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Sure Ways to Save on Auto, Home Insurance

With most of us looking to cut corners every way we can during the recession, an often overlooked path to savings is closely examining our automobile and homeowners insurance. As "Early Show" money maven Ray Martin explains in this column, that could provide more in savings than you might realize.

According to an annual survey of Consumer Reports readers, many folks have stayed with the same auto insurer for 15 years. The insurance industry says this is a good thing. Some say that, if you stay with the same carrier for several years, you may receive a discount for being a long-term policyholder. But that may not always be best. Insurance companies can change their appetite for risk and their pricing over time. Depending on your profile and where you live, you might be able to save hundreds of dollars by shopping around every few years and asking for discounts.

If you haven't compared costs for your auto and home insurance in awhile, start with the
National Association of Insurance Commissioners' Web site and click on NAIC States and Jurisdictions to find your state's insurance department. Most states Web sites will provide comparative premium quotes, based on standard customer profiles. If your state doesn't, you can compare premiums from multiple carriers by using insurance Web sites such as InsWeb, Insurance.com and Insure.com, according to the Insurance Information Institute.

But shopping around is only the half of it - you also need to know the available discounts, and which coverage to decline. With the average cost of home insurance running at $1,200 a year and auto insurance costing $800 per year, smart shoppers who ask for and get all the discounts can save over 30 percent, which can add up to over $50 per month in savings.

WHERE TO LOOK FOR SAVINGS ON AUTO AND HOMEOWNERS INSURANCE

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Money-Saving Checklist for Your Home Insurance:

With real estate values in decline, don't be tempted to reduce the dwelling coverage on your home, figuring you will save money on insurance, now that your home will sell for less than when you last updated the coverage in your policy. Home insurance is designed to cover the cost of rebuilding a home and not the sale price of the home. Homeowners should be careful to purchase enough insurance coverage to completely rebuild their home and replace their belongings.

There are better ways to save money on home insurance, including:

Increase the Deductible: Consider a deductible of at least $500 or more. If you raise the deductible to as much as $1,000, you may save up to 25 percent on many home insurance policies. Some carriers allow you to raise the deductible to as high as $5,000. Since the average person only files a claim every eight-to-10 years, most homeowners will save money over time.

Ask about Home Security Discounts: Most home insurers offer at least a five percent discount for a smoke detector, burglar alarm or dead-bolt locks. Some companies may offer discounts of as much as 15 or 20 percent if you install a sprinkler system over your kitchen stove or a fire and burglar alarm that connects to a central monitoring station. Water level and leak-monitoring and automatic water shut-off systems can also garner a discount, in addition to being a great idea for a second home. But these systems aren't cheap, and not all of them will qualify for a discount. Before you buy, find out what your insurer recommends, and how much the device would cost as opposed to how much you'd save on premiums.

Buy All Policies from the same carrier: Most insurers that sell homeowners insurance also sell auto and excess liability insurance (An excess liability policy, also known as an "umbrella," provides additional liability coverage.) Many companies will reduce your premium by 10 - 15 percent if you buy two or more insurance policies from them; this is called a multi-line discount. But make certain this combined cost is lower than buying the policies separately from different companies.

Seek Additional Discounts: Ask your insurance company representative about any other discounts that may be available to you. For example, if you're at least 55 years old and/or retired, you may qualify for a discount of up to 10 percent at some companies. If you've modernized your plumbing or electrical system since the last time you updated your policy, tell your insurance company, and they may offer a price break. You may also pay less if your house is located close to a fire hydrant or in a community that has a professional, rather than a volunteer fire department. While many companies offer these and other discounts, they don't all offer the same types of discounts or the same level of discount in all states.

Finally, when considering home improvements, before you get too far into the project, ask your insurance company representative what you can do to make your home more resistant to natural disasters such as windstorms, floods, earthquakes. You may be able to save on your premiums by adding storm shutters, shatter-proof glass and reinforcing your roof. Also, consider modernizing your heating, plumbing and electrical systems to reduce the risk of fire and water damage.

