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Fine-tuning your auto insurance.

Although premiums are rising at three times the rate of inflation, there are still options for putting the breaks on the high cost of insuring your car.

Home, gasoline, and food prices come to mind when you reflect upon the cost of living. Then a look at your auto-insurance premiums makes you think you're back in the hyperinflationary 1970s. Auto insurance has become a significant part of the cost of living because it's rising like a river near flood stage-nearly 13 percent per year, about triple the rate of inflation, according to an industry group,

Insurers naturally blame the health and legal professions for medical payments and judgments that rise faster than revenues. Guess whom the doctors and lawyers blame for high rates? Angry California consumer groups, incensed at average premiums of $588 per year, are trying to put voter referendums on the ballot. Rates would be forced down 20 percent immediately and then frozen for two years.

Political remedies aside, you can save on auto insurance if you're a reasonably safe and sober driver. "Defensive driving" is the leading factor in reducing rates in this case, ticket- and accident-free driving.

Insurance companies have a vested interest in your safe driving. It means fewer "losses" paid on claims for them. To insurers, a clean record means no moving violations or accidents. Many companies will raise your rates even if you have only one ticket per year. An accident in which you are charged with a violation may also force your rates up.

If you're a "safe" (as opposed to a "high risk") driver, your insurance company has already rewarded you with a 5 to 10 percent discount. The criterion is no "chargeable" (ticketable) offenses in three years.

Who Is a "High Risk" Driver?

Insurers base their rates on rather dull and mysterious statistics called "actuarial tables." These numbers tell the companies who is most likely to cost them money based on the location, age, marital status, and frequency of accidents for each group.

The riskiest group, at least according to the companies, is single, male, teenage drivers. Why? Because they tend to have the most accidents and generate the most tickets. If you get married-even as a teen-your rates go down a bit. Being married and turning 30 bring the rates down a few more notches. For girls, the story is slightly different. But even though they don't get in as many accidents as boys, the age and marriage rules still apply in varying degrees.

Taking the age factor to the nth degree, those with the largest potential savings are good drivers over 50 with no young, unmarried drivers in the house.

Where you live also plays a big role in how your rates are determined. Again, the rates are based on the number of losses that occur in a particular area. City dwellers usually pay more for comprehensive (theft, noncollision) coverage because of typically higher theft and vandalism rates in the city. Really want to get steamed? Compare your rates with a farmer's.

The geographical rate system isn't fair for most safe drivers living in the city, but it's observed across-the-board by the major insurers. I was paying sky-high rates, for example, because I had the same city zip code as a rundown neighborhood a few blocks from me. It had nothing to do with me, although I fumed every time I paid my insurance bill which dropped by about one-third when I moved out of the city.

Another savings factor that may or may not be within your control is the distance you commute. If you commute less than 15 miles one way per day, most insurers will charge you about 10 percent less than they would for a greater distance. They calculate that the less you have to travel, the smaller the chance you will have an accident.

Savings Based on the Kind of Car You Own

Rates are also based on the loss record for the particular kind of car you own. You pay a lot more to insure a Porsche 944 than a Ford Escort. The Porsche will be stolen more often, and its cost to repair following an accident is greater than its less glamorous counterparts.

Although few people base car-buying decisions on a car's anticipated insurance bill, it's worth a look. Cars are assigned rates according to their numerical "rating groups." Subcompact cars like the Escort would be somewhere near the bottom of the industry scale. A Porsche or a Rolls-Royce would be near the top. "Performance" or "luxury" cars like Trans Ams or Jaguars carry higher rates than "basic transportation" cars.

The age of your car is also important in determining rates. Generally, newer cars carry higher rates than older cars. In many cases, older cars are cheaper to repair than their younger versions.

Raising Your Deductible

If you have an older car, and you don't really care if it gets banged up, you might consider raising your deductible on collision and comprehensive coverage-or eliminating those types of insurance altogether. (Your deductible is the amount of a repair or loss you have to pay out of your pocket.)

You could save $30 to $100 per billing period by raising your deductible from $100 to $500. Don't, however, eliminate your liability coverage. You need that in case you're sued. It's the kind of thing you can't do without today, considering the surplus of lawyers looking for work.

Agents generally recommend basing your deductible on the amount you can afford to pay on a claim. If you raise your deductible from zero (caned "full coverage"-the company pays everything) to $500, your comprehensive and collision rates will drop. Many insurers will quote you a variety of deductibles along with their corresponding rates, but you have to ask for them. They usually don't volunteer this information freely.

Miscellaneous Discounts

There are quite a few of them, depending upon the company, the type of driver you are, and your car. You should ask your agent if you qualify for them. And always shop around for the best rates and service. Here are the discounts offered by the major insurers:

-Multicar discount. If there are two or more cars per family or insured, you can save up to 10 percent per car. That's if all the drivers are with one insurer.

-Older-driver discount. Some companies give an automatic discount to drivers over 50. Note that some firms may require these drivers to pass a state-approved "driver's-assistance class."

-Car-pool-member discount. The insurer assumes that you will be driving less, thus reducing your exposure to accidents.

-Good-student discount. Highschool or college students carrying a "B" average or better are eligible for this discount. State Farm Mutual, for example, gives males a 25 percent break and females 5 percent. The discounts are usually given if the students are co-insured with their parents.

-Air-bag discount. The expensive, optional safety devices may bring notable discounts from some insurers. Usually, though, you have to pay an additional $800 to $1,000 for this option when you buy the car. The air bag is also a difficult option to find, and it's offered only on the pricier models.

-Auto-alarm discount. You can obtain a special discount if you have an auto alarm installed in your car. Depending upon the complexity of the alarm, you can save up to 15 percent. Some alarms only make noise and annoy neighbors. Others will cut off the ignition. The biggest discount goes to systems that prevent rather than deter theft.

-Home/auto discount. Some insurers will give you a 10 percent discount if they also insure your home.

For a clear, basic explanation of auto insurance, consult the Insurance Information Institute's Auto Insurance Basics, available by calling 1-800-221-4954.
COPYRIGHT 1988 Saturday Evening Post Society
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Copyright 1988 Gale, Cengage Learning. All rights reserved.

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Title Annotation:techniques for savings
Author:Wasik, John F.
Publication:Saturday Evening Post
Date:Jul 1, 1988
Previous Article:My most important decision.
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