Knowing ins, outs of auto insurance can save money

• Tips on lowering insurance costs

By Deborah Adamson
Advertiser Staff Writer

Talk to people about their cars, and they likely can tell you if they have a four-wheel drive, an automatic transmission or good mileage.

But ask them about their auto insurance, and you'll probably get a quizzical look.

According to a national survey by Progressive Insurance, almost all new car owners know more about the features of their vehicles than about their bodily injury liability coverage. Further, almost a third of those surveyed didn't know how much they paid for car insurance.

Too many drivers are confused about auto insurance, and that's the case in Hawai'i, as well.

"Most people don't know the ins and outs of their policy," said Mike Onofrietti, an AIG Hawaii vice president. "I think that's true everywhere."

Local insurance agents say that customers walk into their offices asking for full coverage, but not knowing what it means. Often, the agent has to explain the basics of insurance, and do it in about 15 minutes because the customer can't stay too long. Customers usually end up getting the cheapest policy and bare-bones coverage.

But there are ways to save on your premiums and still get the coverage you want: Learn what you need in a policy, know the discounts you qualify for and be prepared to shop around for the best deal.

Getting the right amount of coverage is important. The risk of minimal coverage is that it could wipe out much of your assets, said Janet Bamford, author of "Smarter Insurance Solutions."

"If you put somebody in the hospital, you could run through $25,000 in three days," she said.

In Hawai'i, each motorist must carry:

• Bodily injury coverage of at least $20,000 per person, up to a maximum of $40,000 per accident.
• Property damage covering a minimum of $10,000 per accident.
• Personal injury insurance of at $10,000 per individual. If your car is financed, the lender usually requires higher levels of coverage, said J.P. Schmidt, state insurance commissioner.

But Bamford said the requirements imposed by the state are much too low. She recommends at least $100,000 per person, $300,000 per accident for bodily injury and $50,000 for property damage.

To understand your auto insurance policy, think about it as many policies rolled into one, Bamford said. You can drop some types of coverage to save money, and you can add others according to your needs.

First, the state requires you to have liability coverage, which protects assets such as your house or condominium if you're sued in an accident. There are two types of liability coverage: Bodily injury and property damage.

Since 1998, Hawai'i has not had a minimum requirement for medical bills, lost wages and related costs that drivers need to accumulate before they can sue each other. But there is a $5,000 deductible.

Bodily injury covers medical expenses and other costs related to being incapacitated by an accident for everyone in your car, Bamford said. If you're at fault, this insurance also covers medical costs of the occupants of the other vehicle. These two components make up about half of your insurance premium.

The other major portion of your auto insurance is collision and comprehensive. Hawai'i, along with other states, doesn't require that you carry this coverage. However, your lender might, Bamford said.

Collision covers repairs to your car or the cost of replacement it if it's totaled. Comprehensive covers you if your car is stolen or if it is damaged in ways other than from a collision, such as if a tree falls on it.

Don't skip uninsured or underinsured motorist coverage. If an uninsured driver without assets hits you, you're on your own unless you are covered.

Estimates in Hawai'i of uninsured motorists range from 8 percent to 19 percent of drivers, Schmidt said.

Remember that the $10,000 per person required for personal injury insurance coverage pays for medical costs, funeral expenses and some lost wages. In this state, the coverage kicks in before your own medical insurance in the case of an accident, Onofrietti said.

Reach Deborah Adamson at dadamson@honoluluadvertiser.com or 525-8088.

Tips on lowering insurance costs

If you want to boost your coverage but minimize your premiums, here's what to do:

• Raise your deductible. One family with a GEICO policy for two cars was able to raise its deductible from $250 to $1,000 and quadruple its coverage. The six-month premium rose by only $100, or $17 a month.
• Consider dropping comprehensive and collision, if you have a car that's at least 10 years old. This coverage pays to repair or replace your car if it's damaged or stolen, but insurance only pays up to the car's market value. To get an idea of what your car is worth, check Kelley Blue Book at www.kbb.com. One rule of thumb: If your insurance payment is higher than 10 percent of the value of your car, it may be time to get rid of comprehensive and collision, said Janet Bamford, author of "Smarter Insurance Solutions."
• Keep a good driving record. The best discount to get is for safe driving. At AIG Hawaii, if you've had a good driving record for three to six years, you may qualify for discounts ranging from 8 to 22 percent, said Mike Onofrietti, an AIG Hawaii vice president. If your vehicle has airbags, anti-lock brakes, automatic seat belts and other safety features, you could receive more discounts.
• Insure more than one car. Negotiate for lower premiums if you are seeking coverage for a second car.
• Use the same insurer for your other policies. Consolidating homeowners coverage with your car insurance coverage usually lowers your costs.
• Check for group discounts. Call any associations, groups or programs you belong to that negotiate lower rates for members. These include teachers groups, unions, AAA and mileage clubs.
• Shop around. There are many auto insurers in Hawai'i. Get an insurance broker to search for the best deal and coverage.
• Choose cars that cost less to insure. The least expensive to insure in 2004 are the Oldsmobile Silhouette, Pontiac Montana, Saturn SL, Chrysler PT Cruiser and Saturn SC, according to Progressive. The most expensive are the Dodge Viper, Acura NSX, Jaguar XKR, Porsche 911 and BMW M5.