Navigating Auto Insurance: Strategies To Avoid Costly Premiums

Auto insurance is a necessity for drivers, but it can be costly. While some people may consider foregoing it, this is illegal in most states and can lead to serious financial consequences in the event of an accident. To avoid paying high premiums, there are several strategies drivers can employ, including shopping around for the best rates, taking advantage of discounts, improving one's driving record and credit score, and adjusting one's coverage. Additionally, it is important to be aware of auto insurance fraud, which can cost unsuspecting drivers.

Self-insured auto insurance: In some states, you can be self-insured by posting a bond or cash deposit

Self-insured car insurance is an option in some states, allowing vehicle owners to assume all responsibility for protecting their car and any financial risks resulting from losses. This means that instead of paying an insurance company, you absorb all costs related to accidents, theft, or liability.

To self-insure your vehicle, you will need to follow the protocols of your state's DMV, if it allows self-insurance. You will also need to prove that you have the finances to cover a loss. This can be done in two ways:

Posting a Bond

You can purchase a surety bond that guarantees you will cover the costs (including both bodily injury and property damage expenses) if you are at fault in a car accident. In this case, you buy a bond from a financial institution that fronts the funds for you. For example, if the state requires $30,000 of liability coverage, you will pay a fraction of that amount to the institution. When you cause an accident, the bond will pay for the damage upfront, and you will be responsible for repaying the financial institution.

Cash Deposit

You can make a cash deposit with the Department of Motor Vehicles (DMV) or state Department of Insurance. You will set up a special account with the state that is used only in the case of an auto accident. This covers your liability, the damage, and any injuries you may cause to other drivers. The amount of money you are required to put in the account will vary from state to state. For example, if your state requires $20,000 of bodily injury insurance per accident and $10,000 of property damage insurance per accident, you would need to deposit $30,000 into the account.

It is important to note that self-insurance is not the same as simply not having insurance. Self-insurance is only viable if you can cover state liability limits yourself, and you must submit proof of your net worth to show that you have enough cash to pay for any bodily injuries or damages in the event of an accident. The amount of money set aside in your bank account for car insurance must be at least the amount the state requires.

No insurance requirements: In New Hampshire, auto insurance isn't mandatory, but you may face penalties if you cause an accident

In New Hampshire, auto insurance is not mandatory, but that doesn't mean you should avoid it. While the state doesn't require you to have insurance, if you cause an accident, you will be liable to cover the costs of any resulting property damage and medical bills. This is because New Hampshire is an at-fault state. So, if you choose to go without insurance and cause an accident, you will have to pay those costs out of pocket.

The state does, however, require proof of financial responsibility. This means that if you opt out of purchasing auto coverage, you need to show that you could pay whatever costs might be incurred by another driver if you are found at fault for an accident. If you can't prove that you could pay up to those limits, you'll be required to purchase auto insurance.

If you don't meet those financial responsibilities after opting out, your driving privileges will be suspended. You'll also face suspension if you can't provide proof of insurance or the ability to pay for treatment of up to $50,000 in injuries and repair of up to $25,000 in property damage after causing an accident.

The best way to cover these costs is to carry insurance. The New Hampshire Department of Safety strongly recommends that all owners of motor vehicles carry standard liability and property damage insurance. The minimum car insurance limits for those who purchase coverage in New Hampshire are:

• $25,000 in bodily injury coverage per person
• $50,000 in bodily injury coverage for an accident involving multiple people
• $25,000 in property damage coverage
• $1,000 in medical payments coverage to pay your own medical bills in an accident

While auto insurance is not mandatory in New Hampshire, it's essential to understand the risks and requirements if you choose to go without it. Causing an accident can result in significant financial strain, and you will be responsible for covering the costs if you are at fault.

Avoid fraud: Be cautious of scams like staged collisions, fake insurance agents, and inflated repair bills

Staged automobile accidents, fake insurance agents, and inflated repair bills are all common fraud schemes in the auto insurance industry. Here are some ways to avoid becoming a victim of such scams:

Staged Collisions:

• Be cautious in urban areas with a high volume of vehicles and in wealthier communities, as these are common targets for staged accidents due to the perception of better insurance coverage.
• If you're driving a new, rental, or commercial vehicle, be vigilant. Criminals often target these types of vehicles because they are more likely to be well-insured.
• Be aware of common schemes like the "Left Turn Drive Down" or "Right Turn Drive Down" scams, where criminals manipulate traffic situations to make it appear as if you are at fault for an accident, leading to fraudulent insurance claims.
• If an accident situation seems suspicious or too convenient, note the details, take photos or videos, and report it to the authorities or organizations like the National Insurance Crime Bureau (NICB).

