For one illustrative couple living in Philadelphia, annual premiums for
standard auto insurance coverage would range from $2,256 to $3,949 among
area companies, a difference of nearly $1,700 per year. Even with State
Farm, Pennsylvanias largest insurer, the annual rate would be $3,517$1,261
higher than the lowest rate we found.
If youve recently had an accident and have a male, teenage driver on your
policya nightmare for most insurers (and most parents)the rate differences
loom even larger: from $3,024 to over $8,000 per year.
These and other comparative rates, obtained from company websites, insurance
agents, and the New Jersey Department of Banking and Insurance, are shown
on our price comparisons for the largest insurers in the area, along
with details of the assumptions underlying the companies rate quotes.
It takes a little effort to shop for insurance. But it is easier these
days than it once was to get at least a reasonably competitive rate using
the insurance companies websites. Even if you have to request quotes by
phone from companies and agents, the effort is small compared to the potential
You wont want to give up having a company that will deliver quality service,
financial soundness, and a willingness to stick with you if you have an
accident or violation or two. But you dont have to. Such concerns are
not a reason to stand pat.
In this article, we will give you the background you need to shop successfully
and, on our price comparisons, and Ratings Tables, comparisons
of individual companies to help you focus your shopping efforts on the
The first step in shopping is to decide on the types and levels of coverage
that will keep your risk to an acceptable level, at a reasonable annual
premium cost. You will have to decide among a broad range of available
auto insurance coverage options. When thinking about how much coverage
to buy, try to keep in mind that the purpose of insurance is to protect
you from losses that you cant afford to cover yourself. When you buy more
insurance than you need, you are wasting money that simply goes to insurance
companies profits and administrative costs.
When you injure someone else or damage someone elses property, you may
be required by law to pay for the loss. Your home, your savings, and even
your future wages are vulnerable.
Liability coverage pays the amount of money for which you may be liable
for bodily injury and property damage to others, up to certain limits,
and covers legal fees incurred in your defense. Bodily injury claims can
include wage losses, medical expenses, rehabilitation costs, and pain
and suffering. Property damage can include damages to someone elses car,
building, or other property.
Your liability coverage will generally protect you, your spouse, other
members of your household, and anyone else who drives your car with your
expressed or implied permission. But any liability coverage you buy will
come with payout limits. If the damages for which you are found liable
exceed the limits specified in your policy, youll have to pay out of your
own pocket. It is up to you to decide the limits you are comfortable with,
keeping in mind that the higher the limits you choose, the higher the premium
The limits your insurance company will pay are usually specified in the
policy as a set of three numbers divided by diagonal lines. For example,
a 100/300/50 policy pays a maximum of $100,000 for bodily injury to one
person, a maximum of $300,000 for total bodily injuries when more than
one person is hurt in an accident, and a maximum of $50,000 for property
damage in a single accident. Some policies are simply written with a single
limit, say, $300,000, and will pay up to this limit even if only one person
is injured or if only property is damaged. Because of its greater flexibility,
single-limit $300,000 coverage is worth somewhat more than 100/300/50 split-limit
Since your insurance not only protects your assets but also ensures financial
relief for anyone you may injure, Delaware, New Jersey, and Pennsylvania
laws require you to buy at least a minimum level of liability insurance.
The minimums are 15/30/10 in Delaware and 15/30/5 in Pennsylvania. New
Jerseys minimums vary because there are two types of insurance policies
available: Basic and Standard. Basic insurance is a bare-bones policy
and requires only $5,000 in property damage liability coverage and no bodily
injury coverage. The Standard policy requires liability limits of at least
If you are considering driving without liability insurance, or if you are
considering a policy at the minimum coverage amounts, you should realize
that once you have driven without insurance or with low insurance coverage
levels, most companies will treat you as a person who takes unnecessary
risks, and will charge you very high premiums for future coverage.
Most drivers buy liability insurance and insure beyond the legal minimumperhaps
out of a social concern for the possible victims of their negligence or
perhaps out of a personal concern to protect their assets from catastrophe.
Individuals with substantial assets (or with expectations of substantial
assets in the future) have the strongest reasons to purchase sizable liability
coverage: they have the most to lose; they are the most attractive targets
for suit; and they may get the least sympathy from juries.
Although buying coverage with higher limits will cost more, the cost increases
are often modest. As Figure 1 shows, a policyholder with 100/300 bodily injury
liability coverage (and $500 collision and comprehensive deductibles, discussed
below) might expect to increase his or her total annual premium by only
about 12 percent by moving up to 250/500 coverage and might expect to save
only about 10 percent by moving down to 50/100 coverage. And for most auto
insurance buyers, doubling the limits of property damage coverage from
$50,000 to $100,000 costs only a few dollars per year. Most consumers consider
these extra costs a bargain for increased peace of mind.
If you want to protect your assets and future income from claims in excess
of $500,000, youll want to consider an umbrella policy. Such a policy
will give you liability protection in addition to that provided by your
auto and homeowners policies. In addition to protecting you from claims
by others for bodily injury and property damage, an umbrella policy will
protect you against suits for other types of injuries, such as libel, slander,
defamation of character, false arrest, and invasion of privacy, which are
not covered by your auto or homeowners policies. Before selling an umbrella
policy, many insurance companies will require you to increase the liability
coverages in your auto and homeowners policies to the maximum amount offered.
