Insuring. (cover story)

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Author: Henry, EdPhillips, Christopher

BUYER'S GUIDE

The cost of insuring a new car has more than doubled in the past decade. A driver in Indianapolis between the ages of 30 and 50 with a good safety record and a midprice car like a Ford Taurus pays an average of $770 a year for liability, collision and comprehensive insurance. In New York City, the premium doubles. In Los Angeles, it triples.

A stellar driving record is your ticket to the best coverage for the lowest cost. Next, pick a car with a low insurance-cost rating (in the tables, the index ranges from 1 to 17, with 9 representing the average, based on claims compiled by the Insurance Services Office). Then take high deductibles and shop hard. Start with phone calls-to direct writers such as GEICO, USAA and 20th Century and to agent-sold insurers such as Aetna, Allstate, Hartford, Nationwide, State Farm and Travelers. Before you call, determine the coverage you want so that each company prices exactly the same policy.

Cost-cutting is important, but don't let the desire to save money deprive you of coverage in areas where you may actually need to boost it.

UPDATE YOUR LIABILITY COVERAGE. Forty-one states and the District of Columbia require liability insurance. However, the usual legal minimums-$25,000 per person and $50,000 per accident for bodily injury, plus $10,000 for property damage (often abbreviated as 25/50/10)-are woefully inadequate. With today's medical costs, bodily injury liability coverage, which pays medical expenses and legal fees for anyone hurt in an accident caused by you, should be a minimum of $100,000 per person and $300,000 per accident.

Property-damage coverage, which pays for damage you cause with your -own vehicle or someone else's, should be at least $50,000. That's reasonable considering the number of cars on the road priced over $35,000. If you total one and have only $10,000 in property liability coverage, you'll pay the difference.

RAISE YOUR LIMITS? It's relatively inexpensive to raise your limits. in Chicago, where 100/300/50 coverage from State Farm costs about $175 for six months, an additional $4 will buy another $50,000 of property-damage liability.

A policy providing 100/300/50 coverage should be ample when you rent a car, except overseas. Most American policies don't cover you abroad, so buy insurance from the rental company. Gold credit card holders are usually covered overseas if they pay with their card, but restrictions may apply.

Select no-fault coverage if you can. Currently, 14 states and Puerto Rico have no-fault laws that restrict the filing of lawsuits. Kentucky, New Jersey and Pennsylvania motorists can keep the right to sue or elect no-fault. New Jersey drivers who elect to sue pay up to 25% more for liability insurance.

Collision and comprehensive limits are determined by the value of your car. Buy to cover catastrophic costs, not minor repairs-such as scrapes, dings and broken glass. You can lower the cost by setting the deductible as high as you can afford out of pocket. For example, collision coverage for a new Taurus sedan in Indianapolis costs about $315 a year with a $100 deductible. Raise the deductible to $250 and the yearly rate drops to $283; at $500, it drops to $246. With a $1,000 deductible, which few drivers choose, the rate drops to $184. The savings are greater in high-risk, high-cost cities like Los Angeles and New York.

The relatively low cost of comprehensive coverage for the same driver--ranging from about $135 per year with no deductible to $58 with a $1,000 deductible--offers less savings; but if you accept the notion that insurance is for large losses, you can save a little by increasing your deductible here as well.

Medical-payment coverage kicks in whenever someone named in your policy or tiding in your car is injured in an auto accident. It's voluntary in states with no-fault laws, and you may not need it anyway. Medical expenses for others are usually covered by the liability portion of your policy. Your own medical expenses are probably taken care of under your health insurance.

Discounts can offer important savings. The ones to ask about:

OUT-OF-TOWN STUDENTS. Students who attend school 100 miles or more away from home can get a discount if they are insured under the family's policy and don't take the car to school.

SENIORS. Drivers age 50 or older may qualify for a 10% to 20% discount.

PASSIVE RESTRAINTS. Discounts range from 10% to 30% for factory-installed automatic belts and air bags. Savings apply only to medical coverage and personal-injury protection.

ANTI-THEFT DEVICES. A hood lock and burglar alarm or disabling device can reduce comprehensive insurance costs by 5% to 15%. Such discounts are mandatory in Florida, Georgia, Illinois, Kentucky, Massachusetts, Michigan, New Jersey, New York, Pennsylvania, Rhode Island, Texas and Washington.

DRIVER EDUCATION. Drivers who complete driver training or defensive-driving courses may get 5% to 15% discounts.

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By Ed Henry

Reported by Susan Province