Compare Car Insurance: How to Find the Best Rates

When my auto insurance policy term ended last year, I shopped around for rates before renewing my coverage. This wasn’t because I was unhappy with my insurer; I do this every year, and you should too.

When I got quotes for new auto insurance, there was more than a $100 difference between the offers that companies gave me for the same coverage. This wasn't a surprise. I get dozens of insurance quotes each year for my job, and I know there's a lot of variation in pricing from one insurer to the next.

Not shopping around could have cost me a lot of money, and the same thing could happen to you. To make sure you aren't wasting your hard-earned funds, read on to learn how to compare car insurance rates effectively and find the best policy.

Key takeaways

• Before shopping around, make sure you have the right information and know your coverage needs.
• Insurance companies have different formulas for setting rates, so prices vary from one company to the next.
• You must make sure you're comparing policies with similar coverage as you shop for prices.
• You should take customer service into consideration as well as premiums.

Understanding what impacts your rates

When you shop around for car insurance, it's wise to understand which factors affect the rates companies offer you. Here are some of the things that can make the biggest impact on the cost.

• Your driving history: Good drivers pay less for auto coverage. Drivers with accidents, speeding tickets, DUIs, or other past problems pay more. That's because insurers feel there's a greater chance these risky drivers will make claims.
• How often and how far you drive: The more you’re on the road, the higher the chance that an accident will occur. This means you might pay more than an occasional driver.
• Your age: Your risk of an accident typically decreases as you age because you get more driving experience and often become more responsible. However, your rates might increase again when you reach your senior years.
• Your gender: Statistically, women have a reduced chance of accidents and high-risk behaviors such as impaired driving, so they often pay less for auto insurance.
• Your marital status: Married people are statistically less likely to crash, so they generally pay lower premiums than single people.
• Where you're located: There's a higher risk of accidents and auto theft in urban areas, so premiums are often higher in urban rather than suburban or rural locations. Your state's rules on coverage also affect how much you'll pay.
• Where you store your vehicle: Cars stored in garages are less likely to be stolen or vandalized, so vehicle storage affects your premiums.
• Which features your vehicle has: The more safety features and anti-theft protections your car has, the less the chance you'll make a claim. Premiums might be lower due to added protections.
• Your credit report: Drivers with a solid credit history have a statistically lower chance of auto insurance claims, so they pay less for insurance coverage.
• Your deductible: A deductible is an amount you pay out of your pocket before your insurer pays for the rest of a covered claim. A lower deductible means your insurer is more likely to have to pay more money, so it results in higher premiums.
• The amount of coverage you buy: The more coverage you buy, the more risk you transfer to your insurer and the higher the price you'll pay for your policy.

Some of these factors you can control, such as how much coverage you get or how large your deductible is. Others, like your marital status or age, aren't things you can change.

Insurers use different methods of setting prices and weigh these factors differently. This explains why rates vary so much from one company to the next. Insurers also have different rules for when and how they award discounts that help you save on coverage. That is why shopping around is so vital when you sign up for insurance.

How to compare car insurance quotes in 5 easy steps

You can compare car insurance quotes online, which makes the process of finding the best coverage easier. However, this isn't as simple as just asking an insurer what a policy costs.

Because so many factors affect your premiums, you'll need to ensure you're comparing “apples to apples” when you get quotes. You also don't want to just pick an insurer based on price alone.

Take these five steps to compare car insurance quotes effectively and find the best policy for your needs.

1. Get the right information

Part of my job requires me to get auto insurance quotes regularly, so I'm well aware of the fact that insurance companies want a lot of information when you ask for a price. This makes sense since they need details about you and your car to accurately assess the risk of covering you.

If you're prepared and ready with the information insurers need, it will be much faster and easier to get quotes from different companies. Here are some of the things you'll need.

• Your driver's license number: Insurance companies want this information to find out about your driving record.
• Details about your driving history: The quote tool will ask things like how long you’ve had your driver's license and whether you've ever had an accident or gotten a ticket.
• Your Social Security number: While providing this is usually optional, it can help you get more accurate quotes since your credit history can affect your rates. You'll need to provide it when you sign up for a policy anyway, so have it ready.
• Your vehicle identification number (VIN): Again, you usually don't have to provide this for a simple quote. But if you don't, you're going to need a lot more information about what make and model of vehicle you have and which specific features are installed. I personally don't know things like the trim level or safety devices my car has, so it's much easier to just provide my VIN number and let the insurer gather this information automatically. Plus, your insurer will likely ask for it when you apply.
• Factors that could affect eligibility for discounts: This includes things like whether you're a good student, a military member, a federal employee, or someone who has recently taken a defensive driving course.
• Personal details about others in your household: Insurers want to know about everyone who could potentially drive the car since the insurer will likely be responsible for covering damages those other people in your household cause if they operate your vehicle.
• Information about your current insurance: Unless you’re a new driver looking for car insurance for the first time, insurers will want to make sure you're currently covered. A lapse in coverage can be a major red flag since it's illegal to drive uninsured.

2. Carefully think through your coverage needs

When you get quotes for insurance, you must know how car insurance works so you can decide the kinds of coverage you want. That's because your chosen coverage type, features, and limits will affect the price.