Collision and comprehensive coverage pay for repair or replacement
of your car, regardless of who is at fault. This coverage is not required
by law, but if your vehicle is financed, your lender may require you to
Collision coverage pays if your car rolls over or collides with an object,
including another car. Comprehensive coverage pays for damage to your car
from almost all other causesincluding vandalism, explosion, fire, wind,
and collision with animals. It will even pay if your pet chews the upholstery.
Comprehensive also pays if your car is stolen.
Both collision and comprehensive pay only up to the actual cash value
of your car. If you expect compensation for upgraded stereo equipment or
a special paint job or other unique feature, you will have to arrange in
advance for special coverageand pay an extra premium.
As the actual cash value of your car diminishes, the cost of comprehensive
and collision coverage declinesbut only declines significantly for the
first few years of the cars life. You pay about the same collision premium
for a 10-year-old car, for which if you had a complete loss your insurance
company would pay you almost nothing, as someone else pays to insure a
six-year-old car. Accordingly, collision coverage becomes an increasingly
wasteful purchase as your car grows old.
Collision and comprehensive coverages are sold with a deductible, a specific
amount you agree to pay out of your own pocket on a claim before you are
entitled to collect from your company. By taking a high deductible, you
protect the company from the paperwork of processing small claims and you
do so without exposing yourself to the possibility of catastrophic loss.
In general, the wisest way to manage your money is to take as a deductible
as large an amount as you can afford to lose without seriously disrupting
The considerable savings that can be made in this way are illustrated on
Figure 1. For example, the sample couple for whom we did the calculations
for Figure 1 would probably save about six percent off their total insurance
bill by increasing their collision and comprehensive deductibles from $500
to $1,000 but would add about seven percent to their total insurance bill
by reducing their deductibles from $500 to $250.
The virtues of substantial deductibles are more obvious when you consider
that you may not even want to file claims with your insurance company unless
damages exceed $1,000 or so. Filing small claims might lead a company not
to renew your coverage or might lead to higher premiums.
In Delaware, you are required to purchase personal injury protection
coverage (PIP), with a limit of at least $15,000 per person involved in
an accident and $30,000 per accident. Under this coverage, your insurance
company will pay medical expenses and loss of wages for you, your family
members, and your passengers resulting from an auto accident, regardless
of who is at fault for the accident.
In New Jersey, like Delaware, you are required to purchase personal injury
protection coverage. Under this coverage, your insurance company will
pay medical expenses for you, your family members, and your passengers
injured in an auto accident, regardless of fault.
If you elect to take a Basic policy authorized by the state, you are
required to take PIP coverage for medical expenses up to $15,000 per person
per accident and up to $250,000 for permanent or significant injury.
If you take a Standard policy in New Jersey, you have a number of choices.
You can take coverage limits for medical expenses as low as $15,000 or
much higher, up to $250,000 regardless of whether there is permanent or
significant injury (there is always mandatory coverage up to $250,000
if there is permanent or significant injury). You can also elect, for
additional premium, to get coverage for lost wages and to pay someone to
do tasks you ordinarily do yourself such as housecleaning and doing laundry.
With the Standard policy, you have the option of taking a deductible, which
will mean that you wont be able to collect on your PIP coverage until
expenses exceed the deductible amount. There is also an option to save
money by arranging to make your familys health insurance plan the primary
payer of medical expenses in the event of an accident.
In Pennsylvania, you are required to purchase at least $5,000 of medical
payments coverage. Under this coverage, your insurance company will pay
medical expenses for you, your family members, and your passengers injured
in an auto accident, regardless of fault.
You can choose more than the minimum $5,000 level of medical payments coverage
if you wish, and you can purchase related coverages, for income loss, accidental
death benefits, and funeral expenses. As an alternative to choosing all
of these related coverages separately, you can purchase combined first
party benefits coverage, which includes medical payments, income loss,
accidental death, and funeral expenses.
How Much Makes Sense
You can buy more than the minimum medical expense and PIP coverages, but
Most of the medical expenses that would be paid by medical payments coverage
or PIP coverage would be covered by the injured partys regular health
insurance. If you and your family have health insurance, the value of medical
payments coverage or PIP coverage is in filling in gaps in health insurance
(deductibles, copayments, etc.) and in covering medical expenses for your
passengers who may not have their own health insurance.
Increasing medical payments coverage to a high limit is relatively inexpensive,
and might make sense if you do not have health insurance, but you might
do better to put this money toward financing health insurance, since health
insurance coverage would protect you and your family from any disease or
injury that might befall you, not merely from injuries that involve automobiles.
Buying additional protection for income loss is relatively expensive. Since
such coverage will pay out only if you have lost income as a result of
an auto accident, again, youre probably better off putting this money
toward financing disability insurance, since disability insurance would
protect you from a wide range of disabilities in addition to disabilities
that involve automobile accidents.
New Jersey and Pennsylvania are called choice no-fault states. No-fault
refers to the fact that, if you live in one of these states, your own auto
insurance coverage provides protection to you no matter who is at fault
in an accident.
