A little bit of alertness and willingness on your part for comparison shopping pays off handsomely saving you in hundreds.

Accidents are common place and there are nearly 100,000 of them every day, and if there is something between you and financial catastrophe it is insurance. This fact most normally leads one to resign to paying steep insurance premiums which can be avoided despite you having a less-than-perfect driving record.

We enacted a real life drama by picking up real people with real driving experiences from a family and a single person and shopped around for them with a view to find out how much they can actually save. The results are startling:

1. The loftiest biannual premium quoted for the single man was $1,727 which was over three times the minimum amount of $533 for the family for the same coverage.

2. The maximum semiannual rate for the family's policy, $2,100, was over two times the minimum rate, $890.

3. Even those insurers that quoted best family deals quoted worst rates for the single.

The huge difference and consistent quotations emphasized the need for rationalizing car insurance. This is attributable to different formulae for calculating premiums which is a confusing combination of a number of variables like age, sex, driving record, place of living and the car you own. Spending a little time in researching the company/policy whose baseline meets your and your family's best interest will richly reward you.

Reality Check 1

The family in the study had a teenager who was driving since two years which obviously jacked up the premium of the family's policy. To top it, he had two speeding tickets last year and in addition his mom had also been booked once for over speeding. Although these are common place, the aggregation made them risky in the perception of insurers.

Earlier, the family had been paying $1,061 every six months for insurance for their two cars 1990 Toyota Celica and 1989 Mazda MPV minivan. The policy included:

1. Liability amount for bodily injury and damage to property- $100,000

2. Medical expenses cover of $2,000/person

3. Comprehensive coverage of $100

4. Collision coverage deductibles at $200

5. Uninsured and underinsured for coverage motorist at $100,000

Fine-tuning and shopping

We began the search in the background of above figures and recommended the family to hike their liability protection as below:

1. $100,000/person

2. $300,000 per accident

3. $50,000 for property damage

4. $100,000/person and $300,000 per accident

5. $250 for deductibles

6. We left the medical coverage without a change

The result was the drastic reduction in six-month premium to $890 an almost $350 a year for greater coverage.

The low premium is also attributable to the teenager being now assigned to Mazda, a confirmation that assigning teenagers to an older car still works.

Reality Check 2

In the other case where we shopped for, the person is a 30+ year executive living in an upscale area in San Francisco. He drives a 1993 Isuzu Rodeo. But insurance companies have their own ideas instead; his residential address has caught the eyes of insurers in boosting the car insurance premiums.

Some companies arbitrarily decide on premiums because someone is single, owns a home, but parks by the street side overnight and was caught for entering in a no-entry lane. To his credit, he drives only six miles a day.

We looked for a similar coverage as for the family but increased the collision and comprehensive deductibles to $500. The lowest quote we got was for $533 for six months.

Contain Your Premium

The reality is it is hard to generalize insurances and premiums. Ironically enough, in our case it was the same insurer that quoted the highest price for the family and the lowest for the single person. Having accidents and getting caught for violating traffic rules always call for increased premiums. But what is apparently not obvious is how car insurance companies compile premiums. However, your car insurance premium is determined by a complex process beginning much before you approach them and when you do, a company underwriter screens you and decides whether to insure you and where to place you.