You can look at your current policy to see what you already have, but you should always take the time to think through what protections you want. Some common types of coverage include:

• Liability coverage: Bodily injury liability pays if you hurt other people, while property damage liability pays if you cause property damage to others. Most states require this kind of coverage.
• Collision coverage: This pays if you get into a crash — whether or not you're at fault — and you need to fix or replace your own car.
• Comprehensive coverage: This pays for losses that aren’t caused by a crash with another vehicle, such as if your vehicle is vandalized or stolen, extreme weather damages it, or you collide with an animal.
• Personal injury protection (PIP): Some states require this. It pays for minor injuries — no matter who was at fault — for a crash in states that follow no-fault insurance rules.
• Medical payments coverage: This would pay for your medical bills in the event of a crash.
• Gap insurance: This covers the difference between what your car is worth and what you owe on your auto loan. It's important because many people owe more than their car is worth (which is all their insurance would pay if the car was stolen or declared a total loss).
• Rental car reimbursement: If you get into a wreck and your car needs to be fixed or is totaled, it often takes some time to get back on the road. Rental car reimbursement pays for you to have wheels in the meantime. When I was in a collision years ago, my rental car coverage paid for a replacement car for three weeks while my claim was sorted. I would have been lost without it.
• Roadside assistance coverage: If you don't have a AAA membership or a similar plan, you may need this kind of coverage if you get into a tough situation on the road and need a rescue.

You have to decide what kind of coverage you want and how much you need. Your state sets minimum limits for liability protection, which you can find on the website of the Department of Insurance or DMV where you live. However, you may want more than the minimum, and your lender may require specific coverages, including collision and comprehensive.

For example, if you only have $10,000 per person in liability injury coverage, even a pretty minor injury you cause to others is likely to exceed your coverage limits. You could be personally responsible for paying losses above those limits. I want to protect my assets, so I have $250,000 in bodily injury liability coverage per person and $500,000 per accident — way more than what's required.

Finally, you have to decide on a deductible, which is what you'll pay out of pocket for a covered claim. If you have a $1,000 deductible and cause $5,000 in damage, your insurer would pay you $4,000 for repairs, and you'd pay the other $1,000.

I chose high deductibles because I've saved up a car repair fund, and I'd rather not pay higher premiums. But if you couldn't come up with a few hundred or thousand dollars after an accident, a lower deductible may be better for you, even though it increases your policy cost.

When you decide how much coverage to get, remember you’re buying protection and transferring risk to the insurer. The less risk you transfer, the less you pay them but the greater the chances you'll be out a lot of money later. If you don't buy collision coverage, for example, you'd get paid nothing if you totaled your car, and you’d have to buy a new one yourself.

3. Look for potential car insurance companies

Once you know what you're looking for, it's time to decide which companies to get quotes from. You can search online or ask around about companies of all sizes, including big companies with solid reputations and smaller regional insurers. Some insurers to consider getting quotes from include:

• State Farm: This is a well-known company with a large agent network and extensive discounts.
• USAA: Open only to military members and certain relatives, this insurer has a reputation for low prices and top-notch service.
• GEICO: This insurer generally offers very competitive prices and is a national name with a trusted reputation.
• Travelers: This company is known for its solid process for handling claims to make life easier in your time of need.

Try to put together a list of at least three to five insurance companies to get quotes from so you can make the most informed decision. And remember, the more companies you get quotes from, the better your chances of finding the best price.

4. Submit quotes online

After making your list of insurers, you can visit each of their websites to get quotes. You can also use quote comparison sites where you input your information once and get prices from multiple insurance providers.

You'll need to answer all of the questions you prepared for when gathering your information, including details about you, other drivers in your household, and your vehicles. You must provide accurate information to get accurate quotes.

Most insurers let you adjust your coverage options so you can see how much different levels of protection will cost you. For example, here's what a GEICO quote looks like. You can change the coverage options in the drop-down menus, and your price will change in real time.

5. Compare quotes and policy options

Finally, you should carefully look at each quote from the insurance companies and see what they charge for the coverage you've chosen. When you’re comparing, always confirm that you have the same coverage types, deductibles, and policy limits from each company so you can make an accurate assessment of which is cheaper.

Also, consider what kinds of add-ons and discounts each company offers. For example, some insurers offer military discounts, but others don't. Some provide new car replacement coverage so you can get a brand-new vehicle if yours is totaled. If these add-ons are important to you, find an insurer that offers them.

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How to pick the right car insurance company

As you get quotes, remember that you don't just want to find the cheapest auto insurance — you want to find the best car insurance. This means that you want to:

• Pay a fair price
• Work with an insurer that has a solid reputation for handling claims
• Find a company that makes your policy easy to manage, ideally by offering a user-friendly mobile app and website

You can research each insurer’s reputation by checking the National Association of Insurance Commissioners complaint database to see if the company has an above-average or below-average number of complaints. For example, here's the NAIC report for State Farm.

You can also refer to the J.D. Power U.S. Auto Insurance Study and the J.D. Power Auto Claims Satisfaction Study to see how your insurer compares to others in terms of customer satisfaction.

Once you've determined that the insurer you're considering charges a fair price and takes good care of its customers, you can finish the application process and sign up for coverage. Most often, you can complete this entire process online and even get an immediate digital copy of your new insurance card.

Tips for saving on your coverage

While shopping around can help you save money on car insurance, there are also other ways to lower your cost. Some of the steps you can take to reduce your premiums include:

• Maintaining a safe driving record: An accident history or tickets on your record results in significantly higher premiums. If you get a ticket, see if you can challenge it or complete a driver training class to avoid or remove points from your record.
• Claiming all the discounts you can: This can include steps such as taking a defensive driving course, bundling policies, signing up for paperless statements, and so on. Ask your insurer what kinds of discounts are available to make sure you aren't missing out on any savings you're entitled to.
• Consider participating in telematics programs: These involve downloading an app or installing a device that lets your insurer monitor your driving so you can get discounts for driving safely.

FAQs

Bottom line

Whether you're buying a new car or your policy is simply up for renewal, you should always shop around for insurance before you buy a policy so you don't overpay for auto coverage. Remember to gather as much information as you can, get accurate quotes, and pay for the protection you need from a company you can trust. That way, your insurer will be there for you in your time of need. Consider checking out the best cheap car insurance companies.

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