1. Know Your Coverage Types
What is your car insurance actually insuring? Although you're buying a single insurance policy covering a specific vehicle, a number of components make up the final cost: Bodily injury liability: Covers injury and death claims against you, and legal costs, if your car injures or kills someone. Property damage liability: Covers claims for property that your car damages in an accident. Because liability coverage protects the other party, it is required in all but three states. Medical payments: Pays for injuries to yourself and to occupants of your car. This is optional in some states. In "no-fault" states, personal injury protection replaces medical payments as part of the basic coverage. Uninsured motorist protection: Covers injuries caused to you or the occupants of your car by uninsured or hit-and-run drivers. "Under-insured" coverage also is available, to cover claims you may make against a driver who has inadequate insurance. In some states, as many as 30 percent of drivers are uninsured. Collision coverage: Covers damage to your car up to its book value. Collision coverage carries a deductible, which is the amount per claim you have to pay before the insurance takes effect. The lower the deductible, the higher the premium. While it is legally optional, a lending institution or leasing company usually requires collision coverage. Comprehensive (physical damage): Covers damage to your car from theft, vandalism, fire, wind, flood, and other non-accident causes. Comprehensive also carries a deductible.
2. Your Vehicle Affects Your Premium
You might want a sports car or a fancy SUV, but your insurance company may charge you more to protect you while driving it. Insurance premiums are based partly on the price of the vehicle, which affects the replacement cost if it is stolen or "totaled" in an accident. How expensive the vehicle is to repair -- including parts and labor -- can also affect the cost. In addition, surcharges may apply to vehicles that are frequently stolen or involved in accidents.
3. Who You Are Affects Your Premium
Factors that you can least control may have the greatest impact on your insurance costs. Your age, gender, and driving record are key factors that affect your insurance premium. Single males under the age of 25 pay the highest rates. Statistics show they are involved in the most accidents, so insurance companies charge young men higher premiums than women of the same age.Married men, who statistically have fewer accidents, pay less than single men. A handful of states do not allow rates based on sex or age, but that prohibition has tended to result in higher rates for women, not lower rates for men.
4. Decide How Much Coverage
You Need While it is dangerous to be underinsured, having too much insurance can be an expensive mistake as well. Without insurance, your property is put at risk in an accident that is your fault. The minimum amount of insurance required in your state is seldom enough. State law may require as little liability coverage as $15,000 per person, $30,000 per accident, and $5000 property damage. About half of the states require $25,000 per person and $50,000 per accident. Half of them require $10,000 in property damage coverage. If you can afford it, buy more than the minimum. After all, $10,000 for property damage may not be enough if you hit a $100,000 Mercedes-Benz.
5. You Can Reduce Your Premiums
The biggest difference you can make is to buy a vehicle that qualifies for a discount or at least doesn't carry a surcharge.
- Ask your insurance agent about the cost of insuring vehicles you are interested in before you make your purchase decision. Here are several other ways that you can save money on your car insurance: Most companies give a break to those who drive less than 7500 miles a year. If you take public transportation instead of driving to work, your premium will go down. Out of the question? Try carpooling.
- Make sure you get all the discounts you are entitled to. You might qualify if your vehicle has an alarm, for example. Discounts used to be given for such safety features as airbags, but they're fading away as those items become more commonplace. Discounts might also be available if you insure your vehicles and your home with the same company. People who pass a defensive-driving course or don't smoke or drink often get discounts.
