Car Insurance Buyer’s Guide
Shopping for auto insurance is a balancing act. You’ll want to find a company that promises comprehensive coverage, helpful resources, and reliable service — all while keeping premiums low. We’re here to help you strike that balance.
With the input of seven industry experts, we put together a quick-start guide to shopping for the best policy. Learn what coverage you should look for, how to vet providers, and the best ways to cut costs on your annual premium.
Shopping Around: Everything You Need to Know
Review your coverage
When should I review or renew my car insurance?
It’s best to re-evaluate your car insurance options each time the policy comes up for renewal. There are a few reasons for this. First, because insurance needs change over time. Maybe you added a teenage driver or sent one off to college; maybe you moved to a safer (or less safe) neighborhood; maybe you customized your car and want the upgrades protected. Any number of scenarios could warrant new and better auto coverage.
It’s also smart to vet your car insurance periodically because prices are not static. Your premium could be affected by a shift in underwriting, new discounts offered, a change in your driving record, and so on. In short: Car insurance isn’t a ‘set-it and ‘forget-it’ deal. Taking the time to compare quotes each year could save you a bundle in the long run.
“It’s a common mistake to think that the cheapest car insurance company 6-12 months ago will still be the cheapest today. Your coverage needs change, and rates change quite often — so taking 15 minutes to compare quotes online from a number of different companies is a smart move to lower car insurance rates.”
Joel Ohman Certified Financial Planner™ and Founder of CarInsuranceComparison.com and InsuranceProviders.com
How much car insurance coverage do I need?
Auto insurance is required in almost every state, with the exception of New Hampshire and Virginia. Where insurance is required, drivers generally have to purchase coverage for bodily injury liability, property damage, personal injury protection, and sometimes uninsured/ underinsured motorist.
Every state has different minimum requirements for coverage on your policy. If you’re unsure about what your state requires, you can check out our rundown of every state’s minimum requirements.
You can check your state’s minimum auto insurance coverage requirements with the Insurance Information Institute.
In the handful of states where insurance isn’t required, drivers must do one of two things: They can either prove “financial responsibility” (meaning they could cover damages in the event of an accident), or purchase an expensive liability bond. The third option where insurance isn’t mandatory is to go ahead and purchase it anyway — likely your safest and least expensive bet.
Car insurance is the only route that doesn’t lead to you paying everything out-of-pocket after an accident.
What car insurance do I need?
To cover all your bases in the event of an accident, theft, or other incident, you should absolutely have coverage in these six core areas:
- Bodily injury liability covers the cost of physical injuries to another party caused by the policyholder. This coverage is crucially important and required in almost every state.
- Bodily injury liability pays for damage to vehicles and other property caused by the policyholder. Like bodily injury, property damage is required almost universally.
- Personal injury protection (PIP) covers medical costs to the driver and/or passengers in the policyholder’s vehicle.
- Uninsured/underinsured motorist supplements the payout if someone else hits you, but doesn’t have enough insurance to cover the total cost of injury and damages. Experts stress the importance of this coverage. It isn’t required in all states but is the only thing that will protect you if another party simply can’t pay.
- Collision covers damage caused by — yes — colliding; with another car, an object, or from flipping. Most accidents qualify as collisions, so you’re likely to use it.
- Collision covers most things that aren’t caused by collision; theft, vandalism, damage from natural disasters, and so on.
Beyond these, there are a number of supplemental coverage options or “endorsements” that can be added to your policy. These include things like roadside assistance and towing, mechanical breakdown, rental reimbursement, even pet injury — coverage that may not be essential to your body and your vehicle, but can protect even more of your assets.
Adding endorsements to your policy will always mean a bigger premium. That said, better coverage may be a more affordable upgrade than you think. “Get a price on all of the endorsements that the agent is suggesting,” says Matt Straley, Agency Manager at Insurance Consultants of Pittsburgh. “A lot of time these add-ons are very cost effective. For example, adding a diminishing deductible might only cost you 30 a year to save 100.”
Choose a provider
Where can I get car insurance?
When it’s time to compare car insurance companies, you’ve got two options. The first is to shop around on your own. This is pretty straightforward, as most companies now offer car insurance quotes online. You can compare and select providers this way without having to talk to an agent (or even leave your couch).
Shop around on your own if:
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- You’ve purchased car insurance before and are re-evaluating your coverage
- You’re comfortable filling out personal questionnaires online for quotes
- You’d prefer to research and compare companies at your leisure
Your other option is to work with an independent agent or broker. “Independent” is the key word here — it means the agent sells policies from more than one company, and will shop around for the best deal on your behalf. By comparison, “captive agents” (like a State Farm or Allstate agent) work with only one company and won’t help you compare providers. As Joel points out:
“Working with an independent insurance agent who can help you compare options from many companies is a great way to find an affordable car insurance rate but be sure to do your research online and compare rates!”
Work with an insurance agent or broker if:
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- It’s your first time buying car insurance, and you’d like some extra guidance
- You’re worried about filling out online quote forms accurately
- You’d prefer to sit back and let a pro compare companies on your behalf
Where can I find car insurance companies?
