Auto Insurance Questions & Answers

Q: There is a wide price range for the same auto insurance coverage. In most human activities, there's no such thing as a free lunch, so that's got to be true in auto insurance as well. What's the downside if I pick a low-cost insurer?

A: That depends on which insurer you pick and what you consider a downside.

If you don't mind dealing with your company over the phone rather than in person, you might not care that a company keeps its costs low by not having agents. If you can't ever get that company to answer its phones, however, you may think it's taken the low-cost thing too far.

Likewise, you may admire a company that watches the bottom line so closely that it challenges every claim--until you get rear-ended and can't get your car fixed.

Even when you eliminate the real dogs, however, you'll still find a huge range of prices for what is essentially the same insurance. That's because some companies prefer not to write certain types of insurance in certain areas, and price accordingly. Insurers also know that there's a huge inertia factor--not as many consumers shop around as they should.

That's why a married couple in Burbank with a good driving record might pay $2,144 a year for standard coverage from the Auto Club of Southern California, while the same policy from State Farm might cost $2,958 (these figures are from last year's California Department of Insurance premium survey). Geico, meanwhile, was charging $4,372. All three companies have good reputations for customer service and for paying claims, but the couple who go with the Auto Club could save more than $2,000 a year.

Most other states have similar premium comparison surveys, and they all show the same thing: big price variations in what is basically the same product.

For that kind of savings, it's worth doing a little research.

You can start by callind your state insurance department's number, found in your local telephone book, or visit its Web site to see if it has a premium survey. Check to see which companies tend to offer the best deals for people in your situation.

Once you've got a few companies in mind, do a little background check. Ask your co-workers about their experiences with these companies. If your state insurance department has a complaint survey, take a look at that. (Pay particular attention to the companies that have the lowest complaint ratios and those that have the highest; these surveys tend to have significant flaws, making all the data in the middle mostly noise.) Then get the customer service and claims numbers and call them, both during the day and after hours. Better to find out before you're a customer that you'd be spending the next six months on hold.

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Q I've always been an insured driver, but I only have liability and uninsured motorist coverage. I've never had collision or comprehensive coverage, even on new cars. I reason that I'm a good, safe driver and unlikely to cause any accidents that would damage my car--which is what collision and comprehensive are designed to cover. If the other driver causes the accident, his liability insurance has to pay--or if he's uninsured, my uninsured motorist coverage kicks in. Am I missing something? Or is this a smart way to save money?

A You're missing a few things. For starters, comprehensive coverage insures you for non-collision losses such as if a tree falls on your car or a thief decides he likes your wheels. That coverage has nothing to do with your driving ability.

And most people overestimate their driving ability. Even the best drivers on the road--police and highway patrol officers, who are trained for the most challenging conditions--still occasionally get into accidents, although at a far lower rate than the populace at large. Anyone can get momentarily distracted at the wheel, and the consequences at 65 mph can be disastrous. And 65 mph is the fastest you'd ever go, right? Being the good, safe driver that you are?

There are many better ways to save on insurance. Shopping among several different companies is one way to start. Raising your collision and comprehensive deductibles to $500 or even $1,000 could also save you a lot. The sting of that co-payment would be an appropriate consequence of any driving mishaps, but it could be far less than the financial risk you may be running now.

Of course, if you can afford to buy yourself another car if your current one gets wrecked, dropping comprehensive and collision coverage can make sense. If you have to take out a loan to buy your next car, however, plan on paying for both kinds of coverage. Most lenders won't give you a loan if you don't have collision and comprehensive coverage in addition to liability insurance.

Copyright © 2015, Los Angeles Times
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