If you are like a lot of people, chances are that it has been a while since you have shopped around for car insurance.  Just checking some Internet auto insurance quotes doesn’t count either.  This little oversight could be costing you a lot of money.

Why You Should Shop Around For Auto Insurance Every Year or Two

Most people think that the advice to shop around for car insurance is based on their being a company out there that is more competitive and just flat out has cheaper rates, that isn’t really true.

While it is possible that another car insurance company has cheaper car insurance rates for you, the real reason that you should check every 12 to 18 months for new car insurance quotes is actually different.

It can be hard to find accurate, non-biased, information on auto insurance on the Internet.  Your best bet is InsureUOnline.org (notice that it is ORG, not COM).  InsureUonline is the consumer education website from the National Association of Insurance Commissioners, the group that represents the Insurance Commissioner from all 50 states.  Unlike most other insurance websites you will find, they are not affiliated with any insurance company, and do not make money by selling insurance or selling leads to insurance companies.

Car insurance, like all forms of insurance, is based upon pooling risk.  The ides is that for any group of like people, there is an amount that can be collected from each member of the group that would add up to cover the collective losses of the whole group.

For example, assume that there are 1,000 people in a group.  In a given year, 5 of them have accidents.  Those damages and other payouts (like medical expenses) for those 5 accidents total up to $100,000.  Given that scenario, if you charged each person $100, then you could cover the annual car accident costs of the group.  If you charged $150, then you could cover the group, and make a $50,000 profit.  Not bad, right?

Of course, it isn’t this simple.  What if there is a bad year and there are 20 accidents?  Or, what if it is a normal number of accidents, but one accident is really bad and costs $500,000?

The trick is, that the larger the group (sample, statistically speaking), the less variable the outcome.  In other words, while those worries are probably a pretty big deal with 1,000 people, they become much less significant with 100,000 people, and even less significant with 1,000,000 people.

Furthermore, the more alike the group is, the smaller the variables are likely to be.  That is why auto insurance companies charge you different rates depending upon who you are, they are breaking you out into groups of people who are the most like you and dividing the risk over the entire group.

All you have to do to make money as an insurance company is get large enough groups of drivers paying premiums to even out those unusual cases that arise, and then charge them the right amount of money.  Of course, this is the tricky part.

Charge too much money, and not enough people will buy your brand of car insurance which means your groups will be too small.  Charge too little money, and no matter how many customers you have, their premiums won’t add up to enough to cover all the expenses.

Car Insurance Companies Re-Rate and Change Rates Every Few Years

This is where shopping around for auto insurance comes in.

Every so often (typically 12 to 36 months), car insurance companies will look at their “experience”, that is how much money each group is costing them, and adjust their rates up or down accordingly.  Auto insurance companies often do this on a state by state basis, because insurance is regulated at the state level.  That means that the rules for how they are allowed to divide out the insured groups, as well as the rules for changing people’s auto insurance premiums, are different in each state.

If you live in California, for example, and the car insurance company has lost less money there than they expected to, they would likely lower their auto insurance premiums.  If, on the other hand, you live in Texas, for example, and the insurance guys lost more money there than they expected, they might raise their rates in Texas.

So, how does this save you money on your auto insurance premiums?

Because, the insurance companies don’t do all 50 states every year, and they don’t use the same schedule or rotation.  That means that State Farm might have re-done its numbers (and its rates) for Oregon in 2008, and Washington in 2009.  Allstate, on the other hand, might have done Oregon and Washington together in 2007.  They are scheduled to do Oregon and Washington again in 2010.

Since all car insurance companies are likely to have the same experience in each state that means that if things were better in Oregon in 2008 than in 2007, then all of the auto insurers will be lowering their rates for Oregon.  The catch is that, in our example, State Farm lowered them in 2008, while Allstate won’t lower them until 2010.

If, on the other hand, Washington was terrible in 2009, then State Farm will be raising its rates in Washington, while Allstate will still have their lower rates in place until at least 2010.

This is why you should shop around for car insurance every year.  If you can’t make yourself do it every year, then at least do it every two years.

Another reason to shop around is that each insurer builds different groups and different costs which they also adjust periodically.  If Geico decided to charge bad drivers $100 more than the base rate (there is no such thing, but for example purposes, just go with it) and good drivers $100 less than the base rate, while Amica decided to charge bad drivers $50 more than the base and good drivers $50 less, then a good driver would get a better deal at Geico, while a bad driver would get a better deal at Amica.

Depending upon how that works out for the insurers, they might switch up their models and who gets a better deal where, could flip.

What it all comes down to, is that you can potentially save a lot of money on car insurance just by checking around every year or two.

If you haven’t done it in a while, make three or four calls, the results might shock you.

State Insurance Regulator – Insurance Commissioner

For specific consumer information and info on insurance laws and regulations in your state, visit your state’s website.  This website has a link to all 50 states’ insurance commissioner or insurance regulation agency.

Look for data to help save you work on researching car insurance.