Before you can compare quotes or offerings, you’ll have to compile a list of companies to look at. Try starting with your state’s top auto insurance providers by market share; you can find these at the Insurance Information Institute.
For a more detailed analysis of some of the nation’s top insurers, check out our review of the best auto insurance. There, we take a deep dive into policy options, discounts, and ratings to give you an idea of which company might align best with your needs.
Which car insurance company is the best?
The next step, selecting a provider, is the tricky part. You’ve probably gotten the gist of this by now, but there is no single “best” insurer for everyone. The best car insurance company for you is whichever one can offer the coverage you need at the most competitive price.
So — how do you find a company that hits the sweet spot between affordability, great coverage, and reliable service? Our experts shared a few pointers for getting started:
#1 Compare quotes. The key to a low premium is finding a company whose underwriting favors your circumstances. The only way to do that is by comparing personalized quotes from a number of providers before you buy.
Ohman points out that “certain auto insurance companies specialize in higher risk drivers. This means that if one has a DUI in their history, many accidents, or even poor credit, it becomes all the more important to shop around and compare rates from many different car insurance companies.”
#2 Check claims records. “You can buy cheap insurance anywhere” says John Espenschied, Agency principal and owner of Insurance Brokers Group. “But if you find out that the provider isn’t able to adequately handle your claim, you might be disappointed in the settlement if and when you need to use your insurance.”
We recommend checking our list of ratings for the top 20 auto insurance providers by market share in the industry currently. We vetted these providers using information from rating agencies, like A.M Best and S&P Global, along other sources like J.D Power and Consumer Reports. Choosing a tried-and-true company is your safest bet for smooth and painless claims handling.
#3 Consider customer service channels. J.D. Power’s 2018 survey found that auto insurance customers are more satisfied with their providers than ever before — in large part, because online services make shopping, paying premiums, and filing claims much less of a headache. According to Robert Lajdziak, Insurance Practice Business Consultant at J.D. Power: “Customer satisfaction is at its highest when customers take care of transactions themselves and save the high-value interactions for live channels.”
Look for providers that offer diverse resources — email, online chat, phone, social media — so you can reach them in a way that’s convenient for you. Choosing a company with online bill pay and mobile claim filing will also help streamline and improve your overall experience.
Understand your premium
How are car insurance premiums calculated?
Insurance companies calculate rates through a process called “underwriting.” For car insurance, underwriters use your personal information — age, location, driving history, make and model of your car, etc — to determine the likelihood that you’ll end up filing a claim. The more likely, the higher your rates.
Are car insurance quotes accurate?
Online quotes are not guaranteed to be perfect. Why? The underwriting process — which determines your actual premium — is incredibly thorough compared to the brief questionnaire you’ll take online. It will include pricing factors that your online quote didn’t turn up. So quotes are somewhat of an imperfect tool, at least when you only get one. Testing the waters and getting quoted by multiple providers is the best way to ensure you, at the very least, have an idea of the cost you’ll be paying.
That said, online quotes are still a valuable resource. While estimates may not be spot-on, they will show you how companies stack up against one another. That way you can find the provider that’s friendliest towards your unique situation.
Follow these tips to make sure you’re getting the most accurate quotes possible — that way, there won’t be any surprises when you’re ready to buy:
#1 Use the same coverage levels for every quote. Bill Hebert, Regional Director at Mercury Insurance, advises: “If you’re getting quotes online, be sure to watch for the coverage details you’re selecting, as it could turn out to be an apple-to-oranges rate comparison where one is cheaper than the other because it doesn’t provide the same amount of coverage.”
Make sure you’re entering equal coverage levels into each company’s quote tool whenever possible. The limits and coverage options will affect your price, so entering the same numbers and selecting the same options across the board ensures a more accurate comparison.
#2 Pay attention to discount opportunities. Many providers ask questions like “Have you completed a defensive driving course?” or “Have you installed an anti-theft device on your vehicle?” Honest answers to these questions let insurers gauge which discounts you’re eligible for, and apply them to your online quote. Be sure to answer the questionnaire fully — and take note of the companies where you qualify for the most savings.
#3 Be honest. “A lot of new insurance buyers leave out info or massage the truth to get a lower rate,” says Matt Straley, Agency Manager at Insurance Consultants of Pittsburgh. “The problem comes when underwriters find out and cancel the policy. A canceled policy makes it more difficult to obtain new coverage and increases costs in the future.”
Lowering rates: Tips for saving on your car insurance
Look for discount options
One way to save on your car insurance is by choosing a company with ample discount opportunities. Many are easy, even effortless, to qualify for; like signing up for paperless billing or having anti-lock brakes in your car. The majority of companies also offer savings for claims-free drivers, home ownership, safety-course completion — pretty much anything that makes you less likely to file a claim can earn you a discount.
