Driving Down Cost of Insurance for a New Car
New car buying season is revving into high gear as auto makers unveil their new car lines. However, if you’re buying a new car, you’re also going to need a new auto insurance policy. And, as surprising as it may seem, you could pay as much for insurance coverage over the next several years as you pay for your new wheels.
Consider a young Los Angeles driver with a new Ford Mustang. His new car costs about $20,000--or a bit less than $5,000 a year, assuming it’s financed for five years. What does his auto insurance cost? A cool $5,390 annually if he’s a reasonably good driver but can’t take advantage of any special discounts, according to Farmers Insurance Group.
Still, those who shop carefully--both when buying the car and when purchasing insurance--may be able to save hundreds, even thousands, of dollars annually by taking advantage of discounts and special deals offered by most auto insurers.
This same young driver, for instance, could cut his premium by more than $2,000 annually by keeping his grades up, opting for anti-lock brakes and passive restraints--such as air bags or automatic seat belts--and raising his deductible a bit.
Of course, some of the things you’d have to do to save money may not suit your personal desires. For example, you can save a fortune by buying a station wagon instead of a Corvette or a Ford Taurus instead of a BMW.
If our Mustang driving youth picked a more sedate vehicle--a Honda Accord LX, for example--he’d qualify for lower basic rates as well as additional discounts worth another $1,000. His annual premium could go as low as $1,258.
But auto insurance discounts are tricky. Not only do they vary company to company, they also vary by state. The reason for the vast disparities stems from a combination of competition, experience and state regulation, insurers say.
Then, too, where a good agent should apply the discounts automatically, many don’t. Frequently, consumers have to ask to have discounts applied to their policies. As a result, it’s important to know what types of discounts are common. And when you’re shopping for auto insurance, you must ask whether your company offers these and other discounts.
What sorts of discounts are common?
* Good driver discounts. Most insurers will give you a break ranging from 20% to 40% for maintaining a clean driving record. In California, a 20% good driver discount is mandatory.
* Good students. Keeping a “B” average or better is likely to win a 10% to 20% premium break. A Chicago-based man who drives a Ford Taurus, for example, would pay $2,939.36 to insure himself and his 16-year-old son. But if his son qualified for a good student discount, the annual premium would drop to $2,258.24.
* Anti-lock brakes. Considered an important safety feature, anti-lock brakes can cut your overall premium between 5% and 10%.
* Passive restraints. Air bags and automatic seat belts can also cut your premium, although usually by lesser amounts. Generally speaking, insurers will pare the premium dedicated to medical payments coverage by about 10% to 40%. But because that’s only a small portion of your auto insurance premium, the total premium will usually drop by just a few percentage points.
* Multi-car discounts. If you insure more than one car with the same company, you’ll usually score something akin to a volume discount. These discounts can be noteworthy, too, paring between 5% and 20% off your annual bill. Some companies also give you a break on auto rates if you insure your house with them too.
* Loyalty discounts. If you’ve insured with the same company for several years--usually more than three--and have a good driving record, you could get up to 20% off your rate.
* Defensive driving discounts. If you’re over age 55, most insurers will pare your rate 5% to 10% if you complete a defensive driving course. In many states, insurers are required to offer these discounts.
* Anti-theft devices. The comprehensive and collision portion of your premium can be cut if you buy and use certain anti-theft devices, such as car alarms. These discounts vary widely, depending on where you live, what you drive and the type of anti-theft device purchased.
Devices that set automatically usually win bigger discounts since insurers know that people sometimes forget to set their car alarms, says Bob Sasser, spokesman for State Farm Insurance.
* Low-mileage discounts. If you drive less than five miles to work each day, you may qualify for another modest break.
* Nonsmoker discounts. These are relatively rare, but they can be substantial where they’re offered.
Aside from discounts, you can cut your auto insurance premiums substantially by raising deductibles, limiting comprehensive and collision coverage on older cars and notifying your insurer when driving-age children go off to college.
