FOOL'S SCHOOL DAILY Q&A

Car Insurance Savings

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By Selena Maranjian (TMF Selena)
June 4, 2003

Q. How can I save money on a car insurance policy?

A. One simple way is to increase the amount of your deductible. The lower your deductible, the higher your premiums. Ask yourself how likely you are to incur expenses, and how often that might occur. Compare that with the extra amount you're paying on your policy. For many people, it makes sense to carry a deductible of about $500 and pay lower premiums. Hiking a deductible from $200 to $500 might save you 15-30%.

Another option is to make sure you're not over-insuring your car. If you're driving an old clunker, you may not want to bother with collision and comprehensive coverage on it. Cars worth less than $1,000 are often not worth repairing. If you have an accident where the cost to repair the car exceeds its fair value, the insurance company will usually opt to "total" the car.

That means your car is labeled a "total loss" and the insurance company is only obligated to pay you the "Blue Book" value minus your deductible, rather than paying the higher amount necessary to fix the car. They also will no longer insure the car, so you'll be left looking for a new set of wheels.

Many insurers will give you a significant discount (up to 10%) if you hold more than one policy with them. So, look into buying both auto and home insurance from the same insurer. Whichever company you choose, make sure you investigate all possible discounts. Some insurers will knock off a few dollars for safety devices such as airbags or anti-theft devices such as passive engine disablers.

Oddly enough, paying a little more for your policy can save you money, too. Most policies, for a few dollars per month, will pay for a rental car should your car be damaged and unusable. This can be a big savings, so it's something to think about. Something else to include is coverage that protects you if an uninsured or underinsured motorist hits you. (According to some experts, as many as half or more of all motorists fall into these categories.) Most policies offer a degree of coverage in this area, but it might not be as much as you need or want.

Learn more about insurance in our Insurance Center. You may not have thought about some kinds of insurance, such as disability or long-term care insurance, but they're vital for many people. Take a little time to learn more and you may be very happy you did, if some calamity occurs in the future. Additional insurance information can be found at InsBuyer.com and Yahoo!

Finally, if you're a shareholder in Warren Buffett's company, Berkshire Hathaway (NYSE: BRK.A), you may be in luck. Berkshire Hathaway owns car insurer GEICO and offers discounts in the neighborhood of 8% to shareholders. GEICO also offers discounts to members of various organizations too. Call GEICO at 800-861-8380 for more information.

If you have any questions, thoughts or opinions on this column, share them with others on our Ask the Fool discussion board.

This question and answer is adapted from The Motley Fool Money Guide: Answers to Your Questions About Saving, Spending and Investing. For answers to this and 499 other common money questions, check it out -- it's a handy resource.