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How To  Cut Your Car Insurance Costs

Car Insurance Policy
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Car Insurance Policy

When it comes to saving money these days, even those expenses normally thought of as fixed are fair game -- like auto insurance.

The cost of insuring your car remained fairly stable in 2008, with average increases of 2.5 percent to 3 percent, according to Carolyn Gorman, vice president of the Insurance Information Institute, or III. But that doesn't mean you can't find ways to cut your premiums.

In fact, industry insiders and consumer advocates are full of suggestions on how to do just that. Some apply equally well to everyone, while others are better suited for families with teen or senior drivers. Several moves, which involve cutting or minimizing certain types of coverage, will work better in some situations than others, so consider all the angles before you try them. And then there are the "old reliables" -- classic insurance tips that never go out of style.

We'll break the money-saving techniques down into four categories.

All drivers
Track the mileage on each vehicle. Insurance companies always ask how many miles your car is driven annually, and the answer is factored into the premium. If you've cut back on driving because of volatile gas prices, you may be in line for a rate reduction. Similarly, if you've started driving a smaller car in the family fleet rather than the big sedan or sport utility vehicle, you're probably putting fewer miles on the old gas guzzler. Even if you add another car, don't assume you'll be driving it the same number of miles as the first car. Many times, the total miles driven gets split between two cars, and the better mileage model often gets driven more nowadays, says Mark Savage, senior attorney for Consumers Union. Give your agent an accurate assessment of how many miles you put on each of your cars -- but make sure you don't overestimate -- and you could be in for some savings.

Get the volume discount. By covering your home and auto (or more than one car) through the same company, you can save up to 15 percent on each premium, says Madelyn Flannagan, vice president of education and research with the Independent Insurance Agents & Brokers of America.

Shop around. Consumers see it as perfectly natural to comparison shop for the best prices on electronics, household goods and food, but they don't do the same for auto insurance. One driver can see "massive differences in the premiums" with different companies, Savage says. But make sure you're comparing the same coverage, he says. Be alert to differences in policies and terms. Also important: getting service in a format that works for you. Do you want a local office and agent? "You may pay a little extra for the privilege," Savage says. Conversely, a company that contacts customers almost exclusively through long-distance phone calls, mail and e-mail might offer a lower price but leave you cold in the personal service department. "It's important that the consumer know what he or she wants," Savage says.

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Pull your credit report. The importance of your credit rating "is huge in today's insurance environment," says Jack Hungelmann, author of "Insurance for Dummies" and an agent/consultant with Corporate 4 Insurance Agency in Edina, Minn., who says that he's seen discounts of 15 percent to 20 percent for great credit.

For some consumers and consumer advocates, that practice is deplorable.

"It's not a valid factor because it does not measure the risk of getting into an accident," Savage says.

But most insurers insist it's a valid use. "There is a direct correlation between the way a person manages their credit and whether they will file an insurance claim," Gorman says.

But even when it's used, it's just one of many factors, says Robert Hoyt, a professor of risk management and insurance at the University of Georgia and past president of the American Risk & Insurance Association. "No state allows a credit score to be the only basis of a decision," he says. And that makes it "all the more important to shop around," Hoyt says. "Not everyone is weighing it in the same way."

To protect yourself, review each of your three credit reports at least once a year and have any errors corrected. (You can get all three for free through www.AnnualCreditReport.com.) If you find any errors, have them corrected, then request that your insurance company rerun your credit, Hungelmann says.

Don't be afraid to ask...read more