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November 2005 |
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Driving Down Your Car Insurance CostsThis is part two of a two-part series. Last issue we looked at what we are paying for with car insurance. This issue, we look at how to pay less. If you you'd like to read last month's article, click here. There are basically two ways to lower one's car insurance costs: Buy only the insurance you need, and wherever possible, lower your risk. The easiest of these is buying only the insurance you need. It's best to talk to a professional — a financial planner, not an insurance agent — but there's no harm in thinking it over first. For instance, if you have significant assets (roughly $500,000 or more), you might need more liability coverage than you'd expect. The thinking is that if you are found liable for someone's severe injury, they might be more interested in suing you than accepting your insurance company's settlement. Another question regarding your bodily damage is what will your health insurance cover? There's no sense in paying for overlapping coverage. Insurance or pre-paying for services? There are a few add-on insurance items that might fall outside the category of "insurance you need." One of these is towing insurance. How many times has your car been towed in the past ten years? How much did those tows cost? For the vast majority of us, the total amount would be a few hundred dollars or less. In that case, is it really worth it to pay for towing insurance each time we get an insurance bill? Are we insuring or are we just pre-paying? Another example of this is an add-on known as "rental reimbursement," which will pay for a rental car if you need transportation while your car is being repaired. Again, how many times have you rented a car for more than a day while yours was at the mechanic? For many of us the answer is never. But if we did, a week's rental is only a few hundred dollars. Is it worth it to raise your insurance premium to cover this? Drive safe, pay less The much-more talked about way to reduce your insurance is by lowering your risk and being a good driver. This is true. You'd be hard-pressed to find a more ridiculous expense than driving recklessly. First of all, it isn't healthy. Second, it can result in fines. And third, just a few violations will raise your insurance rates. If your insurance premium is severely increased because of your driving record, consider driving school. Ask your insurer what kind of impact that would have on your rates. And then, over time, clean up your record. Other ways to lower your risk After being a safe driver, the best way to lower your risk is to buy a car that is deemed low-risk by insurers. For instance, some insurers say a four-door is cheaper to insure than a two-door. Those tires that the car dealer said would give you added performance and safety? Well, the insurance companies see performance tires as a sign of a dangerous driver. And of course one of the biggest ways to reduce your insurance is to buy a cheaper car. When car shopping, ask your agent to suggest cars that are cheap to insure. Lastly, there a few things your car already has that may win you a discount such as anti-lock brakes and airbags. Just make sure you ask your agent to include these discounts. |
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