How to cut insurance costs

The insurance company starts with a set of base premiums for each of the coverages that make up its policy. Those base rates are set to cover a particular customer: an adult male with a standard car used only for pleasure (as opposed to business or commuting). Everyone else pays more or less, depending on the company's evaluation of his or her relative risk potential.

In effect, you are assigned to a group defined according to characteristics that are believed to predict the group's chances of creating insurance losses. Although classification plans differ, the companies employ for the most part these basic criteria: age, sex, marital status, accidents and traffic violations, whether a young driver has taken a driver-education course or is entitled to a good-student discount, the number of cars, the models, use of the cars (pleasure, commuting, business, farm) and the mileage. Some even take your credit record into account.

To find the best deal:

* Shop many sources. Survey after survey confirms that auto-insurance companies often charge greatly different premiums for the same coverage. Many state insurance offices distribute auto-insurance pricing guides (see the box below), and the Insurance News Network includes results at its Web site (www.insure.com). The categories they use may not match yours, but you can use such a guide to identify your state's most cost-effective insurers.

The odds are you will discover substantial differences if you take the time to get premium quotations from a number of companies. Begin with a market leader, such as State Farm or Allstate. Then use that quotation as a measure against which to judge identical coverage at other companies. (The worksheet on page 85 will help you compare quotes).

* Before you buy a new car, check the cost of insurance. Our tables beginning on page 18 list relative insurance costs for various new models. The box on pages 86 and 87 lists models that State Farm charges more or less than average to insure.

* Use your computer. InsWeb, at www.insweb.com, provides quotes from 13 insurance companies. Some companies, such as Progressive (www.autoinsurance.com) and 20th Century (www.20thcentins.com), let you request quotes online.

* Keep in mind that price isn't everything. Is it easy to collect on claims? Does your agent provide good service? Are you required to use an inconvenient body shop? Ask other policyholders about their experiences, and find out if your state's insurance department keeps a complaint record.

You can check out an unfamiliar company's stability in Best's Insurance Reports: Property-Casualty at your local library (or ask an agent how Best's rates his or her company). Insurers with the top two ratings can be considered solid.

Desperately seeking discounts

When it comes to shaving today's sky-high premiums, you need to cash in on every possible discount. As you shop, don't be shy about asking for breaks; you may not always be told which discounts you're eligible for.