Six Ways to Save on Auto Insurance

Updated on July 9, 2008.

GOOD NEWS, DRIVERS: insurance premium hikes have hit the breaks. The Insurance Information Institute (III) estimates the 2007 average annual costs at $847, a 0.5% decrease from 2006 and the first decline since 1999.

But just because prices aren't breaking the speed limit doesn't mean you should be complacent about costs. With a few relatively painless steps, you can probably find yourself a cheaper policy. Here are six ways to save:

1. Shop Around
You've heard it before: When looking for a new policy, get at least three quotes. And if you really want to save, gather several more than that. According to a 2004 survey of more than 100,000 consumers across the country, conducted by Progressive Insurance, rates for comparable coverage can vary by more than $500 for six months' worth of coverage.

When shopping around, it's crucial that you understand the lay of the land. Broadly speaking, the auto-insurance world is divided into three camps. There are the direct writers (like Geico and Amica), that use in-house employees to sell insurance directly to consumers via the Web or phone. Other insurers, like State Farm and Allstate use captive or "exclusive" agents to sell their products. (These are independent contractors who work predominantly on commission and can sell the products of only one company.) Finally, there are the independent agents who sell the insurance of various different companies. These folks also earn their keep based on commission. (To find a local independent agent, visit the Independent Insurance Agents & Brokers of America.)

Assuming you have a decent driving history, you should get the best deals from the direct agents, since they remove the middleman (who often receives a commission of 15%). But these folks can be picky. So if you've had recent entanglements with the law or another car's fender, your best bet is probably to check with the major providers, such as State Farm and Allstate (which hold 18% and 12% of the market, respectively), and then head to an independent agent to see if he or she can beat your best quote. You also can comparison shop at Web sites such as InsWeb, which operates as an independent agent and a lead generator.

One note of caution: Don't let your quest for a bargain lead you into the dark woods of substandard companies. Make sure you go with a company that has a good credit rating with a rating service such as Standard & Poor's or Moody's. You might also want to check with your state's department of insurance to see if a particular company has a high number of consumer complaints, says Sally McCarty, commissioner of the Indiana Department of Insurance. (Click here to find the Web site of your state's department.)

2. Get All Available Discounts
Discounts can vary widely by company as well as by state. Some to ask about are: