-strength steel that the original Ford part uses. A radiator support was made of plastic instead of the magnesium used in the Ford part. In computer-simulated crash tests, the fakes changed the timing of the crash pulse, which might affect air-bag deployment.

"Differences in material could result in a difference in the timing of the air-bag deployment," says Mike Warwood, Ford's parts marketing and remanufacturing manager. "The air bag might deploy earlier than it should or later than it should. Or it might deploy when it shouldn't or not deploy at all when it should."

Ford's testing followed a demonstration conducted by Toby Chess, a master collision-repair instructor, who used a reciprocating saw to easily slice through an aftermarket bumper bar. The saw couldn't cut through the original automaker bumper bar.

Some insurers have suspended use of the bumpers in repairs. And when the Certified Automotive Parts Association, which tests and certifies the quality of some aftermarket replacement parts (but not bumpers), tested a sample of aftermarket bumpers, it found "serious deficiencies" in metal hardness, material thickness, and fit.

Bottom line

Don't let your insurance company pressure you into using aftermarket collision-repair body parts, especially safety-related ones. If your car has already been repaired, check your invoices or ask your insurer to see whether aftermarket parts were used. If knockoffs were used, demand that they be replaced with original equipment.


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