Cutting Costs On Auto Insurance

By Michael R. Abramowitz

Now that you got the third degree warning against avoiding insurance, how can you lower the price tag for such a basic necessity? Thankfully there are several ways to cut costs.

While the methods below are not going to prevent you from paying through the roof, they are proven cost-saving methods that could cut hundreds of dollars off your premiums:

• Drive an old, everyday car. You likely won't turn heads driving a 1993 Ford Escort, as opposed to a 2003 Corvette, but you will save a ton of cash on your auto insurance policy. Cars that are made out of steel are far cheaper to fix than sports cars made out of fiberglass. The rate of injury and theft is also lower in an Escort than a hot rod. Plus, if your car is worth $3,000 or less, you can choose to eliminate collision insurance from your policy.
  
  "Older cars save money because you don't need the physical damage coverage," explains Jackie Jungsberger, vice president of the Tri-County Agency of Brick Inc., in Brick, N.J., and chairperson of the National Young Agents Committee for Independent Insurance Agents and Brokers of America. That alone can save you hundreds of dollars a year.
• Maintain good credit. Pay all of your bills on time so that your credit score is strong. Automobile companies look at your credit history because they believe there is a significant correlation between good credit and good driving habits - and vice versa.
• Strive for a good driving record. As tempting as it is to drive your Mazeratti 185 miles per hour, obey speed and traffic laws. The money you save from fines and higher insurance rates is worth the "slow poke" label you may get from fool-hearted friends. Also, if you can find a driver's education course, take the class, and let your insurance company know about it. It can save you bucks on your insurance premiums.
• Membership has its privileges. Let your insurance company know about any memberships in clubs or organizations. For example, GEICO offers significant discounts for fraternity membership, Golden Key National Honor Society membership, and scores of other student and alumni organizations.  AAA members can get discounted rates by purchasing auto insurance through AAA's insurance partnership with American Insurance Group (AIG).
• Make sure your insurance company knows about every safety feature on your car. While virtually all insurance companies look up the specifications of your car by searching its Vehicle Identification Number (VIN), some important safety features can slip through the computer's cracks. So make sure your policy lists features such as: Anti-lock brakes; security systems including car alarms and Lojack car recovery systems; VIN etching on windows to prevent theft; driver, passenger, and side air bags; and automatic seatbelts. These items can cut up to 15% off your bill.
• Higher deductibles, lower premiums. By raising your deductible, say from $250 to $500 for liability insurance (covers medical costs caused by you in an accident), you can save several hundreds of dollars in premiums. Also, you can save by lowering the limits of coverage. So, instead of carrying 100/300 ($100,000 of coverage per person/$300,000 per accident) of liability insurance, you can decrease this coverage to 50/100 ($50,000 per person/$100,000 maximum. But make sure you carry the state-required minimums for legal operation of your car and that you carry enough insurance to adequately protect you if the worst-case scenario happened.
• Avoid scams and shop around. On campuses, you will often see signs promising "Auto Insurance for $29" or for a similar ridiculously low rate. Avoid these tempting offers. Typically, these are covers for a fraud or a non-admitted company to your states' insurance pool.

Should you have a wreck and you are covered by one of these scams, you are left footing the bill, even if you have a piece of paper from the company promising you coverage.

It can pay to shop around and do your homework. Either call or surf the Web site of your state's insurance commission to gather a list of legally licensed insurance companies. Also, search online and by phone to compare premiums.

If these methods don't save you enough money to afford your car, then you may need to swallow your pride and turn the keys over to someone else. You'll save plenty of money by walking, riding a bus, catching a ride with a friend, or riding a bike. It may not be so glamorous on a date, but at least you can afford to pay for dinner.