Normally, I love shopping. Whether I’m shopping online or browsing the racks at my favorite boutique, I enjoy the experience of retail therapy when my budget allows.
And then there’s shopping for car insurance.
I feel that shopping around for the best insurance rates is one of the many duties of a responsible adult. And, even though my husband and I budget for car insurance in our household expenses, I still cringe when I write that check.
The Importance of Shopping Around
I know that shopping around for car insurance is about as exciting as watching paint dry, but there’s a reason why I force myself to do it on an annual basis. For one thing, the rates insurance companies charge customers are dependent on a variety of factors, many of which are in constant flux – your driving record, your credit score, even your age, just for example. To get an update quote in the quickest time you can compare car insurance online. There are more obvious factors that affect your insurance rates, like moving to a new state or buying a new vehicle. Even though you may have been with Insurer A for years, that doesn’t mean Insurer B may offer rates more suited to your life today. And, it goes without saying, better rates equal more money back in your pocket.
Getting The Right Coverage
The amount of insurance you need varies from state to state, but in general, it falls into six categories:
- Bodily Injury Liability – this coverage that protects your personal assets in case you cause an accident that results in an injury to a driver or passengers in another car, or pedestrians
- Personal Injury Projects – Also known as medical payments, this covers you and your passengers in case of accident, covering everything from medical bills to lost wages to funeral expenses
- Property Damage Liability – similar to bodily injury liability, this coverage protects your assets in accidents resulting in damage to another’s property, including vehicles, street lamps, or buildings
- Collision – if you’re involved in an accident and need to get your car fixed, you’ll need collision insurance; this is typically the type of insurance that carries a deductible
- Comprehensive – this coverage covers everything from flying debris on the highway to a theft in a store parking lot
- Uninsured Motorist – Although all 50 states require drivers to carry insurance, not everyone listens; uninsured motorist coverage protects insured motorists in these gaps
You can also add roadside assistance or rental reimbursement, although these policies are not required by any state insurance programs. They’re completely ancillary; in fact, many vehicle manufacturers and even agencies like AAA offer this coverage for their customers and members complimentary.
Decide On A Deductible
In many respects, deciding how to much to pay for car insurance depends on how much coverage you want to have. For example, if you’re driving an old vehicle, you may opt out of collision insurance altogether (if your state allows it). But there’s another way to limit your car insurance premiums: increasing your deductible.
The deductible is the amount of money you’ll pay out of pocket if you file a collision or comprehensive claim with your insurance company. More insurers have a variety of tiers to choose from when it comes to a deductible. For example, years ago I had a $250 deductible on my auto policy, which meant – had I been in a crash – I would have only had to pay $250 to get my car repaired. Not bad… except when you consider that in all the years I had the policy, I never had one accident. Instead, I paid a huge premium every six months in order to have the privilege of a low deductible. In many ways, increasing your deductible in exchange for a lower premium is like gambling, but it’s one that can pay off. I’ve since increased my deductible to $1,000, but have also managed to shave off $700 from my annual insurance premiums.
Decide On Your Service
You’ve probably heard of companies like eSurance and The General, that offer discount car insurance with ultra-low premiums. While it’s true that these companies do offer good prices, there’s a reason why they’re often called cut-rate providers by their competitors. Some discount insurers make it more complicated for you to file a claim, since you won’t have a personal agent or staff to do it on your behalf. While I’m all for saving money, I know that if I ever have an emergency, I’ll be more comfortable knowing that my agent will be there to guide me through the process in person. I know I pay more for this privilege, but to me, it’s well worth it.
Pinpoint Your Discounts
Car insurance policies are rife with discounts. There’s a discount for being a good driver, naturally, but there are also discounts for living a certain distance from your work, bundling your auto policy with your home or life insurance, or installing certain equipment (like snow tires or an alarm system) on your vehicle. You never know what unique discounts an insurer may offer, so the best option is simply to ask.
Timing Is Everything
Even something as simple as deciding on how and when to pay your insurance policy can help you save money. For example, my current insurer offers me a discount if I pre-pay for my entire six-month policy before it takes effect. An old insurer gave me a nominal discount for automatic payments through my bank. These discounts are typically less than five percent of your overall premiums, but isn’t five percent of $400 better than nothing?
Timing can even be a factor when it comes to securing low rates in the first place. For example, if you have points on your license that are about to expire, or you’re about to have a birthday (drivers get discounts when they reach a certain age, typically 25 for women and 26 for men), you may consider waiting to begin a new policy to secure the best possible rates.
And one more note – it’s a misnomer that you have to wait until one policy expires before purchasing another. The first time I shopped around for car insurance, I thought I would have to wait until my existing policy was up. Instead, I quickly learned that I could switch providers at any time. Even better, my new insurer called my old insurer to cancel, helping me avoid making that uncomfortable phone call.
Compare, Compare, Compare!
In order to truly shop around, you have to call more than just one or two providers. To get a good idea of what rates are available to you, try calling a variety of insurance companies. For example, I tend to call big national providers – like AllState and State Farm – as well as non-agent providers like Progressive and Geico; I also call regional and local insurers.
When you start comparing, you should be looking at similar policies. In other words, don’t compare a policy with $300,000 bodily injury coverage to another with just $100,000 bodily liability; that’s like comparing apples to oranges.
What you’re also comparing here is the reputation of each individual insurer. Just like all policies are not created equal, neither are the providers. Standard & Poor’s assigns grades to insurance companies, much like your high school history teacher. You can view these at the website Insure.com. These grades reflect everything from industry reputation to the insurer’s financial stability (ie, their ability to actually cover your costs if necessary).
Once you make your decision, let your new provider know that you are open to outside competition – this can ensure that your agent (or, if you opted for an agent-less company) is proactive in guiding you towards discounts in the future.
Reader, how often do you shop around for new car insurance rates?