TAKE YOUR POLICY INTO THE SHOP

When it's time to renew your car insurance, don't automatically sign up with your old insurer: You may miss a chance to save. You can shop multiple insurers at insweb.com, but major players like Allstate, Progressive and State Farm aren't on the site. You'll need to go to their sites or call an agent. As you look around, ask yourself these questions.

1. Am I Saving As Much As I Can?

See what others pay. State insurance department websites list sample rates. Find your state's at naic.org.

Up your deductible. The average driver pays $939 a year for car insurance but makes a claim only once every eight years. Raise your comprehensive deductible from $250 to $500 and collision from $500 to $1,000, and shave your premium by 10% or more. Over time, that will more than cover the higher out-of-pocket outlay if you ever make a claim.

Drive less. If higher gas prices have you covering fewer miles--you're carpooling, say--you may get a rate break.

Fix credit errors. Credit troubles can raise your premium. Order a free report at annualcreditreport.com and correct any mistakes that may be costing you.

2. Do I Have the Right Amount?

Don't confuse minimum with optimum. Every state sets a coverage floor, but that may be too low. Pros suggest $100,000 per person, $300,000 per accident and $50,000 for property damage. Carry the same amount in uninsured motorist coverage, which pays your bills if you're in a smashup with an uninsured or underinsured driver.

Give up on your jalopy. Once your car is old, you can probably drop collision and comprehensive coverage. You'll pay as much in premiums over a few years as you'd pay to replace or repair the car. To gauge its current market value, look up used-car prices for your model at autotrader.com or kbb.com. If it's less than $2,000, kick the extra coverage to the curb (average savings: $431 a year).

3. Are the Extras Simply Gimmicks?

Forget "accident forgiveness" coverage. The promise: Pay a higher premium (7% to 15% with Allstate) and your rates won't go up if you wipe out. But paying more now to save money later doesn't add up, says Bob Hunter of the Consumer Federation of America. And it may be unnecessary: Some insurers forgive the first accident at no extra cost. Even Allstate does so if you've been a customer for five years.

Reject "new-car replacement," The fear: Your new car depreciates like mad the second you drive it off the lot, so after an accident the insurance payout isn't big enough to buy a new model. The takeaway: Pass on this one too. It'll add slightly to your premium and won't kick in unless the car is totaled.

4. Can I Afford to Let My Kids Drive?

Sit down. Adding a teen to your policy can double or even triple your premium, all the more reason to shop hard before your children get licenses.

Read her report card. Most insurers offer discounts--sometimes as much as 25% --for students with a B average or better.

Send him away. If your kid goes to a school that's more than 100 miles from home (without wheels, of course), you'll qualify for a lower rate.

Get credit for being strict. Even if you would never give your teen the keys to the Jaguar, your insurance company may price your policy as if he d rove the most expensive car in your garage. Ask about this costly provision--it could be reason enough to switch insurers.

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By Kate Ashford

CAR INSURANCE: TAKE THE HIGH ROAD

FIVE FOR THE MONEY

Here are five of the most common blunders to steer around when choosing a policy to insure your wheels

Recently Five for the Money took a look at some of the biggest mistakes consumers make when buying life insurance [see BusinessWeek.com, 2/1/07, "Life Insurance Blunders to Avoid"]. This week we'll tackle car insurance. Auto insurance isn't as fraught a subject as life insurance; buying a sensible policy doesn't need to be a reminder of inevitable death. But that doesn't mean it's easy to negotiate. Having the wrong car insurance, or making the wrong claims, can put a serious ding in someone's financial health.

As with life insurance, some of the rules are straightforward: shop around to ensure a fair deal and review your policy annually to make sure that it still fits your life and financial condition. Here are a few other common mistakes policyholders should swerve away from:

1. Don't assume the insurance salesman is your friend.

The best insurance policies for consumers aren't necessarily the ones that bring in the best numbers and bonuses for salespeople, says Andrew Tignanelli, president of Luthersville [Md.]-based money management outfit Financial Consulate. Remember that the next time you go shopping for car insurance. Often it's in the salesman's best interest to sell the "least amount of insurance that they can possibly justify." Smaller policies leave insurers less exposed to risk and proportionately tend to be more expensive. As a result, they're more likely to be profitable for the insurer. Because of this conflict of interest and other factors, Tignanelli says he finds that even wealthy clients are often underinsured.

Make sure you have "liability" coverage, which is usually mandatory in most states and covers the costs of another person's car damage and injury. "Comprehensive" will protect you if your car gets stolen, catches fire, or is damaged without coming into contact with another car. And "collision" covers damages if your car collides with another vehicle or object, no matter who's at fault.

2. Don't have a tiny deductible.

When buying auto insurance, consumers frequently think of it as a way to protect themselves against every ding and scratch. That's a bad idea. "You should insure for what you cannot afford to lose," says financial planner Jeffrey Bogue of Bogue Asset Management. That means, don't have a miniscule deductible of $100 or even $250. "If you nickel-and-dime the insurance companies with these small claims, you may get socked with a premium hike or they may say 'we're not going to insure you,' " he says.

Policies with higher deductibles [Bogue says $1,000 is often sensible] that extend to higher coverage levels are not necessarily more expensive and protect drivers from costs associated with more serious car problems. Higher-deductible policies also cost less.

3. Don't assume all cars need the same insurance.

Just as you shouldn't waste insurance on minor incidents, Bogue says some cars just don't need the full insurance package. Drivers always need to maintain their liability insurance in case they cause an accident but some cars just aren't worth the hassle and expense. For example, Bogue's third vehicle is an old Toyota (TM) pickup that he uses sparingly. He wouldn't miss it if it "fell off a cliff tomorrow." Insuring it with a reasonable deductible would be useless, he says; it would irritate insurers without promising much upside in the event of a claim.

