Some Insurance Costs CAN Be Lowered

Not surprisingly, insurance companies spend a lot of time and money processing claims and settling suits. So much so that the cost of these activities totals nearly a quarter of an auto insurance company's expenses.

How is this reflected in the premium you pay?

In several ways, actually. Legal costs are figured state by state, so that areas with large court settlements or expensive legal battles have these costs reflected in their rates. There are some states (like Alabama, for instance), where the practice of large jury awards for damages has made insurance premiums artificially high. The cost of battling insurance fraud is reflected in rates, too. In New York, for example, the cost of fighting insurance fraud has inflated the premiums of all drivers to the tune of about $200 per year.

And, in many no-fault states (a concept that was originally put into practice to lower administrative and legal costs by eliminating the need to assign "blame" in an auto accident) drivers carry higher-than-average insurance rates because of abuse. There, unscrupulous drivers who inflate medical costs or make false claims have led to higher premiums for all drivers.

But although all of these factors affect the rate you pay for your policy, there's little you can do to alter them (save moving).

Just what expenses can you change?

Well, there is one big one, and it has to do with those huge collision and comprehensive bills again. As we already saw, insurance companies pay out a lot of money on these policies. They're not big claims, so there must be a lot of them. And that means a big bill for administrative costs.

It would stand to reason that an insurance company wouldn't be too thrilled about spending money on processing a bunch of smallish collision and comprehensive claims. So much so that they're usually willing to give you a big break on rates for not bothering them with the small stuff.

It's called a deductible, and a small increase in the amount you're willing to pay on it can mean a big decrease in your premium. So consider upping that deductible to the highest level you can comfortably shoulder. Save the money, or put it towards a more cost-efficient policy, like liability.

Company operations.

Here's where the last 25% of your premium check goes. And it really doesn't seem like there's much you can do about it, right? After all, running a company costs money, and there's little a lone policy-holder can do to change that.

But (you knew there would be a "but") a lot of these costs (about half) go toward policy sales. And you can do something about that.

Insurance companies spend a lot on advertising, and a lot on sales staff, brokers, and agents. If you could bypass both these costs and get your get your policy "on the cheap", you'd cut out that entire part of your premium.

Well, guess what, you can, and you've already taken the first step. By looking for insurance information online you're already accessing the cheapest, most direct insurance source around.

By comparing for policy quotes online, you'll bypass the agent or broker (and their added-in fees!), while shopping quotes quickly and conveniently. Even better, if you apply with a online insurance shopping service, you can compare rates from multiple small providers in your area who aren't heavily advertised. (And who have one less expense to pass on to you as a result.)

Want to learn even more?

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