Whether you’re a newly-qualified driver, just bought your first car, or are looking to improve your car insurance, there are always opportunities for a better deal. There are hundreds of car insurance companies in the United States, each offering a slightly different policy, and each with seemingly attractive enticements. It can be confusing; however, there’s no need to panic.
Breaking down the steps into a series of questions will help you determine the following:
What policy do I need?
How do I get the cheapest price?
How do I find the best deal?
Those are the only questions you’ll need to ask yourself when it comes to insurance, and this guide is designed to help walk you through the process.
So follow the steps below, and learn about how insurance works, and how you can find an insurance policy tailored to your specific needs, whether you’re an 18-year-old in a 1996 Toyota Camry, or a 101-year-old in a brand new Tesla.
How do I get a quote?
The first step is to get a quote or quotes from insurance companies so you can see your options and decide what’s right for you.
There are a few different ways to get quotes, and your choice will determine what quotes you get.
A ‘captive agent’ works for one insurance company only, and is usually locally-based. This is a good option if you’re not entirely sure what you want, and would like to talk through your options with someone.
However, this person will only offer you policies for one company, so you won’t get the full range of choices.
An independent insurance broker will also be locally-based, although won’t work exclusively with one agency. This gives them the advantage of being able to compare multiple companies and talk you through multiple options from a more neutral perspective.
They also often have good personal connections with insurance companies, although they may recommend more expensive policies for commission reasons.
A good agent makes their commission through renewed policies, and will help research the best rates if they are trying to maintain a book of renewing policies.
Get a Direct Quote
Going online, or calling insurance companies will cut out the middleman, and you’ll be able to compare a range of options. This can be useful for you to see how different insurance companies differ on similar policies, as well as see how the customer service operation is at companies.
This option is not available from all insurance companies and can be time consuming, though.
Use a Comparison Tool
The rise of the online comparison tool has made comparing quotes even easier. If you input your information into one search engine, the tool will compare quotes, and display the results so you can easily and intuitively cross-compare. According to NerdWallet, drivers save an average of $859 annually by using a comparison tool.
For those new to insurance, a comparison tool is a no-pressure way to compare insurance policies and to get a sense of what a good price is.
How should I pick an insurer?
Once you’ve got your quotes or picked your broker, it’s time to actually select a policy.
There are several factors to consider when choosing an insurer.
Look at the Price
Obviously, the price is going to be a major—if not the primary— factor when it comes to choosing car insurance.
Searching for quotes will show you which company is able to provide you with the most insurance at the lowest cost. Insurance companies regularly compete with one another on price, so you should shop around every time your policy is up for renewal to make sure you’re getting the best deal.
Some companies offer discounts to loyal companies, but if your insurance company is not offering competitive rates or options, your renewal is the right time to search for a different policy.
Look at the Rating
If you get an insurance quote that seems much lower than all the others, it may not be the best option. Search the company name online, or on a Consumer Report site to get a sense of overall customer satisfaction.
According to ConsumerReports.org, of 23,000 people who filed a claim in the period 2014-2017, 91% were happy with their insurance company. Look for insurers who enjoy a solid score on consumer sites.
Which type of insurance should I get?
So now you’ve chosen the insurance company that you want, but there are still decisions to make. You’ll need to choose exactly what type of insurance policy you want.
For instance, the rise of GPS-based technology has broadened the range of options when it comes to insurance, so you don’t always have to rely on the mileage estimates you give your insurance company to set your policy.
Traditional Car Insurance
Traditional car insurance is viewed as the way things have always been done. At the beginning of the policy term, you tell the insurance company…
How many miles you expect to drive over the next 12 months
When you will do most of your driving
Where your car will be stored
Your driving record (plus several other data points)
Your car insurance company will analyze this data and give you a quote based on your calculated risk to insure. The more risk, the higher the price.
A telematics system is a modern form of insurance, based on the company monitoring you as you drive.
Rather than making assumptions on you based on your driving history, your age, your gender, your credit score, or any other factor, a telematics system involves placing a transponder in your car and then monitoring real-time driving information.
