Many people look only at the cost when comparing auto insurance quotes. Don’t be one of them! If you do a bit of homework, you can still get a great bargain. But you could also get the coverage and high-quality customer service you need if something bad happens.
Loyalty May Not Pay
Although some insurance companies reward you for your loyalty, many don’t. In fact, some punish you for being loyal in a process called “price optimization.” This involves the company buying in and compiling huge amounts of data about you and your shopping habits, and then using a sophisticated algorithm to calculate how sensitive you generally are to price. It then bases the premium (cost) it quotes you in your renewal notice on the maximum it reckons you’ll pay, rather than how good a risk you are. According to a 2015 NPR story, “This can mean as much as a 30 percent rate difference between two drivers with the same risks. Only one’s a shopper and one’s not.”
Don’t assume your insurer isn’t practicing price optimization, just because it shows a loyalty discount on your renewal. That NPR story goes on to quote Bob Hunter of the Consumer Federation of America: “They’ll give you a discount for loyalty,” he said. “But, they’ll give you a 10 percent discount after they’ve raised your rate 25 percent.”
Why Else Shop Around?
Why shop around every year? Because things change.
Even if your life feels uneventful, it’s not. Some big changes can obviously affect your auto insurance quotes, including getting married, moving homes or wanting to add a teen driver to your policy. But little things can also make a big difference. For example, in almost all states, your credit score can have a huge impact on the cost of your auto coverage. In some, according to Consumer Reports, the difference in payments between someone with a great score and the same person with a poor one can be $500 a year. In quite a few, it can be more than $2,000. So if your score changes significantly one year, that could save or cost you loads.
But different companies place more or less weight on your credit score – and on a whole range of other big and little issues, including a DUI. So changes in your life will mean more or less to different insurers. And something that might bother your current one a lot may mean little to another – or vice versa. So shopping around can help you find an insurer that’s comfortable with the sort of person and driver you currently are – and that can let it charge you less.
The Thinking Phase
Before you start shopping for savings, think about the coverage you want (or need) to buy:
- Liability – To protect you if have an accident and are liable for death, personal injury or property damage caused to other people
- Collision – If your own car or truck is damaged in an accident and there’s nobody else to claim from
- Comprehensive – If there’s no accident, but your vehicle is damaged by fire, theft, vandalism or similar risks
- Medical payments – Helps with your and your passengers’ medical bills, no matter who caused the accident
- Uninsured or underinsured – Can help if another driver causes an accident, but that person lacks enough (or any) coverage and personal assets to fully compensate you
As a rule, the more coverage you want, the higher your premiums are likely to be. So think carefully and balance the risks you face with the amount you can afford to pay. Try to get quotes offering similar coverage, because that should make it much easier when you later come to compare quotes (see below). It’s hard to compare apples with oranges.
Also consider “deductibles.” These are the dollar amount you agree to contribute to any claim you make before the insurer chips in its (often much larger) contribution. The higher the deductible you choose, the smaller your premiums are likely to be, but it’s important you can find your contribution when the time comes. So think through what’s affordable, and then get all your quotes based on the same deductibles. Again, you want to compare apples with apples.
Getting Ready to Shop
Be ready to answer a whole host of questions insurers will ask online, in person or on the phone. That’s likely to mean pulling together a few documents, including your current policy. Expect to be asked about:
- Yourself – Name, address, date of birth, social security number, driver license number
- Your driving habits – Average number of miles you drive annually, and full details of any moving violations and accidents you’ve had
- Your vehicle – The usual make, model and year stuff, but also its vehicle identification number (VIN), odometer reading (how many miles it has on the clock), and any security or safety features it has
You can shop for auto insurance quotes online, talk to a local insurance agent and ask friends and family who live in the same state as you for recommendations. Those needn’t be alternatives. The more quotes you have, the more likely you are to find the best deal, so by all means do all three. Be sure also to talk to the company that insures your home. Many provide worthwhile discounts for “bundling,” which is when you get more than one type of policy from the same insurer.
Before you begin shopping, there are a couple of things you should probably do:
- Give some thought to any tickets and points you’ve accumulated through moving violations. If any have almost run their course, and are about to be scrubbed from your driving record, you should probably wait until that happens before you get your quotes. They can make a big difference to the amount you’re going to have to pay in premiums.
- Glance through your existing policy to remind yourself what you’ve already got. You may be willing to agree to higher deductibles or sacrifice some coverage in exchange for lower premiums. Or you may be happy to pay a bit more for better protections and less exposure. But knowing what you have now can help you decide what’s important to you, and can help you compare quotes.
How to Compare Auto Insurance Quotes
Clearly, your goal is to pay as little as possible for as much coverage and as low deductibles as you can get. If, as suggested above, you have quotes offering the same coverage and deductibles, it’s easy to spot the cheapest option, though you still need to plow through some small print to make sure there are no exclusions or conditions that make an offer less valuable than it first appears.
If cash flow is an issue for you, you should also note payment options. See whether you’re charged extra for monthly or quarterly payments, and if so how much. Those fees can add up, and undermine the attractiveness of a quote. Also check whether you’re able to pay by credit card, assuming you might want to do so.
Save Even More
Now’s the time to hit the phones. Feel free to use your other quotes to get a better deal. Some call center agents may have limited discretion to offer better deals, so by all means try: “I like your company, and really wanted to go with your quote, but X [named insurer] has offered me a deal that’s $y cheaper. Can you help?”
While you’re on the line, ask to go through all the discounts to which you might be entitled to make sure you’re not missing out on any. For example, if your teen kids drive, you may be eligible for discounts for their good grades and driving courses. But there are loads of other discounts, including ones based on your vehicle’s safety and security equipment, and your personal driver education and driving record.
You might also ask whether the insurer offers pay-as-you-drive, also known as “use-based insurance” (UBI). This is intrusive, because it uses in-car technology to constantly monitor your mileage, speed and so on. But if you don’t mind that, the discounts that come with it can be really valuable.
One Last Thing
The least expensive deal is way too costly if your insurer can’t or won’t pay out quickly and efficiently when you have to make a claim. So, before signing up, you need to carry out “due diligence” (background checks) on the company you choose. You can quickly discover an insurance company’s financial condition online at ratings agency A.M. Best’s Consumer Insurance Center.
And there are various sources from which you can find out about an insurer’s reputation and record for claims handling and customer service (or, at least, complaints about those), including:
This “one last thing” is something many skip. But you might be happy you didn’t if you ever have to make a significant claim.