Here’s a quick rundown of the 10 steps, followed by a more detailed guide.
1. Determine your state’s minimum insurance requirements.
2. Consider your own financial situation in relation to the required insurance and consider whether you need to increase your limits to protect your assets.
3. Review the status of your driving record — do you have any outstanding tickets or points on your driver’s license?
4. Check your current coverage to find out how much you are paying.
5. Get competing quotes from insurance websites and individual companies of interest to you.
6. Make follow-up phone calls to insurance companies to get additional information about coverage.
7. Inquire about discounts.
8. Evaluate the reliability of the insurance companies you’re considering by visiting your state’s insurance department website, reviewing consumer surveys and talking to family and friends.
9. Review the policy before finalizing it.
10. Remember to cancel your old policy.
Whether you’re insuring the first car you’ve ever bought or you haven’t paid attention to your insurance policy in a while, your goal is the same: You want to be adequately covered if you get in an accident, but you don’t want to pay more than you have to. Unfortunately many people do overpay simply because they don’t want to spend time shopping for car insurance. It’s not inherently enjoyable despite how it looks in commercials.
But by doing some comparison shopping, you could save hundreds of dollars a year. When one of our editors used a rate-comparison service, he got basic coverage quotes for his two old cars that ranged from $1,006 to $1,807 — a difference of $801 a year. If you’re paying thousands to your current insurance company because you have a couple tickets or an outdated unfavorable credit rating, shopping your policy against others might be well worth the effort.
Step 1: How Much Coverage?
To find the right auto insurance, start by figuring out how much coverage you need. Requirements vary from state to state, so take a moment to find out what coverage is required where you live. You will find a list of each state’s requirements and an explanation of the various types of insurance in “How Much Car Insurance Do You Need?” If you’re a first-time driver and need a comprehensive overview of car insurance before you go on, review this guide from the National Association of Insurance Commissioners. Now you’re ready to make a list of the different types of coverage you are considering.
Once you know what’s required, you can decide what you need. Your decision will depend on your own degree of comfort in assuming a certain level of risk.
Experts recommend that if you have a lot of assets, you should get enough liability coverage to protect them. Let’s say you have $50,000 of bodily injury liability coverage but $100,000 in personal assets. If you’re at fault in an accident, attorneys for the other party could go after you for the $50,000 in medical bills that aren’t covered by your policy.
The general recommendations for liability limits are $50,000 bodily injury liability for one person injured in an accident, $100,000 for all people injured in an accident and $25,000 property damage liability (usually expressed in insurance shorthand as 50/100/25). Here again, let your financial situation be your guide. If you have no assets that an attorney can seek, don’t buy coverage unnecessarily.
Your driving habits might also be a consideration in determining the coverage you need. If your past is filled with crumpled fenders, if you routinely speed, or if you make a long commute on a treacherous winding road every day, then you should get more complete coverage. Collision coverage pays for damage to your car in an accident or damage from hitting an inanimate object (a tree, lamppost or fence, for example). Comprehensive coverage addresses damage that didn’t occur in a collision — such as from fire, theft or flood. It also covers damaged windshields.
Keep in mind that you don’t have to buy collision and comprehensive coverage. Let’s say your vehicle is older, you have a good driving record, and there is little likelihood that your car would be totaled in an accident. But you have to park in a so-so neighborhood for work, so the car has a risk of being stolen. Then you could buy comprehensive coverage and skip the collision insurance.
Step 2: Review Your Insurance
Read through your current policy or contact your auto insurance company to get the information you need. Jot down the amount of coverage you have now and how much you are paying for it. Take note of the yearly and monthly cost of your insurance since you’ll get quotes both ways. Now you have a figure to beat.
Step 3: Check Your Driving Record
You should know how many tickets you have had recently. If you can’t remember how long that speeding ticket has been on your record, check with your state’s department of motor vehicles. If a ticket or points you earned are about to disappear, thus improving your driving record, wait until that happens before you get quotes. Nothing drives up the price of insurance like a bad driving record.