Money-Saving Check List for Your Auto Insurance

Every state has financial responsibility laws for drivers that require them to buy a minimum amount of liability coverage. But resist the temptation to skimp on auto insurance costs by buying only what the law makes you purchase. If you do, you may end up paying significantly more out-of-pocket in the long-run. Most drivers should have more liability insurance than their state requires because accident damage claims generally cost more than the minimum limits. If you are found to be legally responsible for costs that exceed what your insurance covers, you will have to pay the difference, and these costs could be financially devastating. Also consider purchasing an excess liability (umbrella) policy. These policies provide coverage above and beyond the coverage in the underlying policy. For not a lot of extra cost - typically about $200 to $300 per year - you can get an excess liability policy with $1 million dollars in coverage.

Better ways to save on auto insurance costs include:

Increase Deductibles: As with home insurance, by requesting higher deductibles, you can lower your costs substantially. For example, increasing your deductible from $200 to $500 could reduce your collision and comprehensive coverage cost by 15 percent to 30 percent. Going to a $1,000 deductible can save you 40 percent or more.

Decline Unnecessary Coverage: People are driving their cars longer, so more folks could consider dropping collision and/or comprehensive coverage on older vehicles. A rule-of-thumb is that it may not be cost-effective to continue insuring cars worth less than 10 times the amount you would pay for coverage. Any payment for claims you received in excess of the deductible would not exceed your premiums. And if your car is worth less than $1,000, dropping collision and comprehensive coverage makes sense. Look up the value of your auto online at Edmunds or Kelley Blue Book.

Another thing folks can decline includes medical payments coverage - you are already covered for this if you have employer-provided health insurance.

Ask for Low Mileage Discounts: Some companies offer discounts to motorists who drive a lower-than-average number of miles per year. If you carpool to work, you may also qualify for these discounts. Typically, you will be asked each year to submit a completed odometer report and statement of use for each covered vehicle.

Ask about group insurance: Some companies offer reductions to drivers who get insurance through a group plan from their employers, or through professional, business and alumni groups and other associations. Ask your employer or any groups or clubs to which you belong.

Seek safe driver discounts: Companies offer discounts to policyholders who have not had any accidents or moving violations for a few years. Most insurance companies also offer a discount of up to 15 percent if you have recently completed a defensive driving course.

Some insurance companies are starting to use new technology to reward low-risk drivers. They offer to provide a small box that connects to the car's diagnostic port (which can connect to vehicles built in 1996 or later). The box gathers data from the car's on-board computer, monitoring when the car is on and capturing the speed per second. Using this data, the insurance company can tell if the vehicle is being driven late at night (when there is a higher risk of accidents from drunk driving) and if the driver is braking hard or accelerating suddenly (which are higher risk driving habits). Reports are that drivers with safe driving behavior can get discounts as high as 30 percent. But beware; Drivers who have more jackrabbit starts and sudden stops can be charged more.

When comparison shopping, consumers should inquire about all the discounts that may be available (depending on the state). To recap, these include discounts for higher deductibles, more than one car, no accidents or moving violations in three years, drivers over 50-55 years of age, defensive driving or driver training course, anti-theft devices, low annual mileage, safety features (such as air bags, antilock brakes, and daytime running lights), student drivers with good grades or living 100 miles or more away from home, auto and homeowners coverage with the same company, and being a long-time customer.

Finally: Before you buy a car, compare insurance costs. Your premium is based in part on the car's sticker price, the cost to repair it, its overall safety record, and the likelihood of theft. Many insurers offer discounts for features that reduce the risk of injuries or theft. These include air bags, anti-lock brakes, daytime running lights and anti-theft devices. Some states require insurers to give discounts for cars equipped with air bags or anti-lock brakes.

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