In the State of Colorado, for example, insurance regulation falls under DORA, Department of Regulatory Agencies.  Keep your eyes peeled and you find this official report of Private Passenger Automobile Premiums in Colorado based on where you live and type of Driver.  Don’t forget to run this report yourself.  There are 4 different driver types (younger, older, male, female) and rates change depending upon which city you live in.

You’ll notice right away that some auto insurers are much more expensive for under 25-year old males, while some are better bargains for over 60-year old drivers.  Use these real data sample premiums to thin down the list to the companies that look like they do the best deals with the kind of driver that you are, and make some calls.

Sometimes in the world of personal finance, the hardest thing is knowing who to trust.  While the Internet is full of information about all manner of financial topics, the good unbiased truth from someone who isn’t just trying to sell you what they have to offer, can be hard to find amongst all the other websites that look good, but maybe don’t offer the best information.

One of the best ways to find useful information about may of the top financial concerns is to check with regulatory agencies or trade organizations.  For example, the NAIC is the National Association of Insurance Commissioners.  That is the group made up of the Insurance Commissioners from all of the states that have them. 

The NAIC is a solid reliable source of information regarding all manner of insurance products.  While I wouldn’t but 100% faith in their opinion of whether you do or do not need certain types of insurance, the information about the various types of insurance and products available is worth taking to the bank.  Plus, one guarantee you can have is that they won’t try and sell you anything…they don’t have any products!

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The only downside is that insurance commissioners, a little bit of what they offer is too much about the minimums.  In other words, the difference between legal and illegal.  Just because something isn’t illegal, doesn’t make it a good or ethical deal for you.  So, in those cases, I would say to make sure and find more information.  Use the information from the NAIC to judge the quality of other info that you do find.  These guys are the law, so anyone who says something that contradicts them is suspect at best.

One of the things they provide that many people find helpful is A Consumer’s Guide to Auto Insurance, which is a 20 page booklet about all things auto insurance, ranging from what no-fault means, to what the difference between the types of liability coverage are.

If you are confused about what kind of auto insurance coverage you need, or you want some help figuring out what kind of liability limits or deductibles you need, check it out.

Christmas is over, but the bills might not all be gone.  Plus, Uncle Sam is going to want his kickback, that’s taxes to you and me, by April.  Throw in a recession, and it is probably a good idea to look at saving some money.

If you’ve been through your budget and you don’t find anything out of whack (tip: if your cell phone bill is more than $60 and you aren’t a traveling salesman, it’s time to re-evaluate) then we need to pull out some less used tips.

Homeowner’s Insurance Deductible

The dirty secret about homeowner’s insurance is that filing claims will get you and your policy dropped by the insurance company.  Those same claims will keep you from getting a new insurance policy with another company.  Sometimes, as little as 3 claims in 2 years will get you dropped like a hot potato.

Since there is nothing you can do about how insurance companies behave, the next best thing is to work smarter within their system.  Only file large claims and use your savings to pay for the nickel and dime stuff like a few shingles blown off the roof.  Of course, if you aren’t going to be filing smaller claims, then you shouldn’t be paying for the coverage.

Raise your homeowner’s insurance deductible to at least $1,000.  Chances are a $1,500 or $2,500 deductible won’t lower your rates that much more, but check anyway.  Saving $10 a year to raise your deductible $1,000 doesn’t make much sense, but if you can save $50 or $100 then that’s something to think about.

If you are the very responsible type and you have the recommended 3 to 6 months of living expenses tucked safely away in an emergency fund that you never touch, you can even consider a $5,000 deductible which could significantly lower your home insurance.  But, do the math first.  It will likely only make sense if you have a high value home.

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Also, do a homeowner’s review with your company if you have made any improvements or security upgrades.  The new alarm system might be worth a discount.  The same goes for removing anything that raised your rates.  If you don’t have a dog anymore, make sure they know that too.

Be careful that your insurance agent doesn’t use your review to sell you other insurance, or even more home insurance.  You are there for home insurance only, and you don’t want to talk about life insurance, car insurance, or any other insurance, no matter how good of time it is, or how great the deal is.  You especially don’t care if rates are going up next month (a common insurance salesman line). 

Also, there is no need to insure your home for full replacement value.  Laws very from state to state, but generally, a homeowner’s insurance policy provides for 120% or so, of coverage should your whole house need replaced.  But, that kind of event is relatively rare.  Even if you have a fire, chances are you’ll be repairing the house, not rebuilding it from scratch.

Flood Insurance

A major mistake many homeowners make is not getting flood insurance.  Your regular home owner’s insurance does not cover flooding.  That includes not just a river flooding, but also a water main break, a broken pipe (outside the home), and many other issues.  If you live anywhere near a river, lake, or ocean, flood insurance is a no brainer.  But, don’t assume you are safe if you don’t.

Check your city planning office to find out where your home is located.  Residentially zoned areas are generally categorized by flood plain status.  If your home sits in a 100-year flood plain, you might risk it.  But, don’t assume a 50-year flood plain equals safety.  The statistics don’t quite work that way.  Check with an expert.