Paying too much for car insurance? Quite possibly.
With hundreds of insurance companies competing for your business, it pays to shop around for the best rates. And among the more notable factors that could be driving up those premiums: your ZIP code.
According to a new survey, auto insurance premiums in California can vary wildly, even within the same ZIP code.
In Sacramento County, for instance, the average premium – for a 45-year-old married couple with two cars – swings 43 percent, from the cheapest corner of the county (Folsom, ZIP code 95630) to the most expensive (Sacramento, ZIP code 95823). To a lesser degree, the same spread occurs in traffic-dense Los Angeles County, according to InsuranceQuotes.com, which commissioned the study of all major insurers in California.
State insurance officials say it isn’t surprising, given that insurance companies must base their rates on claims history, cost of repairs, and rates of theft, vandalism and fraud.
Much of it’s simply geography. Generally, auto insurance costs more in more urban, traffic-dense regions than in rural, freeway-free areas.
“If you’re in Stockton, the auto theft capital of California, you’ll pay more. If you’re in San Francisco, where it’s more expensive for auto-body repairs, you also may pay more,” said Nancy Kincaid, spokesperson for the state Department of Insurance. “All of those things are part of the consideration. That’s why it pays to shop for insurance.”
In California, insurers must base auto rates on three primary factors: annual mileage, driving experience (number of years licensed) and driving record (accidents, DUIs, speeding tickets). Beyond that, there are another 16 factors, which are weighted differently from one carrier to another.
“That’s why it’s really important to shop around and see who gives you the best deal,” said Tully Lehman, spokesman for the Insurance Information Network of California.
Tap the state Department of Insurance’s list of names, numbers and websites of more than 150 licensed California carriers of personal auto insurance. Use insurance comparison websites, like InsWeb.com, Esurance.com or InsuranceQuotes.com. And above all, ask for discounts.
“We’ve been pretty shocked at the number of consumers who are unaware of the discounts that are out there,” said Laura Adams, senior insurance analyst with Burlingame-based InsuranceQuotes.com, which commissioned the ZIP code comparison study.
Among the most common discounts: Safety features (anti-lock brakes, air bags, anti-sway devices); good driver (few or no accidents); good student (generally, a student must maintain a “B” average through graduate-school age, say 25 or 26); multivehicle or multipolicy (having more than one type of policy with the same carrier).
But other discounts also can shave dollars off your monthly premiums. Here are some:
• Lifestyle changes: Whether it’s moving or getting married, check with your insurer, as those kinds of major changes could reduce your rates.
“If you used to commute an hour a day to work each day, but now you’re five minutes from work, that low-mileage difference can really save you money,” said Adams. It’s the same if you’re self-employed working from home or now take public transportation to work: If you cut your annual mileage below 10,000 to 12,000 a year, it can qualify for discounts.
Similarly, getting married can lower your rates. Adams said one of her co-workers saved $200 a year on car insurance after her wedding because insurers tend to treat married couples as less risky than singles.
• Distant driver: If your son or daughter is attending school more than 100 miles from home and doesn’t have a vehicle in that city, you can qualify for discounts. Typically, the discounts cut off around age 25 or 26, but it pays to ask. Students are still covered in the event they drive a friend’s car.
• Less paper: Some carriers give discounts if you pay your premium in full, rather than paying quarterly or half-year installments. Same if you pay electronically online, rather than using a credit card or mailing a paper check.
• Low-cost coverage: In California, if you’re at least 19, have a clean driving record of at least three years and own your vehicle outright, you may qualify for California’s Low-Cost Auto Insurance Program (see box). It provides basic liability coverage (theft or vandalism are not covered) for less than $340 a year. To qualify, the maximum income for singles is $28,725 a year; up to $58,875 for households of four.
• Alternative cars: Some carriers, but not all, offer discounts for hybrid, electric or alternative-fuel vehicles.
• Affinity discounts: Discounts are often available for employees in specific companies or professions, such as teachers, engineers, doctors and dentists. Military members – and sometimes college students enrolled in ROTC programs – can also get discounts from many carriers. Some insurers offer discounts if you’re affiliated with certain professional associations, college alumni groups, even fraternities and sororities.
• Get a CLUE: Unbeknownst to most consumers, insurance companies can pull a history of all your insurance claims. It’s a tool used to assess how likely you are to file a claim, which can impact your premiums. The two major providers are CLUE and A-PLUS. To check if everything in your report is accurate, request a free copy (see box).
(Note: These insurance claims reports are different from a credit report, which is a history of your debts, loans and bill payments. Several states, including California and Massachusetts, ban auto insurance companies from using credit scores when setting premium rates.)
• Hot wheels: It’s not exactly a discount, but driving a boring car can save you in premiums. Generally, if you drive a vehicle that’s not expensive to maintain or repair, or is at low risk of theft, your premiums are lower.
Last month, the National Insurance Crime Bureau released its “hot wheels” list of the most-stolen cars in 2012. In California, the top three vehicles stolen were 1994 Honda Accords, 1998 Honda Civics and 1991 Toyota Camrys.
• Just ask: Not all discounts are prominently advertised. “You have to speak up and ask for these discounts. Send an email or get on the phone with your insurance company,” recommends Adams.
Check around once a year, when your policy comes up for renewal, said Lehman. “It keeps you up to date with what’s going on. Things change in your life and you could end up missing out on discounts. ... It’s very competitive out there. Insurers want your business.”