4. Don't ignore car ownership.

This won't necessarily come up when buying insurance, but vehicle ownership can make all the difference in potential payouts. "There's absolutely no good reason to own a car jointly," says Dr. Steven Podnos, principal at Wealth Care, a financial planning and investment advisory firm in Merritt Island, Fla. If a husband and wife share ownership, both are exposed to liability if one causes an accident. Both can be sued.

Parents should be aware of the age of majority [usually 18] in their state. When the kids reach it they should assume title for their cars so that parents can avoid liability for any mishaps caused by drivers who are of age, but still young.

5. Don't forget your umbrella.

Umbrella policies tend to be very cheap and can help drivers [and homeowners] weather the most severe storms. Say there's been a severe car accident that involves significant property damage extending beyond what a solid insurance policy covers. When this happens, policyholders need umbrellas to shelter them from liability extending beyond the limits of their standard policy.

Since these umbrella policies protect against only the worst accidents, they rarely pay out and so can be bought for very little, sometimes $200 for a policy stretching from where the liability stops to around $2 million in damages, according to John Discepoli of Discepoli Financial Planning near Cincinnati. This could be an amount of car insurance coverage that allows most drivers a smooth ride.

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By Alex Halperin

BAD CREDIT? IT CAN BE A PROBLEM WHEN IT COMES TO AUTO INSURANCE COSTS

You always use your turn signal and observe the speed limit. The only ticket you've ever gotten was for an expired parking meter. You should be eligible for lower car-insurance premiums than that bozo who cut you off this morning is, right? Not necessarily.

If your credit report is blemished, you might not get the lowest insurance rates, despite your spotless driving record. And as a result of a Supreme Court decision last week, your insurer doesn't have to tell you that you're not getting the best rates.

The high court overturned a 9th Circuit Court of Appeals ruling that said the federal Fair Credit Reporting Act requires insurers to notify customers whenever their credit history prevents them from getting the best available rate.

Insurers argued that credit histories are just one of many factors they use to set rates. They also contended that the ruling would have required insurers to send out millions of notices to customers to avoid costly class-action lawsuits.

For about a decade, most insurers have considered a customer's credit history when setting rates, says Joseph Annotti, a spokesman for the Property Casualty Insurers Association of America. Annotti says research has shown that drivers with poor credit are more likely to file insurance claims.

A credit report "is a solid predictor of risk," Annotti says. "People can get tickets taken off their record, DUIs get changed into running a stop sign -- there are lots of ways to play with your motor vehicle record. It's less likely for a person who is inherently financial irresponsible to, all of a sudden overnight, change their behavior."

Consumer groups disagree. The insurance industry's contention that people with damaged credit are high-risk drivers is a "pretty disturbing moral hypothesis," says Chi Chi Wu, of the National Consumer Law Center. Many people have poor credit because of divorce, job loss or serious illness, she says. "They're not bad people. They're people who have fallen on hard times."

In addition, credit reports are "notorious for errors," Wu says. Identity theft could also damage an individual's record, she notes.

In November, Oregon voters defeated a measure that would have barred insurers from using credit histories to set auto and home insurance rates. Still, 26 states have adopted a model law that requires insurers to notify consumers that their credit history might affect their rates. The law also bars insurers from refusing to insure someone based solely on the individual's credit history.

The model law also encourages insurers to take into account "extraordinary life events," such as a catastrophic illness or the loss of a spouse, when evaluating a consumer's credit history.

Know your score
Consumer groups contend that a notification requirement would encourage people to check their credit reports more frequently. Most consumers aren't aware that their credit histories can affect their insurance rates, says Scott Shorr, a lawyer in Portland, Ore., who represented the plaintiffs in the insurance case.

Now, though, "If you want to know whether there's some inaccuracy in your credit report that's resulting in your paying more for insurance or credit generally, then you're going to have to check your credit report yourself," says Scott Nelson, an attorney for Public Citizen, a consumer-advocacy group.
How to protect yourself:

*When applying for insurance, ask the insurer what factors will be considered in determining your rates. Insurers won't tell you how they weigh them, but the company might tell you the factors it considers when reviewing a potential customer's credit report, Annotti says.

For example, he says, some insurers are interested only in major credit events, such as foreclosures and bankruptcies.

Annotti adds that the use of credit reports in setting rates can benefit drivers with excellent credit. "A lot of times, a good credit history can offset a spotty driving record," he says.

*Monitor your credit reports regularly for errors. You're entitled to a free copy of a credit report from the three credit-reporting agencies -- TransUnion, Equifax and Experian -- once a year.

You can order your credit reports at www.annualcreditreport.com or by calling 877-322-8228. You'll have to pay extra to get your credit score.

If you find errors in your credit report, contact the credit agency that issued the report. The agencies are required by law to investigate disputed items.

*Beware of companies that claim they can "repair" your credit report
You can find more information about credit-repair scams at the Federal Trade Commission's website, www.ftc.gov.

To suggest future columns, e-mail: sblock@usatoday.com.

TEXT OF INFO BOX BEGINS HERE
Warning signs of a credit-repair scam
*The company wants you to pay upfront, before it provides any services.
*The company fails to tell you your legal rights and what you can do for free.
*The company tells you not to contact the credit-reporting agency.
*The company suggests you try to invent a "new" credit identity -- then, a new credit report -- by applying for an Employer Identification Number to use instead of your Social Security number. It's a federal crime to lie on a loan or credit application, to misrepresent your Social Security number or to obtain an Employer Identification Number from the IRS under false pretenses.

(c) USA TODAY, 2007