No-fault laws were established to help ensure timely attention to medical
costs for all parties involved in an accident, and to reduce the incidence
of lawsuits related to auto accidents. The laws in New Jersey and Pennsylvania
are such that the coverages you purchase for personal injury protection,
medical payments, and loss of income (described in the previous section)
will provide benefits to you and your passengers in the event of an accident,
regardless of who was at fault.
In both New Jersey and Pennsylvania (and many other states that have no-fault
laws), the guarantee that benefits will be paid regardless of who was at
fault is accompanied by a requirement that you give up some portion of
your rights to sue the other party. So when you purchase an auto insurance
policy in New Jersey or Pennsylvania, you will have to choose between buying
full-tort or limited-tort coverage.
Since Delaware is what is known as an add-on no-fault state, no-fault
coverage is added on to traditional tort coverage. In other words, if you
are injured in an auto accident, your rights to sue the other party (or
the other partys right to sue you) cannot be limited. So if you are a
Delaware resident, you wont have to decide between a full-tort or limited-tort
With full-tort coverage in New Jersey and Pennsylvania, you retain your
unlimited right to sue the at-fault party in an accident. With limited-tort
coverage, your rights to sue for pain and suffering and other non-economic
losses are restricted unless your injuries reach a threshold of severity.
In Pennsylvania, full-tort coverage is typically 20 to 30 percent more
expensive than limited-tort coverage; in New Jersey, full-tort coverage
often costs 50 percent more than limited-tort coverage.
Aside from the obvious cost considerations, it is difficult for us to recommend
whether you should choose a full- or limited-tort policy. On the one hand,
buying a limited-tort policy will save you considerably on your insurance
premiums each year. And limited-tort policies are meant to benefit all
consumers by eliminating lawsuits and therefore keeping premiums low for
On the other hand, buying a limited-tort policy essentially means that
if you were injured in an auto accident, you would be unable to seek full
compensation for pain and sufferingeven if the accident were caused by
another drivers negligence.
If you are the victim of an accident in which another driver is at fault,
you might expect to collect from that drivers insurance company. But despite
mandatory coverage laws, many drivers are uninsured. Also, even an insured
driver may be underinsured if your loss is large. If you are the victim
of an uninsured or underinsured motorist, you can turn to your collision
coverage (if you have it) for repairs to your car, or to your medical payments
or personal injury protection coverage for your medical bills. But you
will need other coverage if your losses exceed these coverages. Uninsured/underinsured
motorist coverage fills this gap if you can show that the other driver
was at fault or if you were the victim of a hit-and-run driver.
Neither Delaware nor Pennsylvania requires this coverage. New Jersey requires
this coverage at the 15/30 level on a Standard policy (its not required
on a Basic policy). In Pennsylvania, if you choose to buy this coverage
and have more than one car on your policy, you may choose to stack your
coverage. Stacking essentially pools your un/underinsured motorist coverage,
increasing your limits for any one car in an accident to the total coverage
for all your cars. That is, if you have 100/300 stacked coverage and two
cars on your policy, in an accident involving an un/underinsured driver
your policy would pay up to $200,000 per person and $600,000 per accident.
Stacking 100/300 coverage for two cars might be expected to raise your
total annual premium by about eight percent. All the reasons that argue
for higher limits on liability coveragewhere you are protecting someone
elsealso argue for high limits on uninsured/underinsured motorist coveragewhere
you are protecting yourself. The cost of increasing your limit from 20/40
or 25/50 for the personal injury portion of uninsured/underinsured motorist
coverage to 100/300 will generally be small.
For an additional premium, most insurers will broaden your collision or
comprehensive coverage to include reimbursement for the expense of a rental
car while damages to your car are being repaired.
Since just about all the auto insurance companies are shameless in promoting
rental car coverage, were guessing that it is a lucrative line of business
for them. Given that even a modest level of coveragetypically $30 per
day with a limit of $600 per claimusually costs $50 to $75 per year, our
advice is to decline it altogether, since the additional premium costs
over time are very likely to exceed the benefits you will collect.
Towing coverage will pay for the costs of towing; emergency road service
coverage will pay the labor charges for any repairs that can be made at
roadside (such as, changing a tire). Some companies offer only towing coverage,
others offer both towing and road service coverage together. Most companies
offer these coverages for about $10 to $25 per year, and a few companies
dont charge anything for towing coverage. Under many policies, this optional
coverage will reimburse you only for $25 per claim. But for $3 or $4 more
per year, you can get coverage for up to $75 per claim. Though towing and
road service coverage is inexpensive, an auto club membership that includes
towing and road service might be a better deal for you if you would use
other club benefits.
Recently, some insurers have begun to advertise new policy features such
as accident forgiveness. When considering these types of plans, be aware
that some can be useless, and others need to be carefully evaluated on
a cost-benefit basis before buying.
As an example, Allstate heavily promotes its accident forgiveness feature.
With this option, if you have an accident, your premiums will stay the
same. Considering that your premiums might increase by 12 percent to more
than 100 percent, depending on the company, as a result of having just
one at-fault accident, Allstates offer might seem like a pretty good deal.
