6 steps to better, cheaper car insurance

The National Association of Insurance Commissioners, or NAIC, recommends that consumers review car insurance policies every year. Yet, only 20 percent to 35 percent of people actually do so, according to the NAIC.

There are many benefits to annually reviewing your car policy. Either you'll confirm that you have the right coverage for your needs, or you'll gather crucial information for making smart decisions about switching providers.

If you decide to shop around for a better deal, investigate new companies carefully to avoid any policy pitfalls. While most consumers simply look for the best price, it's important to consider other factors. Can the new company successfully underwrite a policy under the terms you request? Is it considering rate hikes in the near future? Have you timed your switch so that you won't have a lapse in coverage?

Shifting gears
Changing insurance companies can sometimes save you money, but also consider other factors when deciding which policy is best for you.

Annual car insurance review:

1. Determine if your needs have changed.
2. Check your company's discounts first.
3. Make apples-to-apples comparisons.
4. Get accurate quotes from companies.
5. Look for quality reputation.
6. Make sure you have continuous coverage.

Determine if your needs have changed
When reviewing your current policy, think about whether recent life changes might require you to revise coverage limits or to add new coverage.

"Don't just copy existing coverage," says Pat Moore, a partner with Antalek and Moore Insurance Agency in Beacon, N.Y. "Your situation may have changed, requiring different coverage treatment."

Factors that may cause you to reconsider the terms of a policy include events such as adding a new member to the family, driving to a different job location or purchasing a new car.

"I find that a lot of people are underinsured," says Mike Jones, an agent with Alfa Insurance Company in Montgomery, Ala. "For example, some policyholders may only have $25,000 of coverage to repair someone else's vehicles. If you consider that the average car is in the $25,000 to $35,000 range, then a multiple-car accident will wipe out your coverage. The other people involved in the accident will be looking to you personally to make up the difference."

In addition to reviewing coverage amounts, this is also a good time to examine optional products such as rental reimbursement coverage and emergency road service.

Check your current company's discounts first
As you're shopping around, don't forget to check with your existing provider to see if you can get a better deal than the one you have now.

"If people get a renewal quote in the mail, sometimes they go (insurance) shopping," says Jacki Frank, owner of Tri-County Agency of Brick, N.J. "But their current agent could also offer them another solution."

For example, many insurance companies provide discounts to consumers who purchase multiple policies. So, if you've just bought a home and are considering insuring it through the same company that covers your car, check to see if a discount is available.

Also, verify that your current insurer is aware of any changes you've made that could qualify you for a car insurance discount. Installing anti-theft devices, getting good grades at school, taking a driver-safety course or switching to a vehicle with lower mileage can help reduce rates.