By Richard McGrath, CIC, LIA
Until recently, Massachusetts was the only state in the country where the insurance commissioner set rates. As a result, it hardly mattered where you bought your auto insurance. Thanks to the introduction of a competitive market for auto insurance, Massachusetts consumers now have the freedom to choose the auto insurance that best suits their needs. So, how can you take best advantage of today’s competitive market?
Analyze Your Needs
The first step toward saving money is to analyze your insurance needs.
Competition should mean lower rates for most drivers, but it’s also important to know what you’re buying. Not all insurance is the same. To keep prices low, some carriers will provide bare-bones coverage that does not meet your needs. Cheap insurance is only cheap until you file a claim and find that you don’t have adequate coverage.
Your insurance agent should provide you with a thorough analysis of your needs. For example, someone driving a car of little value may not need collision coverage; while a safe driver who is unlikely to have an accident may opt to save money by having a high deductible.
Once you understand your needs, consider any discounts that may be available for a policy that meets those needs. Insurance companies competing for your business may offer a variety of discounts or special features, including:
- Discounts for placing all of your insurance with one carrier;
- Loyalty discounts for sticking with the same auto insurer;
- Full replacement coverage for new cars that are stolen or totaled;
- Accident forgiveness and loss-free discounts.
The next step is to identify which insurance cattier can provide the best protection at the best price. Take your time. Don’t think you can get the coverage you need by spending 15 minutes comparing prices online. Know what’s covered – and what should be covered -to provide you with the protection you need.
Improving Your Driver Rating
Long-term, you can also reduce your costs by improving your driver rating. Your rating, which is used to calculate your premiums, is based on many factors, including your driving record, where you live, the type of car you drive and more.
It costs more to insure cars that are expensive to repair or that are more likely to be in accidents. If you drive a luxury car or a sports car, you will pay more than if you drive a family car. Likewise, if your car is kept in a city or other location with a high incidence of accidents, your premiums will be higher than if you live and work in the suburbs.
Your driving record, of course, can have an even greater impact on your insurance premiums. Major accidents where you’re at fault and traffic violations can increase your premiums for six years.
Many people know their insurance will cost less if they drive safely, but few people understand how the Massachusetts surcharge program works. There are really two programs at work – one that rewards safe driving and one that penalizes unsafe driving.
Safe drivers can qualify for either an excellent driver discount or an excellent driver “discount plus.”
The excellent driver discount plus rating lowers your premiums by 17% on three of the four compulsory coverage areas, plus collision. To be eligible, you can have no violations in the past six years that would result in a surcharge.
The excellent driver discount lowers your premiums by 7% in the same areas as the “plus” discount. To be eligible, you must have at least five years of driving experience and no more than one minor traffic violation during the past five years; the violation must be at least three years older than the date the policy begins.
Conversely, unsafe driving is penalized based on a surcharge plan. A major traffic violation, such as driving under the influence, adds five points; a major accident in which you are at fault and are responsible for a claim of more than $2,000 adds four points; a minor at-fault accident resulting in a claim of $500 to $2,000 adds three points, and a minor traffic violation, such as a speeding ticket adds two points.
Each point increases premiums by 7.5% for drivers with less than six years of experience and by 15% for drivers with six years of experience or more.
If you’ve driven safely for five years and have an incident in the sixth year that would normally result in points, no points will be charged. Likewise, no points are charged for the first non-criminal minor traffic violation in the five years preceding the effective date of your policy.
Three years of safe driving can also help. If you have no more than three incidents resulting in surcharges over the past five years, the point value of each will drop by one when you have three years of incident-free driving.
When you consider that a single count of driving under the influence can increase your premiums by 75%,while a safe driving record can lower them by 17%, it should be no surprise that the best way to save money on your auto insurance is to drive safely.
Richard A. McGrath, CIC, LIA is President and CEO of McGrath Insurance Group, Inc. of Sturbridge, Mass.He can be reached at firstname.lastname@example.org.
This article is written for informational purposes only and should not be construed as providing legal advice.