Allstate actually offers a few different plans: one provides the accident-forgiveness
benefit after you have had a claims-free policy with the company for at
least five years; another plan provides the accident-forgiveness benefit
immediately, and also has a disappearing deductible feature, whereby
your deductible decreases by $100 for each year in which you do not have
To get either of these options, Allstate will charge you an additional
premium, starting right now. In essence, Allstate is trying to sell you
insurance not only against losses and claims you might experience because
of a future accident but also against future insurance-cost hikes that
might result from an accident. For our sample, 30-something couple with
totally clean driving records, with two cars and living in Lansdale, adding
Allstates basic accident-forgiveness option would cost an extra $54 in
premiums per year. That means our sample couple would pay $270 in extra
premiums over the course of five years before they could actually benefit
from the plan, and they would benefit after that time only if they had
an accident. To add Allstates accident-forgiveness-with-deductible-rewards
plan, which would provide immediate accident-forgiveness coverage, the
extra cost is $126 per year.
Is this immediate add-on to your insurance costs really worth it? If you
have a clean driving record, theres a very good chance you wont have
an accident that would cause your premiums to increase for a long time,
if ever. If you dont, this premium protection will do you no good. If
you have a poor driving history, the chances are higher that you will have
a future accident, but the price you will pay for accident forgiveness
will be much higher than the price increase for our sample couple. In any
event, you have to decide whether even a substantial increase in premiums
as a result of an accident or accidents would be a catastrophe for you.
If not, dont insure against it; insurance is to protect you from catastrophes.
Armed with a knowledge of various possible coverages, you can ask each
company you consider to give you a breakdown of its premium by type of
coverage and to quote premiums for different liability limits and deductible
levels. A typical annual premium quotation for a married couple with clean
driving records and two cars in the Pennsylvania suburbs might look like
Bodily Injury Liability$100,000/$300,000 $713
Property Damage Liability$50,000 $207
Medical Payments$5,000 $40
Un/Underinsured Motorist Bodily Injury$100,000/$300,000 $142
Comprehensive$500 deductible $71
Collision$500 deductible $578
Rental Reimbursement$30/day, $600 max. per claim $34
Towing/Emergency Road Service $13
What youll pay for insurance depends not only on the coverage limits you
select but also on your driving record; your age, gender, and marital status;
where you live; the kind of driving you do; your credit record; and other
factors. Knowing these factors will give you a sense of how warmly you
can expect insurance companies to greet your requests for coverage and
may also give you some ideas for changes you can make in your life to cut
your insurance rates.
Your driving record is very important. Industry data indicate that an individual
who has had two accidents in the past two years is almost two-and-a-half
times more likely to have an accident in the coming year than someone who
has had no accidents. Similarly, the accident rate for individuals with
two traffic convictions in a three-year period is twice as high as the
rate for those with no convictions.
It will come as no surprise, then, that your previous driving record will
have a big impact on the best rate you can get.
As you can see for the illustrative couple for whom we did the calculations
for Figure 1, if the husband had received just one speeding ticket in
the last three years, the couples rate would jump by $131 per year, on
average. With some companies, having only one speeding ticket wouldnt
have affected the couples premium, but with others, one speeding ticket
meant a penalty of over $500 per year. If the husband had two speeding
tickets in the last three years, the resulting premium increase was much
more substantialtheyd pay an additional $764 per year, on average.
Having a previous accident will be even more costly than if you just had
a speeding ticket. If the husband in the profile used for Figure 1 had caused
one accident in the last three years, our sample couple would pay an extra
$696 per year, on average. If hed caused two accidents in the last three
years, their annual rate would increase by almost $1,500double what the
couple would pay if they both had clean driving records.
Most companies consider the driving records of everyone who will be driving
your car or cars. Therefore, if you have a perfect driving record but your
spouse has had violations or accidents, you may not qualify for the preferred
rate. Different companies treat driving records differently for families
with more than one car. Some companies will charge a higher premium only
to the car driven primarily by the driver with violations and/or accidents,
while others will pool the points from the violations and accidents together
and spread them out over all the cars, or will assign the driver with the
worst record to the highest-cost car.
Men under 25 have the highest accident rates; after age 30, accident rates
are lower and fairly constant right up to age 65. Married men generally
have better accident rates than those who are unmarried. And women, especially
married women, do best of all.
This does not mean that women or older persons are better drivers than,
say, 25-year-old men. It is possible that their accident frequency may
be lower simply because they tend to drive fewer miles.
Nonetheless, low accident rates result, of course, in lower premiums. If
a company agrees to insure him at all, a single 17-year-old male can expect
to pay about four times as much as a 30-year-old male and twice as much
as his 17-year-old twin sister for comparable insurance coverage. Even
at 25, he can expect to pay about one-and-a-half times as much as his 30-year-old
A few of the common rating guidelines are as follows:
Young drivers will generally find that between the ages of 16 and 20 their
rates will be slightly reduced each year (so long as their driving records
remain accident- and violation-free), then will remain level between the
ages of 21 and 24. But a few companies offer married women adult rates
(which are relatively low) beginning at age 21.
Rates for single males age 25 to 29 are often the same as for those age
21 to 24. But single females in this age bracket may be classified as adults.
Married males in the 25-to-29 age bracket are often offered adult rates
and married females almost always are.
