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Controlling Premium Costs
American consumers paid some $83 billion to insure their
cars in 1991. The price of auto insurance, like the
price of almost everything else in our economy, tends
to go up each year. But there are steps you, as an
individual, can take to control your own car insurance
premiums.
What you pay for auto insurance is determined by (1)
how much coverage you buy, (2) your probability of
having an accident or other losses to your car, and
(3) the kind of car you drive. You have little control
over many of the factors that determine your insurance
premiums, but others are well within your ability to
change.
How much coverage?
You can exert control over how much insurance coverage
you buy. State laws require liability coverage, which
pays other people when you injure them or damage their
vehicles. But collision and comprehensive coverage,
which pay for loss to your own vehicle, are under your
control.
As your car gets older, it's value decreases. You may
want to consider dropping collision and comprehensive
coverage on it and saving the premiums. But you need
to decide whether the savings are enough to offset the
risk of footing the entire cost of repairing or
replacing your car. If you need collision and
comprehensive coverage, you can still lower your
premiums by taking higher deductibles. A deductible is
the amount you agree to pay before your insurance kicks
in. You can generally choose collision and
comprehensive deductibles of $50, $100, $200, $500 and
$1000.
Accident Probability
Some of the things that affect risk of your being
involved in an accident are beyond your control. Young
drives pay more than adults do, and young males pay
more than young females in most states. Drivers in
densely populated areas pay more than those in small
towns or farm country. Your driving record, however,
is under your control and it is one of the major factors
affecting your accident probability. Insurance
companies generally raise the premiums of drivers who
have at-fault accidents while they give discounts to
policyholders with clean driving records for several
years.
The more miles you drive the greater your risk of being
in an accident. Most insurers charge lower premiums to
adult customer who drive shorter mileage each year and
to those who don't drive to work.
For young drivers, there are other ways to reduce
accident risk and thus premiums. The cost is less for
a young motorist who drives a family car on an
occasional basis than it is for one who drives his or
her own car. Many insurance companies give discounts
of as much as 25% to young drivers who make good grades
- generally a B average - in high school or college
because statistics show they have fewer accidents. In
many states, insurers offer a discount to teenagers who
have passed a driver education course.
The car you drive
Since somewhere around half of your auto insurance
premium goes to protect your vehicle, the kind of car
you drive plays a major role in determining your
premium.
The premium that you pay for the two coverages that
protect your own car (collision and comprehensive
coverage) is determined primarily by the new car
sticker price of your vehicle. Expensive vehicles
cost more to insure than less costly ones. New cars
require higher premiums than older ones.
Many insurers increases premiums for cars that sustain
more damage in collisions cost more to repair, or get
stolen more often; but they reduce premiums for those
that fare better than the norm.
A high-powered sports car generally cost more to insure
than a family car sedan in the same price range. It is
wise to check with your insurance agent when buying a
car.
Insurers often give discounts for cars that are equipped
with airbags or passive safety belts. In some states,
insurers offer discounts for cars equipped with certain
anti-theft devices. Check with your agent or company.
Other discounts
Most insurers offer a multiple automobile discount if
two or more private passengers vehicles owned by family
members in one household are insured with the same
company. This can amount to a 10 to 15 percent premium
reduction for each vehicle.
In many states, insurers offer a small discount to
motorists who have take certain approved defensive
driving courses within the last three years. Check
with your agent or company to see whether this discount
is available to you.
Vehicle safety affects insurance rates
Small utility vehicles, or 4x4's, are becoming
increasingly popular on the road today. Many consumers,
though, are not familiar with the dangers and higher
insurance costs of these vehicles.
Before you purchase a utility vehicle or small pickup
truck (the second most dangerous type of vehicle) you
may want to look at the facts. Larger cars offer
better protection for you and your family (or other
passengers) and can be insured at a lower cost.
The cost of your auto insurance is affected directly by
how safe your vehicle is. The safer the vehicle, the
lower the insurance rate.
The occupant death rate in single-vehicle rollovers is
about 25 times as high for small utility vehicles as
for large cars, according to the Insurance Institute
for Highway Safety. The government is considering new
safety standards, but utility vehicles currently are
exempt from:
· Regulations that specify the roof's crush-resistance and the body's resistance to side impacts
· Mandatory head restraints (although many models have them)
· Eye-level brake lights
· Automatic safety belts
· Standards for bumper protection
The relaxed safety standards for these vehicles mean
more accidents, expensive repair cost and higher
insurance rates.
A car's ability to protect occupants in a crash depends
on its size, weight and design. Passengers in small
cars and utility vehicles are injured more often and
more severely than occupants of large cars. A smaller
vehicle transfers the crash impact to a greater degree
to the occupants because it doesn't have the mass to
absorb the crash. The death rate from accidents in
small vehicles is double that of larger cars, regardless
of the driver's age.
To keep your insurance rates in line and to protect
yourself, and your family, consider safety first. This
means:
· Driving a car that is well designed and performs well in crash tests
· Driving within the speed limit and obeying all traffic laws
· Driving defensively
· Driving only when every passenger in your vehicle is wearing a seat belt
The safety and reparability of your car, as well as your
driving habits affect your insurance rates. A safe
vehicle and a good driving record will keep your
insurance rates in line, as well as protect you and
your family.
From: The Insurance Educator