Young drivers can get some breaks on their insurance bill

THE BALTIMORE SUN

BEING YOUNG has many advantages, but getting a good deal on auto insurance isn't one of them.

Actuarial studies show that drivers younger than 25 are more accident-prone than older groups. And to compensate for the added risk, insurance companies will charge higher premiums - often 30 percent or more.

But there are some ways to lower the costs.

First, if you have been insured as a secondary driver of your parents' cars, you have an insurance history with a particular company and your initial rate may be lower than with a new company. After getting a quote, however, compare it with other insurers to find the best rate.

If you're shopping for a new car, contact an insurance agent for coverage estimates on specific models. High-performing vehicles with costly repairs and a greater likelihood of theft will be more expensive to insure.

Cars with such features as air bags and anti-theft devices may earn you discounts. Check with the Insurance Institute for Highway Safety (www.iihs.org) for your auto's safety ratings.

Another area where you can save is collision and comprehensive coverage, which reimburse you for damage to your car from events such as hail, fire, collision and theft.

Since collision and comprehensive rates are based on your car's market value (what you could sell it for) at the time of the claim, the coverage is essential for newer autos, especially if you are still paying off a car loan.

But you can lower this portion of your annual premium by 15 percent to 40 percent when you opt for a higher deductible, according to the Insurance Information Institute, a nonprofit industry resource.

Just make sure you can afford the extra cash outlay should you have to make a claim. With older vehicles that have depreciated considerably, you may want to drop collision and comprehensive altogether.

But where comprehensive and collision are optional, you should not skimp on liability coverage.

Liability insures against medical costs, lost wages and property damage that you cause someone else. Because lawsuits - not market values - determine these amounts, your coverage should equal the value of all your assets, including savings and property.

When you're just starting out, you may get away with state minimums. See www.iii.org/individuals/auto/a/stateautolaws for what is mandatory in your state.

"Most young people don't need high limits of liability because they don't have property or a lot of equity," says Ron Malham, a senior account agent with Allstate. "They're already paying for a little higher risk because they're inexperienced drivers."

But if you can afford it, a minimum of $100,000 per person and $300,000 per accident generally is recommended because lawsuits are unpredictable and your asset values may change.

Also, do not pass up uninsured and underinsured coverage, which protects you for losses when the other driver lacks insurance. According to the National Highway Traffic Safety Administration, hit-and-run accidents are up 15 percent over the past five years. And the costs for these policies are low.

Many insurers offer discounts to alumni and professional associations. Liberty Mutual, for instance, will cut premiums 15 percent to 20 percent for members of alumni associations of nearly 400 universities.

If you're in college, students with a "B" average or better may snag some savings, and graduates with four-year degrees are often eligible for discounts, too.

The list goes on, so check with your insurance agent, especially after life events such as marriage or the purchase of a home.

And make sure you don't buy services you already have, such as medical coverage (beyond what's state mandated) if you already have adequate health insurance.

Finally, drive safely. With Liberty Mutual, full auto coverage - liability, collision and comprehensive - on a 2000 sedan would cost a 28-year-old male in Chicago about $1,840 annually. With two at-fault accidents, that premium jumps 51 percent to $2,770.

E-mail Carolyn Bigda at yourmoneytribune.com.

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