Honolulu Star-Bulletin Business

Honolulu Star-Bulletin Business
Avoiding AUTO INSURANCE pitfalls

Forget the Legislature!
You can reform your own bills
by following these tips

By Rick Daysog
Star-Bulletin

IF you're like a lot of drivers in Hawaii, you're probably still waiting for the 30 percent reduction in auto insurance premium promised by state lawmakers over the past three years. With efforts to reform Hawaii's costly no-fault auto insurance stuck in legislative gridlock, the promise has been an empty one so far.

But isle consumers don't have to wait for their elected officials to slash their premiums - they can cut a lot of their costs themselves. By following a handful of simple but prudent steps, drivers can shave off hundreds of dollars from their annual auto insurance bill, according to Bob Hunter, director of insurance for the Consumer Federation of America and former Texas insurance commissioner.

What's more, these strategies don't require the kind of radical changes to Hawaii's auto insurance system - such as eliminating consumers' right to sue or repealing Hawaii's 24-year-old no-fault law - that lawmakers have proposed.

Here's a snapshot of what you can do to cut your insurance bills:

Shop around

Premiums differ from company to company and calling around for the best rate can save a driver hundreds of dollars each year.

According to a list compiled each year by the state Insurance Division, a Travelers Indemnity Co. customer with a clean driving record will expect to pay $554 a year in premiums, which is one of the cheapest policies in the state. By contrast, an Allstate Insurance Co. policyholder with a clean driving record will pay up $923 a year in premiums, according to the state.

In the past, many insurers and agents were reluctant to give out quotes over the phone, let alone write a new policy. But now, insurers are "hungry for business" given that profits have improved, said Tim Dayton, local manager for Geico.

Drive carefully

A single speeding ticket can make a big difference in your premiums. For instance, Liberty Mutual Insurance Co. charges policyholders with a clean driving record about $656 a year in premiums, according to the Insurance Division's annual list. But Liberty Mutual customers with one speeding conviction will have to pay $809 a year in premiums, according to the state. That's a difference of more than 23 percent.

Traffic accidents are also costly. A drivers who causes a fender-bender can expect to see his or her premiums increase as much as 40 percent, said Val Keckin, president of the Keckin Group, which coordinates group policies for the Hawaii Carpenters Union.

Check out direct sellers

Companies like Geico and USAA sell policies directly and not through independent insurance agents. That way, those companies can offer more discounts since they're not paying the traditional 10 percent commission to agents, said Hunter.

Opt for higher deductibles

A deductible is the amount that's paid by the policyholder in cases of auto accidents or damages or theft to a vehicle. The higher the deductible, the higher a driver's out-of-pocket expenses. It also means a lower premium.

Dayton of Geico recommend customers opt for a deductible in the personal injury protection portion of their policies. Personal injury protection, or PIP, covers medical costs, funeral costs and lost wages for drivers, car occupants and pedestrians who are injured in auto accidents.

PIP deductibles typically range from $100 to $1,000. With a PIP deductible, the driver agrees to pay his or her initial hospital bills in case of an accident. Most of the hospital bills are then picked up by local health care providers like HMSA and Kaiser under the state's prepaid healthcare plan, Dayton said.

To put the savings into perspective, a consumer with a clean driving record who opts for a $100 PIP deductible under a policy at TIG Insurance Co., can expect to see a 10 percent reduction in his or her overall premium, said Keckin. A $300 PIP deductible could lower overall premiums by 20 percent while a $1,000 deductible could mean savings of 33 percent, Keckin said.

Comprehensive, collision

If you drive an old car that's fully paid for, it might not make sense to pay for optionals such as collision coverage or comprehensive coverage, which insures vehicles in case of flood, fire or theft.

If your car is totaled in an accident, the insurance companies will pay for what the car's worth, not how much it's insure for. Let's say an accident caused more than $3,000 of damage to your car which is only worth $2,000, all you are going to get is $2,000 from the insurance company.

For newer cars, a deductible for collision coverage could save consumers considerable money over the long term. While it's convenient to let your insurance company pay for small fender benders that you may have caused, those types of accidents add up add in premiums you have to pay over time.

"If you report every fender bender in which you're at fault, your rates are going to skyrocket," said Bill McGuire, an editor and insurance expert at Consumer Reports.

Look for other discounts

Some companies like AIG Hawaii Insurance Co. and TIG Insurance Co. specialize in offering group discounts to members of organizations like labor unions and credit unions. Some insurers also offer military families a special discounts.

Safety features in a car - like front-seat air bags, automatic seat belts and anti-lock brakes - may also qualify for discounts.

Families with good driving records and those with two or more cars also are eligible for discounts with some insurers while teenage drivers can qualify for good-student discounts with some insurers, according to State Farm Insurance Co.

Know your car

Obviously, it's going to costs much more to insure a Mercedes or a BMW than a Ford Escort. But premiums also are higher for models that are costly to repair, frequently stolen or offer less crash protection, State Farm said.

"When you buy a car you have to look at the total costs involved," said Hunter. "If you buy a Porsche, don't be surprised when you have to pay a lot for insurance."

Cover me

Here's the amount and type of coverage that all Hawaii drivers must have under their basic no-fault auto insurance policy:
Personal injury protection: Drivers must purchase $20,000 of coverage of personal injury protection. This covers medical costs and wage losses for the driver, a car's occupants and pedestrians who are hurt in a traffic accident, regardless of who caused the accident.
Bodily injury: Drivers must carry $25,000 of this coverage under their policy. Bodily Injury coverage protects the driver if they are at fault in an auto accident and they injure an occupant in another car. This coverage protects the at-fault driver in case of a lawsuit. Some insurance agents recommend drivers with significant assets buy above the legal minimum to protect their holdings.
Property damage: Drivers must carry $10,000 of this coverage. This covers any damage the policyholder may cause to someone's property due to negligence. Again, insurers often recommend affluent drivers buy coverage above the required minimum to protect their assets.
These types of coverage are optional in Hawaii:
Comprehensive: This covers damage due to flooding, fire, theft and vandalism. Protection for your car is optional but is usually required by lenders for cars that are being financed.
Collision: Covers repairs and replacement costs for cars damaged in auto accidents, whether it's moving or parked.
Uninsured motorist: This coverage protects policyholders in case they are hit by an uninsured driver. Many recommend this coverage since one-fifth to one-third of all Hawaii drivers drive illegally without no-fault insurance. Many of uninsured drivers don't have significant assets to pay for damages in case they were at fault and injured another driver or pedestrian.
Source: State of Hawaii, Geico, the Keckin Group

Forget the Legislature! You can reform your own bills by following these tips