Step 4: Solicit Competitive Quotes
Now it’s time to start shopping. Set aside at least an hour for this task. Have at hand your current insurance policy, your driver’s license number and your vehicle registration. You can begin with online services. If you go to an online site to get a quote for an insurance rate, you can type in your information and begin to build a list of companies for comparative quotes. Keep in mind, though, that not all insurance companies participate in these one-stop shopping sites. If a recommendation from friends and family or other research points to a company that you think might be a winner, you can go directly to its website or call its toll-free number to get a quote.
Each quote form takes about 15 minutes to complete. It might be well worth your time — for example, if the entire shopping process takes you two hours and you save $800, you’re effectively earning $400 an hour.
When you use these sites, you might not get instant quotes. Some companies may contact you later. Some that are not “direct providers” might put you in touch with a local agent who will then calculate a quote for you.
Step 5: Gather Company Information
While you’re researching companies, take careful notes so you can easily make price and coverage comparisons. Keep a list of:
- Annual and monthly rates for the different types of coverage. Make sure to keep the coverage limits the same so you can make apples-to-apples comparisons for cost and coverage.
- The insurance company’s 800 telephone number so you can get answers to questions you couldn’t find online.
- The insurance company’s payment policy. When is the payment due? What kinds of payment plans are available? What happens if you’re late making a payment?
Step 6: Work the Phones
Once you have gathered information online, make some calls. Contact those companies from which you haven’t been able to get an online quote. Doing the research by phone can actually be easier and faster than on the internet, provided you have your driver’s license and vehicle registration close at hand. When you get a quote over the phone, be sure to confirm the price by asking the representative to email the quote to you.
Step 7: Look for Discounts
When you’re shopping around, make sure you explore all your options related to discounts. Insurance companies give them for such things as a good driving record, your car’s safety or security equipment, and certain occupations or professional affiliations. Some companies now offer lower rates if you enroll in “pay as you drive” plans. Some will give substantial discounts for young drivers in the family who have high grade point averages. Also consider using the same insurance company for home and auto policies, which will usually get you a better price.
Step 8: Assess the Companies
You now have most of the price and coverage information you need to make a decision. You can see which company’s coverage is least expensive, but it’s important to keep in mind that cost isn’t the only basis for choosing an insurer. How do you know which company is financially sound? How do you find out if an insurance company is going to treat you right — particularly in the event of a claim?
Here are some places to check to develop a clearer picture of an insurance company’s track record for fairness, financial stability and customer service.
- Use the National Association of Insurance Commissioners’ Consumer Information Source to access information about insurance companies, including closed insurance complaints, licensing information and key financial data. You also can visit consumer complaint ratios and basic rate comparison surveys.
- Consider contacting an independent insurance agent for additional information about a company.
- Check out the financial strength ratings for an insurance company by referring to the ratings from A.M. Best.
- Review consumer satisfaction surveys from J.D. Power and Consumer Reports (subscription required).
- Ask friends and family about their insurers and whether they’re satisfied with them. In particular, ask them how their insurance companies treated them when they had a claim. Did they get fair, straightforward service? Or was it a hassle to get the matter resolved?
- Step 9: Review the Policy
When you’ve done your research and zeroed in on a company, read over the main points of the policy. In addition to verifying that it contains the coverage you’ve requested and priced, it’s a good idea to find out if the policy states that “new factory,” “like kind and quality” or “aftermarket parts” may be used for body shop repairs, according to the Insurance Consumer Advocate Network. If the policy has such a requirement, think hard about whether this is the company for you, particularly if you own a relatively new car that you plan to keep for a while. In this case, it’s best to know at the outset that the insurer will pay for original manufacturer parts rather than try to fight over the issue later when you have a claim.
- Step 10: Cancel Your Old Policy
After you have the auto insurance policy you want, cancel coverage with your existing insurance company.