Fake Insurance Agents:

• Be wary of 'ghost broker' insurance scams, where fake insurance agents offer seemingly attractive deals but provide false or invalid insurance policies.
• Always verify the legitimacy of any insurance agent or broker before purchasing a policy. Check their license, registration, and reviews from other customers.
• Deal only with reputable and established insurance companies. If something seems too good to be true, it probably is.

Inflated Repair Bills:

• After an accident, be cautious of repair shops that encourage the use of inflated repair quotes. Get multiple estimates from trusted mechanics to ensure the quoted price is in line with the actual damage.
• Report any suspected fraud to the relevant authorities and insurance companies.
• Stay informed about common repair costs and be cautious if a repair shop provides unusually high estimates compared to industry standards.

Reduce coverage: Consider dropping collision or comprehensive coverage for older cars with low value

If you're looking to reduce your auto insurance costs, one option is to reduce your coverage by dropping collision or comprehensive coverage for older cars with low values. Collision coverage pays for repairs to your vehicle if you collide with another object, such as a car, guardrail, or tree. On the other hand, comprehensive coverage pays for car theft and damage caused by vandalism, storms, floods, fire, falling objects, or collisions with animals.

• Your vehicle's value: If your car is worth less than a few thousand dollars, the cost of coverage may outweigh the benefits. Consider the potential insurance payout after accounting for your deductible. If the payout is low compared to the cost of coverage, it may not be worth keeping.
• Ability to cover repairs: If you have enough savings to cover potential repairs, you may want to drop collision or comprehensive coverage. This is especially true if you have a high deductible, as the insurance payout may not be much higher than what you'd pay out of pocket.
• Driving status: If your vehicle is not currently being driven and is kept in storage or garaged, you may consider dropping collision coverage. Comprehensive coverage can still be useful to protect against theft, vandalism, fire, or weather-related damage.
• Alternative coverage: If your vehicle is insured on a family member's policy that includes collision and/or comprehensive coverage, you may not need separate coverage. However, your vehicle usually needs to be garaged at their residence to be covered under their policy.
• Vehicle age and replacement parts: Older vehicles with significant depreciation may not be worth the cost of collision or comprehensive coverage. Additionally, consider the cost of replacement parts, as expensive parts can easily exceed your deductible.
• Financial considerations: If you own the car outright and have the financial means to buy a new car if needed, you may opt to drop collision and comprehensive coverage to lower your insurance payments.

It's important to carefully weigh your options and consider your specific circumstances before making any decisions about reducing your auto insurance coverage.

Shop around: Compare quotes from multiple companies to find the best rates and discounts

Shopping around for auto insurance is one of the best ways to find the best rates and discounts. Comparing quotes from multiple companies can help you find the most suitable policy for your needs.

Firstly, it's important to decide on the coverage you need. Most states require drivers to carry a minimum amount of liability coverage, and a minimum-coverage policy is usually the cheapest type of plan available. However, there are other factors to consider. For example, if your vehicle is newer or leased, you may be required to carry additional coverage, such as comprehensive and collision coverage.

You can obtain online quotes from multiple insurers, and your driving record and annual mileage will influence the quotes you receive. When shopping for quotes, consider your state's minimum coverage requirements, as well as your car's mileage and features, which may require additional coverage. You can also research various insurers by reviewing their customer service, claims handling, and overall reputation, and don't forget to check for available discounts.

It's also worth getting quotes from different types of insurance companies. Some sell through their own agents, while others sell through independent agents who offer policies from several insurance companies. By comparing quotes from multiple companies, you can find the best rates and discounts that match your coverage needs.

Additionally, don't shop by price alone. Ask friends and family for recommendations, and contact your state insurance department to find out if they provide information on consumer complaints by the company. It's also important to pick a financially stable company, so check the financial health of insurance companies with rating companies such as AM Best and Standard & Poor's.

Remember, when comparing quotes, ensure you are comparing the same types and levels of coverage to get an accurate comparison.

Frequently asked questions