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Posted: 1:15 p.m. Friday, Jan. 21, 2011

Best auto insurance rates go to those who shop around

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The Detroit News reports insurance premiums have declined 5 years in a row. I can't remember a cycle like this ever. Of course, not everybody has had a decline -- you may have added a young driver to your policy or had an accident or a ticket. Or maybe simple inertia has kept you put with your insurer even though your rate has gone up.  

Overwhelmingly, people do not shop for auto insurance. But Consumer Reports finds that most people who shop around will have a very good chance of saving money. Not everybody, of course. But most people. When is the last time you shopped your auto insurance rates or checked your coverage?

Some insurers, in states where it is permitted, will raise your rates based on your credit score. So if your credit situation has changed for the better by an appreciable amount, it is to your advantage to go shop around.

Very often I'm asked when is the right time to drop comprehensive and collision coverage on an old vehicle. The general rule is when the cost of comp and collision exceeds 10% of your old vehicle's value, that's the time to dump it and just have liability coverage. You can determine your vehicle's value at Edmunds.com, KBB.com and NADA.com.

So let's take a simple example. Say your vehicle is worth $4,000. If you're paying anything more than $400 annually (that's 10% of $4,000) for comp and collision, it no longer makes any financial sense. One notable exception to this rule: If there's no way you could financially cover the loss of your vehicle, forget the math and keep paying for comp and collision.

Finally, you should always opt for a $1,000 deductible for the best savings on your policy. At that level, you'll pay a lower premium and won't be tempted to file any small piddling claims.

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