How to Play the Premium Cycle.

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Author: Carter, Adrienne

Want to save $100 or $200? The periodic rise and fall of premiums for auto and homeowners insurance--a cycle as old as the industry--is finally changing in favor of consumers. And with a little effort, and a little luck, you may be able to turn that trend into money in your pocket.

After several years of aggressive rate boosts, auto and homeowners insurers are easing up. The Insurance Information Institute, the industry trade group, estimates that the average auto insurance premium rose by 3.5% this year, the smallest increase since 2000. And the average homeowners policy, which cost an estimated $591 in 2003, went up just under 3% to $608.

Why are insurers giving customers a break? Escalating premiums since 2000 have fattened margins, threatening to attract unwelcome attention from state regulators. In 2000, auto insurers paid out $1.10 in claims for every $1 they collected in premiums; now it's roughly 95¢ for every $1. The payout per premium dollar on homeowners policies has dropped from $1.22 in 2000 to $1.03. Both drivers and homeowners are filing fewer claims, thanks to factors that range from safer cars to fewer hurricanes to changes in consumer attitudes (including, we suspect, the realization that claims may trigger higher premiums on renewal). "Fewer claims translate directly into a lower overall rate increase for consumers," says Robert Hartwig, chief economist for the Insurance Information Institute.

But don't spend that extra $100 or $200 yet. National averages don't tell the full story. Your rate will depend on which state you live in and which company underwrites your insurance. (For example, State Farm has lowered auto premiums in 30 states by as much as 9.1% and raised them in six states by up to 6.8%. The company has dropped homeowners rates in four states by as much as 6.4% and increased them in 13 states by up to 13%.) Risk factors that range from your driving record to your credit history will also affect your premium.

Here are a few tips that will help you take maximum advantage of this favorable point in the cycle.

Don't automatically renew. The competitiveness fed by the new premium environment makes it even more worthwhile than usual to get quotes from several insurers. MONEY compared the rates at four auto insurance companies for a Virginia couple in their fifties with two cars. The range: from $994 to $1,170 a year, an 18% difference.

Start by calling an independent insurance broker, who can get you quotes from several companies. (Visit iiaa.org for a list of agents in your area.) Then check out the prices from a large national insurer like State Farm (statefarm.com) or Allstate (allstate.com)

that employs its own force of agents. Finally, try direct players like Geico (800-841-3000; geico.com) and Progressive (800-888-7764; progressive.com) that skip the middleman. Several companies offer online quotes; Progressive, for instance, lists rates from multiple car insurers.

Increase your deductible. Insurance isn't meant to fix a broken taillight or replace food that went bad in your refrigerator. Some carriers will up your premium, or worse, not renew it, for filing just one claim or even inquiring about one. Since you should file a claim only in the case of a major loss, a $250 deductible rarely makes sense. In fact, some insurers are making $500 the minimum. Raising your deductible from, say, $250 to $1,000 can save you as much as 25% on homeowners premiums and up to 40% on auto coverage. Sal and Catherine Moreno, who saved $145 on car insurance thanks to a rate decrease in Arizona, saved an additional $167, or 7%, by bumping up the deductible on their comprehensive and collision insurance from $250 to $1,000 in July.

Take advantage of new discounts. Some insurers now offer a discount on homeowners insurance if you've recently upgraded your electrical system or replaced your roof. Others are starting to give breaks if you're in a certain profession, say teaching or engineering. When you shop for insurance, the company or agent will generally ask you questions to see if you're eligible for the breaks they offer. But it never hurts to see what's out there, especially since there are often new discounts to be found. Many carriers list potential discounts on their websites.

Consolidate your business. One of the best money-saving moves in insurance is an old standard: Buy your auto, homeowners and other insurance policy from the same company. Doing that in July saved Robert and Sheryl Moore of Santa Rosa, Calif. about $300 on the two policies.

And, as always, make sure your insurer knows about any changes in your life. For example, if you've recently started carpooling to save on gas, you may have a credit coming your way.

Sal and Catherine Moreno Higley, Ariz.

Auto insurance policy on a 2003 Nissan pickup, a 1999 Honda and a 1971 Chevy pickup Premium in 2003 $2,412 Saved by insurer reducing rates $145 Saved by increasing deductible on two vehicles $167 Premium in 2004 $2,100 Total savings: 13% $312

Robert and Sheryl Moore Santa Rosa, Calif.

Homeowners policy on a 2,100-square-foot, four-bedroom house with three baths

Premium to renew $870 Saved by shopping around $10 Saved by buying auto and home policy from the same carrier $80 Premium on new policy with better coverage $780 Total savings: 10% $90

PHOTO (COLOR): This year's decline in auto insurance rates in Arizona has been a boon for the Morenos.

PHOTO (COLOR): The Moores, with their daughter Jessie, got a discount for buying their auto and homeowners policies from one carrier.

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By Adrienne Carter