Assessing Auto Insurance Cost and Coverage

Published: Thu 25 Feb 2010

Perry Begay

The recent spate of car recalls has many drivers alarmed. Drivers all over the country are questioning whether their vehicles are safe to drive. But the questions should not stop there. Motorists should also review their auto insurance policies to verify that they're properly covered in the event of an accident, whether it's the result of a mechanical defect or driver error.

Once drivers have a sense of what coverage they need, the next question to ask is how they can save money on their premiums.

Update Your Insurance Coverage When Necessary

Before you renew your existing car insurance policy, take inventory of your individual circumstances. Major life events-marriage, a move, a divorce, or a different job that changes the distance of your commute-will affect your decision.

Maybe an adult child has returned home and has to drive one of your vehicles. According to a new Pew Research Center study, this happens commonly, with 13 percent of parents indicating that at least one adult child had moved back in with them over the past year. In most cases, that means a new addition to the family car insurance policy and higher premiums.

Even without a major life event, it is still wise to reassess your car insurance needs at least annually when you receive your renewal notice, recommends Jeanne Salvatore, an Insurance Information Institute spokeswoman.

"At that point you want to consider whether or not to renew that policy or look around to see if you can get a better deal," she explained.

Controlling Car Insurance Costs

Remember that insurance companies have their own ways of calculating premiums, and the variations can result in one insurer charging you hundreds of dollars more per year. You can save by shopping around.

Many of the factors auto insurers use in their formulas are basically outside of your control. For example, you can't change where you live or how old you are. In rural states like Iowa and South Dakota, drivers pay about $500 for car insurance per year on average, while drivers in Washington, D.C. and New York pay about twice that amount. So if you're thinking about moving soon, consider how the move will affect your premiums.

Nevertheless, you do have some control over your rates. Here are five things you can do to contain costs:

1. Keep a clean driving record. Avoid accidents and tickets.
2. Spend less time driving. The higher your annual mileage, the more you'll pay.
3. Research rates before buying a new car.
4. Maintain a good credit record. Insurers look at credit reports to assess the risk you represent.
5. Figure out how much coverage you need. Excess coverage wastes money.

Finding the Right Car Insurance Company

Auto insurance is a competitive industry with passenger-car coverage surpassing $164 billion in 2008. The insurance industry is ruled by a few major players who compete for market share with high-profile magazine advertisements and TV commercials.

State Farm owns over 18 percent of the auto insurance market share in the U.S., followed by Allstate's 11 percent.

The insurance company owned by Berkshire Hathaway comes in third with just under 8 percent of the market. Geico is one of several insurers owned by Berkshire Hathaway.

Find names of potential providers online at the website of the Insurance Information Institute. Pare down your list of prospects by asking your family and friends which insurers they use. Also look at customer satisfaction ratings on the J.D. Power website and research complaint histories on the site of the National Association of Insurance Commissioners.