There are two main types of this system:
Usage-based car insurance
Usage-based insurance systems involve plugging a device into your car. This device will record your driving behavior, including how hard you brake, how sharply you turn corners, and what time of day you drive. All of these will impact your policy.
Per-mile car insurance
Per-mile car insurance is a rudimentary version of usage-based insurance. In a per-mile system, the insurance company is only interested in how much you use your car. Again, a device is inserted into your car, and you are charged by your insurance company based on how many miles you drive.
What coverage do I need?
Now you’ve decided how you’re going to be insured, it’s time to decide what coverage you need. This is where things can get a little confusing, and even a bit daunting. Breaking down the options will make it easier for you to compare what you really need (and can afford).
Collision insurance is a basic insurance option. It will cover your car for damage up to its estimated value at the time of the accident. If you have a crash, you will be able to take your car to the body shop and your insurance company will pay for repairs, minus the value of your deductible.
Comprehensive insurance will cover you for problems with your car that aren’t caused by a collision. For example, if your car catches fire, is vandalized, or is stolen, your comprehensive insurance will cover the cost of the car up to its current value.
Liability insurance is what covers your costs when you are at fault in an accident. This covers damage to someone else’s car, property, or even bodily injury if someone requires medical treatment as a result of a crash you caused.
Uninsured driver insurance
As stated above, roughly 1 in 8 drivers on the road is uninsured. If one of them crashes into you, then you are unable to claim from their insurance policy. An uninsured policy will mean that your own insurance company covers you in this instance.
Many Underinsured Coverage options include Underinsured Motorist Coverage as well. This benefit applies when the person who caused your collision did not maintain liability coverage sufficient enough to cover your damages or injury.
Personal injury protection
Personal injury protection will cover you if you are injured and are unable to work. It will not only cover your medical expenses but will also pay your wages (in some circumstances) if you are unable to work as a result of your injuries. Not all states provide Personal Injury Protection Benefits.
Another similar option is Medical payments coverage. As the name implies, this covers medical bills only, and not lost wages.
How can I get the best rate?
There are lots of ways that you can reduce the cost of your insurance, whether in the short-term or over a period of several years. Knowing the tricks and tips can help you wring the last few discounts out of your insurance company.
Good driving record
A big factor in reducing insurance premiums is a good driving record.
If you can demonstrate that you have had several years without making an insurance claim, then you will be less of a risk to your insurance company, and they will calculate your premiums accordingly. Conversely, if you have a poor driving history, your premiums will be higher.
Taking an advanced driving class will demonstrate to your insurance company that you are a dedicated and diligent driver, and will almost certainly lead to a reduction in your premiums.
This is usually a solid option for a teenage driver (who are the most expensive to insure). Taking an advanced driving course immediately will reduce premiums. In some cases, insurers also have discounts for students who maintain a B+ average in school.
Bundling together multiple insurance policies will create an economy of scale, and will reduce the premiums across the board.
This works if you are insuring multiple cars at the same time, but also if you are renewing your home or renters insurance. Most companies will offer significant discounts for doing both at the same time.
As mentioned above, a deductible is the amount you’ll pay out of pocket in the event of a claim. Raising your deductible will reduce your insurance premium, although you’ll need to do the math to determine whether this is worth it.
One key point to note is that, unlike with health insurance, your deductible doesn’t get ‘used up,’ and you can end up paying multiple times over the course of a year.
Additional safety equipment
Modifications you make to a car can also reduce your risk to the insurance company. Installing additional anti-theft features such as a car alarm may reduce your premium, as will safety features such as airbags. If you do this midway through your policy, you can inform your insurance company, and they may reduce your remaining premium, or adjust your policy renewal rate.
Insurance can be a confusing world. There is a lot of terminology and seemingly endless options for a consumer to choose. However, that choice is a positive, not a negative thing.
Knowing what insurance you need, what you want, and what you don’t want will make life much easier; the range of options means that you can often tailor your insurance to very specific needs.
Licensed Insurance AgentCynthia Lanctot
Sources and Further Reading