The real scoop on lowering your premiums
AUTO INSURANCE COVERAGE CAN BE COSTLY. THE average annual expenditure for auto insurance came to $78S in 2009 (the most recent data available), but premiums can sometimes cost thousands. That same year, the highest average expenditure, in Washington. D.C.. came to $1.128. according to the National Association of Insurance Commissioners.
You've probably heard the myths out there about what lowers insurance premiums and what doesn't. Here's the truth about four auto insurance myths.
Myth: Red cars cost more to insure.
Reality: There is no evidence that this is true, according to Loretta Worters, vice president of communications at the Insurance Information Institute. "The type of vehicle one drives will determine rates, including the make, model, engine, size, and year. Is it popular with thieves? Is it more costly to repair? Does it have a good safety record? That's what insurers look at," she says. Your best bet is to purchase a family car. Sports cars usually result in higher rates because those owners tend to drive faster. Family cars cost less to insure because they often attract drivers who are more careful. Family cars are also less expensive to repair (The National Highway Traffic Safety Administration ranks cars by their post-accident repair bills). According to Insure.com, the average insurance premium on a 2012 sports caris $1.776 annually, compared with $1 .3 1 7 on a 2012 family sedan. For more information on vehicle risk levels, visit the website for the Insurance Institute for Highway Safety.
Myth: Loyalty always pays off.
Reality: In fact, being a loyal customer can result in missing out on deals. J.D. Power's 2011 National Auto Insurance Study reveals that only 13% of customers switched carriers over the past 12 months. Though a 3% increase from 2010. this still means that most people aren't shopping around. In addition to seeking out other carriers, you can hold down costs by seeking higher deductibles, reducing coverage on older cars, and making sure your home and car policies are held by the same carrier.
Myth: You have to purchase a policy that covers car rentals.
Reality: You may be able to save money by temporarily adjusting your current policy to cover rentals as the need arises. Those who carry the minimum state required insurance could find that they're in a bind when it's time to secure a rental. Unless your credit card covers car rentals (and be sure to double-check exactly what it covers), your only option may be to buy the expensive coverage offered by the rental company. First, check with your insurance carrier to see if you can temporarily upgrade the policy- This option is usually a lot less expensive than purchasing the coverage offered at the time of the car rental. Insurance companies such as Progressive and Allstate allow their customers to upgrade or downgrade policies without incurring penalties or fees. Policyholders will be charged a prorated rate. Customers who have limited liability insurance who upgrade to a comprehensive policy to cover the rental will be charged about $2 a day, depending on their location and the type of car their policy covers. Buying insurance products from the car rental agency can cost, at minimum. $27 a day for the loss damage waiver coverage, depending on the rental agency and insurance product selected.
Myth: There's not much you can do to lower your premium beyond the obvious, such as having a safe driving record and good credit.
Reality: There are other ways to reduce your premium. For example, you can have your vehicle identification number etched on your windshield and car windows. VIN etching makes it difficult for a thief to profit from stealing a car, and it also makes it difficult to dispose of the car after stealing it. Many police departments offer free VlN etching, or you can buy a VlN etching kit for about $25 and do it yourself. A number of insurance companies offer a discount or waive your déductibles if your car is VIN etched. To leam about other discounts, call your carrier and ask if there are any you've missed.
-Additional reporting by Sheiresa Ngo