Most companies will classify single males as adults at age 30, but some
will continue to charge higher premiums up to age 49.
Rates for drivers over 64 are normally either the same as, or slightly
lower than, the adult rate. Some companies offer a senior discount
for persons as young as 50.
Since youthful drivers have especially high accident rates, companies have
sought various ways to identify better risks so that better rates can be
offered to attract these youths and their parents.
Many companies offer special rates, usually four to 10 percent lower, for
youths who have taken approved driver training courses. Studies have shown
that these courses do not make better drivers, but good risks simply
seem to take the courses; so driver training serves as a convenient screening
device for the companies.
Many companies also give a breakoften 10 to 20 percentto youths who have
good grades (usually B or better). The combination of discounts for driver
training and good grades may total 15 to 30 percent of a familys premium.
Most companies will also cut premiums dramatically if a youth goes to school
more than 100 miles away from home without taking a car. In addition, by
agreeing to restrict a youths driving to a single, less-expensive car,
a family may be able to cut the rates on other cars it owns.
Some areas present more chances for accidents, have higher incidents of
auto theft or vandalism, or have higher repair costs or medical and legal
charges than other areas. These differences sometimes result in auto insurance
rates that are more than twice as high in some parts of the Delaware Valley
area as in others.
Insurance companies charge more for insurance on cars that are relatively
expensive to replace, expensive to repair, or prone to damages or theft.
Some companies charge extra for, or refuse to insure, high performance
cars (Corvettes, for instance) because they think people who drive them
are likely to be less responsible than other drivers.
Table 1 shows vehicle-to-vehicle differences for one illustrative driver
we checked. For example, comparable coverage from GEICO might cost $710
for a Honda Odyssey and $1,012 for a BMW 530ia difference of over $300
per year. There are some vehicle types that tend to be relatively expensive
with all insurers, as you can see by looking at the rates for a Nissan
Maxima and the luxury sedan examples shown on Table 1, but the patterns
are not always consistent across companies.
|Ford Focus SE||1466||1160||1164||851||1157||1010||928||1029||816|
|Honda Civic EX||1357||1120||1124||813||1240||1114||898||979||844|
|Toyota Corolla DX||1378||1120||1106||761||1124||974||944||968||844|
|VW Jetta GLS||1347||1000||1007||851||1241||957||882||950||804|
|Chevrolet Malibu LS||1151||860||1106||876||1157||840||960||959||820|
|Honda Accord EX||1231||860||1113||813||1180||1024||998||939||844|
|Nissan Maxima SE||1348||1000||1119||941||1271||942||1174||1057||948|
|Toyota Camry SE||1123||920||1025||803||1100||877||1032||915||854|
|Cadillac Seville SLS||1188||1100||1030||876||1157||858||1064||1153||838|
|Lincoln LS Premium||1289||940||1148||908||1271||819||1080||1009||872|
|Ford Explorer XLT||1236||840||1018||868||1157||818||994||896||826|
|Honda Pilot EX||1080||900||1018||800||1061||901||1038||919||826|
|Jeep Grand Cherokee Laredo||1240||860||1066||829||1157||959||996||949||816|
|Dodge Grand Caravan SE||1108||780||1157||725||1042||852||918||938||778|
|Ford Freestar SE||1056||800||1050||710||987||858||902||876||780|
|Honda Odyssey EX||1068||720||986||710||1061||794||916||885||778|
|Toyota Sienna LE||1072||800||932||751||1077||816||954||899||788|
1 Prices are annual premiums for 2004 model years for the coverages and driver characteristics for a single female, age 29, living in Lansdale, PA.
2 Rates for Allstate were collected using its website’s “Ballpark” estimator. Rates include $100,000 of property damage coverage and $10,000 of medical expenses coverage.
Your insurance premiums may also be slightly reduced if your car has safety
devices or anti-theft features. For example, most companies give small
discounts for cars with four-wheel, anti-lock brakes; passive disabling
systems (which deactivate the cars ignition system when the key is removed);
and anti-theft tracking devices (such as LoJack). But keep in mind that
these discounts are usually very smalltypically only one to three percent
off the total premium.
In short, you will want to consider insurance costs when deciding what
vehicle to buy (and to some extent, how to equip it), but the impact of
your choice may be larger or smaller depending on which insurance company
you select. You can find information on relative insurance costs in The
Car Book, by Jack Gillis, which can be ordered from the Center for Auto
Safety at www.autosafety.org or by calling 202-328-7700. For information
on safety ratings, you can consult Consumer Reports and the Insurance Institute
for Highway Safety (www.iihs.org).
Costs are higher for drivers who use their cars heavily. Compared to a
driver who uses his or her car only for pleasure, one who drives to work
can expect to pay about two to five percent more for coverage, and one
to four more if the commute is more than 15 miles each wayand about 40
percent more if the car is regularly used for business. You might save
more than $250 per year in insurance costs by using public transportation
or by joining a car pool.
Companies also look at the number of cars they are insuring for a family.
The second car usually costs considerably less than the first because companies
assume you will drive each car less than you would drive a single car.
If you can show that the total mileage per year for your car is less than,
say, 12,000 miles or, better still, 7,500 miles, you might get a further
If you have had a lapse in insurance coverage at any time in the last five
years, including for non-payment of premium, expect your rates to skyrocket.
