Picking an insurer

In Lesson 22

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Top things to know Why insurance costs so much Understand your coverages Picking an insurer Maximizing your savings A few words about claims

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• Medical-payments pays the deductibles and co-payments not covered by your health insurer, or the insurer of any of your passengers. It also covers some funeral and rehabilitation costs. It's not useful unless you face very high health-insurance deductibles. If your state requires it, buy the minimum.
• Towing and labor only pays if you can't drive your car away from an accident. Members of auto clubs with such privileges don't need this coverage.
• Rental insurance costs only a few dollars per year, certainly a worthwhile expense if you travel and rent cars frequently. But spare the expense if you don't rent cars often and can depend on another car in a pinch.
• Glass breakage coverage can add up to 20 percent to your comprehensive premium. When it's not built into the premium, avoid it.

Cast a wide net.

First, check what's out there. Get quotes from at least four carriers. Try a free database such as InsWeb.

Try these options.

Companies like State Farm and USAA that deal directly with consumers without using independent agents are called "direct writers". In theory, they can pass on their savings by eliminating the middleman.

Read your junk mail. Direct marketers like Geico and Progressive Insurance save on overhead - and pass on the savings - by marketing by phone, mail, or the Internet.

Let your state be your guide.

Insurance departments in 33 states and the District of Columbia offer online shopping guides for auto insurance. Your state's guide may identify little-known companies with competitive rates.

Look at service.

No discount in the world will make up for slow claims processing or shoddy repairs, so find out as much as you can about a company's service before you sign on.

Consumer Reports periodically publishes service ratings for large insurers. You can also ask a representative about a company's claims turn-around time; a shorter turnaround is an indication of better service.

Focus on financials.

It's wise to look at the financial ratings of your auto insurer. Ask the company for that information, or check out one of the financial ratings services on the Web.

An A rating or higher from Standard & Poor's or an AA ranking or better from Moody's Investor Service is a good indicator of financial strength. Weiss Ratings, the most independent of the ratings services, and arguably the most stringent, posts a list of the currently weakest companies.

As a last resort, there's your state.

If your driving record is bad, you may initially have only one option other than taking public transportation: your state-sponsored high-risk pool and it's expensive.

If you must join the high-risk pool for now, try shopping again a year from now. Private insurers are always looking for new ways to serve more customers, and one company's black mark is another's business opportunity. Progressive Insurance, for instance, has thrived by insuring people and property that other carriers won't touch.

NEXT: Maximizing your savings

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