Some discounts, like for military members, retired drivers, and students-away-at-school, are a little harder to come by. If your situation warrants unique discounts, be sure to shop around for the company that best matches your needs. When in doubt: talk to an agent over the phone. They’ll be able to provide information on discounts that may not be listed online or show up in the online quote process. Regarding this matter we consulted Nate Parsons, Features Editor for U.S News Best Cars who had this to say:
One way that online quotes may not be the best option is in finding discounts. A great way to be sure you have the lowest rates possible is to take a low online quote and then either call or visit an agent working for the insurance company and go overall all the possible discounts you may qualify for.Nate Parsons
Features Editor, U.S News Best Cars
Safe Driver discounts reward good driving records — if you haven’t had an accident in the last several years, you’ll likely save on your premium.
Good Student discounts provide savings for student drivers who maintain a solid GPA at school — generally around a B average or higher.
Multi-Car discounts are offered for insuring multiple vehicles under the same plan.
Multi-Policy discounts offer lower rates when you bundle two or more insurance products under the same provider. One of the most common forms of bundling is an auto & home bundle
Driver Training lowers your premium if you’ve completed or enrolled in a driver safety program. These courses decrease your risk of being in an accident.
EFT (Electronic Funds Transfer), Paid in Full, and Good Payer deductions reward responsible premium payments and are an easy way to save money on your insurance.
Early Quote or Early Signing discounts are available to customers who sign new policies early — a reward for reassuring your provider that you won’t leave for a new company.
Student Away at School is a discount for families with students who only need coverage when they’re home on breaks and holidays.
Continuous Insurance deductions are offered to customers who don’t allow their coverage to lapse.
Home Ownership rewards customers who have purchased property. Having your own home demonstrates stability to providers, so they’ll view you as a lower risk to insure.
Affiliate Programs reward drivers who are members of an insurer’s affiliate program. Such affiliates earn commission based on referrals that drive business to the provider.
Paperless discounts are among the easiest to qualify for. All it takes is switching your communication method to email to see a deduction in your monthly premium.
Military and Deployment offers discounts for members of the Armed Services (though we’ve seen it at surprisingly few companies).
Drivers Over 50 or Retired discounts provide savings for older drivers.
Federal Employee discounts reward those customers employed by the federal government.
Anti-Lock Brakes installed on the vehicle can net you a discount, as these reduce skidding and help to prevent accidents.
New Car discounts are available for vehicles that come equipped with the latest safety features that will keep you safer on the road.
Anti-Theft Device discounts apply to newer technologies that reduces the risk of theft, including extra locks and electronic tracking systems.
Airbags are a standard safety feature in all cars, but the location of these bags — and their subsequent savings — varies by vehicle. Cars with full-front seat airbags will likely see greater discounts than those with only driver-side airbags.
Daytime Lights increase visibility for yourself and other drivers. Some insurers will reward you for adding this extra degree of precaution.
Usage discounts are offered for installing devices in your vehicle that monitor driving habits, like your speed of acceleration and whether you brake abruptly. If you’re a cautious driver who doesn’t spend much time behind the wheel, you may be able to save a significant amount by opting for one of these plans.
Hybrid/Electric Vehicle discounts reward you for helping protect the environment with your vehicle.
Choose your deductible wisely
A higher deductible means lower car insurance rates. The reason is that when you choose a larger deductible amount, you’re shouldering a larger amount of “risk” so your insurer doesn’t have to. In other words, you’ll pay more after an accident, and they’ll pay a little less.
Of course, while a $1,000 or $1,500 deductible can save you a lot on your premium, it may take an uncomfortable toll on your wallet after an accident. We’d recommend building out a financial plan that accounts for your deductible — that way, out-of-pocket costs won’t put you in a sticky situation if you do have to pay them.
“Start a savings account (or add to your current savings account) that is designated for emergency use only,” suggests Ohman. “Once you have enough money in your savings account to comfortably pay the higher deductible if need be, then call your agent and increase your policy deductible to enjoy the lower premiums.”
Opening multiple lines of insurance with the same company (commonly referred to as every state’s minimum requirements) can save you a fair deal of money across the board. For example, Allstate offers up to 10% off auto and 25% off home insurance if you pair the two, and State Farm boasts savings of up to 17% for bundling auto with homeowners, renters, condo, or life insurance.
Michael Newcomer, Principal at Novel Insurance, counsels: “If you have other lines of insurance such as homeowners or renters, check if bundling with your current or future carriers will give you a significant discount.” Odds are, it will.
The Bottom Line
Review your car insurance often and thoroughly. The industry — and your insurability — change on a regular basis, so your cheapest offer is likely to come from a different company in as little as six to 12 months. Keep in touch with your agent, and notify them of any sort of changes in your driving situation, as Doug Mitchell from Ogletree Financial puts it:
Honesty is the best Policy. Make sure you are 100% honest with your agent about usage. The more your agent understands: where you will drive, how far you drive to work each day, where your car will be parked, [and] who will be driving the car, the better your rates will be because they can place you with the company that fits [your needs] best.Ogletree Financial
President, Ogletree Financial
And remember: Before renewing your policy or purchasing a new one, it’s crucial to compare quotes from multiple companies. This is the only way to find the coverage you need at the most affordable rate.