Insurers view potential customers who have had insurance lapses as high-risk
policyholders and most will not offer these potential customers their lowest
Similarly, many insurance companies will not offer their lowest rate programs
to potential customers who have recently maintained their liability coverage
limits below the 300/100/50 level.
If you are considering switching insurance companies, and have been loss
free with your current company for a while, you will want to consider
in the calculation any longevity discounts your company will be granting
you in the future. Many companies offer discounts of five to 10 percent
for three years of coverage without an at-fault accident and may increase
the discount at six years and nine years. Another benefit of longevity
is that your current company might examine your entire history with it
when deciding whether or not to re-assign you to a higher risk category
(and charge you higher premiums) if you have accidents, whereas a new company
might examine only your driving record in the last three years. Some companies
give accident forgivenessnot raising rates after an accidentto drivers
who have been with them five years or more and had no accidents. This is
different from the accident forgiveness policies, discussed above, that
are offered to new drivers for a price by some companies.
Many insurance companies offer lower rates if you insure both your car
and your home with them. Some knock off five percent, 10 percent, or even
more from either the auto rate or the homeowners rate; some knock off a
percentage from both.
From a consumers point of view, this dual-policy pricing is an undesirable
practice because it makes shopping more difficult; to find out the exact
savings you might realize by switching companies, you have to shop for
both types of coverage at once. But the discounts arent usually so large
that they have a major effect on the relative rankings of companies.
Another way insurance companies attempt to judge what kind of risk you
are is by looking at your credit history with one of the credit reporting
bureausEquifax, Experian, and TransUnion. Many companies have concluded
that consumers with poor credit histories are also more likely than others
to have claims.
Using complicated, secret formulas, insurance companies, or credit bureaus
on their behalf, calculate an insurance score that may be used to decide
what your rates will be, or even whether you will be covered at all. The
insurance score formulas are not the same as those used by lenders (such
as banks or mortgage companies) to calculate your credit score, but they
draw on the same types of data. The formulas vary from company to company,
since different insurers (or the scoring companies they use) weigh the
various factors differently.
The appropriateness of using credit histories in making insurance decisions
is a hotly debated topic among the insurance industry, consumer groups,
and state legislatures. Aware that there is risk of discrimination and
unfair treatment under such practices, many states have passed, or are
considering, laws designed to protect consumers by limiting the insurance
companies use of credit data. But in Delaware, New Jersey, and Pennsylvania,
companies are allowed to use credit data.
In Delaware, companies are required to obtain insurance department approval
prior to using credit information and the state puts some restrictions
on what credit data they may use. Insurers cannot use credit data as the
sole or primary source for setting rates, and insurers may not include
in the scoring outdated credit information, disputed accounts, credit report
inquiries made by insurance companies or anyone other than the consumer,
accounts coded as medical, mortgage inquires that are all made within a
30 day period, or the total amount of credit available to a consumer.
New Jerseys rules on using credit data for insurance purposes are similar
to Delawares, but also require insurers to notify customers of the practice,
the factors that affect the scoring, and whether an adverse event is
being considered in calculating insurance rates. Also, New Jersey bars
insurers from using credit data to raise rates for their existing policyholders,
so long as those customers have been with the company for at least seven
years and during that time have had no claims or violations.
In Pennsylvania, currently there are no laws addressing this issue.
Factors from your credit report an insurer might consider include:
Major negative items (bankruptcy, foreclosures, etc.);
Past payment history;
Length of credit history;
Inquiries for credit;
Number of open credit lines;
Type of credit being used; and
The impact of your credit history on the rates you might pay can be dramatic.
For example, when we queried several companies for an auto insurance rate
for a couple living in Lansdale who had poor credit, we were often quoted
premiums that were roughly double the rates if the same couple had excellent
Clearly, saving on insurance is one of many reasons that consumers need
to maintain good credit recordsfor example, by paying bills promptly,
not opening too many lines of credit, and keeping balances relatively low
on the lines of credit we do have.
You have two main considerations in choosing among auto insurance companies:
how much they charge and how good their service is. You may also want to
give some thought to a companys record on terminating policyholders, its
financial stability, and a few other factors.
Our price comparisons show annual premiums for several illustrative
profiles in several Delaware Valley area locations. The listed companies
account for the vast majority of business done in the region.
The rates for New Jersey were obtained from the states Department of Banking
and Insurances (NJDOBI) annual Auto Insurance Premium Comparison report
for 2007. Unfortunately, the NJDOBI did not issue its report for 2008,
since earlier in the year it overhauled its rules that set auto insurance
rating territories, and many insurers had not yet had their new rates approved.
But the rates shown for 2007 should still be useful, since companies relative
ranks usually dont change much from year to year, and since the new rating
territories likely wont drastically change how the companies rank in price
Our researchers obtained the rates for the illustrative profiles for Delaware
and Pennsylvania whenever possible directly from the companies websites.
Some companies did not have available online rate quotes or would not provide
an online rate to us; for these companies, our researchers called insurance
agents and, without disclosing their affiliation with CHECKBOOK, obtained
rate quotes over the phone.
As you can see, the company-to-company rate differences are dramaticannual
differences of hundreds of dollars in all cases, and over $1,000 in some
cases. The rates on our price comparisons will probably not apply to
you exactly; most readers will differ in location of residence, vehicle
usage, vehicle type, or other ways. But the rates will give you a good
starting point for your own shopping. Companies with low rates on our price comparisons will likely be excellent prospects for you.
When you have identified a few possible companies, you can begin shopping
on the Web. Many companies enable you to get quotes directly from their
company websites. Or you can check the companies websites or the Yellow
Pages to locate agents. You can then ask each agent for a price quotation
for the coverage you want. Before shopping, its a good idea to make a
list of the coverages you plan to purchase.
Some independent agents sell policies offered by many companies; so one
of these agents can give you quotes from various companies. But other companies
are not available through independent brokers or agents; to get these companies
rates, which often are the lowest rates available, you have to get a quote
from a company website or contact company agents directly.
If you will be contacting agents, you may have to push hard to get reliable
information from them. For our article on homeowners insurance, we found that many insurance agents
were inept at providing accurate price quotes and that some agents could
not correctly answer even the most basic questions about coverages. For
auto insurance, most of the agents we dealt with were able to quote accurate
insurance rates, but problems still exist. Some agents quoted wildly inaccurate
rates, while others persisted in attempting to sell more insurance than
we asked for or failed to mention the most attractive available plans.
Always ask an agent whether he or she has any other plans with better rates.
In addition to seeking out companies based on their relative rankings on
our price comparisons, you may want to try using one of the insurance
comparison websites. These sites tend to sound better than they are. Insweb.com,
for example, claims it will enable you to compare quotes from the most
respected names in the industry and lists about 20 participating companies
on its website. But when one of our researchers went through the process
of entering the detailed information necessary to get a quote from Insweb.com,
the site returned quotes from only four companies. On the other hand, we
have often found that among the few returned quotes, there is at least
one quote that is competitiveespecially if you use several of the comparison
sites. The sites we found most useful were
Most insurance companies write auto policies by assigning prospective customers
to a tier depending on their driving and credit records. When dealing
with agents, make sure you ask whether you qualify for the best rates companies
offer, and if not, why.
If you have so many accidents or violations that it is difficult for you
to qualify for coverage, you have the right to get insurance through your
states assigned risk plan (discussed below). Rates in the assigned risk
plan are often three times or more what youd pay for a preferred policy.
Companies actual underwriting practiceswhich drivers get the best rates,
which pay more, and which they wont insure at allare not publicly disclosed.
And they may include different factors.
You will want to consider price in relation to the quality of service you
can expect the different companies to provide. Probably the most important
type of service is claims handling. We give you three types of information
to help you evaluate companies service: a survey of policyholders, a survey
of auto body shops, and an analysis of complaints. Our Ratings Tables
contain our data on 17 companies or insurance groups rated by 10 or more
respondents in our survey of policyholders.
Our Survey of Policyholders
We surveyed CHECKBOOK and Consumer Reports magazine subscribers and collected
more than 1,700 ratings of individual insurance companies from policyholders
who said they had made an auto insurance claim within the preceding three
years. These consumers rated their companies inferior, adequate, or
superior for simplicity of claim procedures, adequacy of claim payment,
and other elements of service. Our Ratings Tables show what percentage
of policyholders rated each company superior on each of these elements.
As you can see from our Ratings Tables, there are big differences in
how companies were rated by their customers. For example, Amica Mutual,
Encompass, NJM, Plymouth Rock (High Point/Palisades/Teachers of NJ), and
USAA were all rated superior for speed of claim payment by more than
80 percent of their surveyed customers. In contrast, AIG got superior
ratings from only 52 percent of its surveyed customers. (For a further
description of our policyholder survey and how its results and our other
research results should be interpreted, click here.)
Asking the Experts: Auto Body Shops
As a second way to assess service quality, we surveyed area auto body shops,
asking them to name the two insurers they considered most desirable for
treating their customers (car owners) fairly and the two insurers they
considered least desirable.
Our Ratings Tables show the number of times each company was mentioned
(either favorably or unfavorably) by area shops and the percentage of the
mentions that were favorable. As you can see, Erie and USAA were highly
recommended by surveyed body shops. Nationwide and Progressive were most
often cited as least desirable. It is also worth noting that in each
of the seven metropolitan areas where we publish CHECKBOOK, Progressive
consistently was one of the lowest scoring companies on this measure (see
Another way to assess quality is to count policyholder complaints and to
look at each companys number of complaints in relation to its volume of
business. While customers might have rated a company less than superior
on our survey of policyholders even if the companys deficiencies were
minor, filing a formal complaint with a government regulatory agency presumably
reflects serious dissatisfaction.
On our Ratings Tables, we have reported counts of private passenger
auto insurance complaints filed in New Jersey and Pennsylvania for 2006
and 2007. (The complaint data for Pennsylvania are for only the 20 largest
insurance groups operating in the state.) We have also reported complaint
rates for each company. The complaint rates are intended to take into
account the fact that some companies do much more business than others
and therefore are more exposed to incurring complaints. The complaint rates
for New Jersey are calculated as the companies total number of complaints
per 100,000 auto insurance policies; for Pennsylvania, they are calculated
as the total number of complaints per $1 million in direct private passenger
auto insurance premiums written.
For New Jersey, the companies on our Ratings Tables with the lowest
complaint rates are NJM and Plymouth Rock (High Point/Palisades/Teachers).
AIG and Travelers have the highest complaint rates. For Pennsylvania, Allstate,
State Farm, and USAA have the lowest complaint rates among the 20 largest
companies; AIG, GEICO, The Hartford, and Metropolitan have the highest.
If the price is right and service appears satisfactory, your next question
will be whether you can be confident that the insurer will not terminate
your coverage or dramatically raise your rates because of accidents or
traffic violations. Termination by your company at best is inconvenient
and at worst can force you to pay rates hundreds of dollars higher when
you find a new company or enroll in a special plan for high-risk drivers.
There are certain legal restraints on termination in Delaware, New Jersey,
and Pennsylvania. It is relatively easy in all three states to cancel a
policy during the policys first 60 days while a company checks the accuracy
of its policyholders applications. Termination is then much more difficult.
Even at the time of renewal there are restraints and certain procedures
that must be followed.
In fact, except in cases of non-payment of premiums, termination is relatively
rare. Accordingly, we dont recommend spending more than an extra $100
or $200 per year to have a company with a particularly good record of sticking
by its policyholders through a string of accidents or violations. And you
shouldnt have to pay even that, since some of the lowest priced companies
get high ratings on our policyholder survey for their termination practices.
On the survey, we asked policyholders who had made claims to rate their
companies on not unreasonably cutting coverage. You can see the results
on our Ratings Tables. The table shows the percent of survey respondents
who rated each company superior on this question.
Of course, termination by a company is not the only disruption you might
experience. If a company raises your rates dramatically in response to
an accident or violation or two, you may be faced with having to terminate
on your own, or take a big hit to your budget. On our customer survey,
we also asked consumers to rate companies on not unreasonably raising
premium. That is the question on which most companies scored lowest. There
was big company-to-company variation, with over half of the companies rated
superior by less than 60 percent of their surveyed policyholders.
In shopping, you will want also to be alert to news of a companys financial
instability. You will not want to sign on with a company that may soon
have to cut many policyholders or raise prices sharply to stay alive. Nor
do you want a company that may go out of business soon, forcing you to
begin your shopping again. This is, of course, more of a concern now than
a few years ago.
On the other hand, there is no reason for great anxiety about insurer stability.
If a company goes bankrupt, policyholders may have to wait to recover money
owed them but generally are protected from major losses. A special insolvency
guaranty fund exists in every state with the duty to assess all insurers
doing business in the state on a pro-rata basis to pay off all outstanding
claims of an insolvent company and reimburse each policyholders paid-in
premium. There is a $300,000 limit on most covered claims, with no deductible,
in Delaware and Pennsylvania. Paid-in premium reimbursement is subject
to a $10,000 per policy maximum in Delaware and Pennsylvania, and in Delaware
there is a $100 deductible. In New Jersey, there is a $75,000 limit on
auto claims and paid-in premium reimbursement, with no deductibles.
You can check on a companys financial soundness using any of several sources:
You should be able to find copies of ratings from at least one of these
sources in the reference section of your local library. If you are unable
to find them, or if the ratings in your library are outdated, you can contact
the services directly. All four services will provide ratings over the
phone or on the Web. On the Web, you can learn about the specifics of the
rating criteria each of these sources uses.
Some individualsusually the young and those with records of accidents
or violationsfind it difficult to locate a company that will agree to
The only answer if you are one of these high-risk individuals is to shop.
Try several of the major groups and ask that you be considered for their
preferred, standard, or non-standard plans. Then try the special
publicly created insurance arrangementthe assigned risk planin each
state: the Pennsylvania Assigned Risk Plan (PA ARP), the Delaware Automobile
Insurance Plan (DAIP), and the New Jersey Personal Automobile Insurance
Plan (PAIP). These plans are open to licensed drivers who cant get coverage
through the regular market. An agent or broker contacts the plan on the
drivers behalf and drivers are then assigned to regular insurance companies.
Each company is assigned a pro-rata share of policyholders according to
its share of business in the state, and the policyholder pays the same
premium no matter what company he or she is assigned to.
Dont assume that because you have been turned down by one preferred
company you must turn to a high-risk company or the assigned risk plan.
Companies standards for accepting new policyholders vary widely and change
from day to day as their rates and volume of business change. To enhance
your chances, remind an agent that you or members of your family have other
business with a companyfor instance, a homeowners policy or automobile
policies for other drivers. On the other hand, dont stop shopping even
if you are accepted by a preferred company. Sometimes the high-risk companies
or the assigned risk plan offer better rates; the PA ARP has a clean risk
option with lower rates than its regular assigned risk policies. If you
must join the assigned risk plan at a very high price, try to get other
coverage after a year.
Delaware Department of Insurance
841 Silver Lake Boulevard,
Dover, DE 19904
New Jersey Department of Banking and Insurance
P.O. Box 471
Trenton, NJ 08625
Pennsylvania Insurance Department
State Office Building, Room 1701
Philadelphia, PA 19130