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UPDATED: Mar 19, 2021
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You just bought an awesome car. Brand new, not cheap.
You’re really proud of it. You show it off and drive it everywhere. Chances are, you haven’t given a second thought to your new insurance payment.
It could be a lot bigger than your last one.
Having the right insurance and saving money on your insurance are two of the smartest financial decisions you can make.
The goal is to get your premium as low as possible while making sure your coverage is as valuable is as possible–all those savings on a suspiciously cheap policy can be erased in an instant when you find yourself paying out of pocket for something that wasn’t covered!
The good news is you can do this easily. It just helps to know each company selects which drivers they want to insure, and choosing the right company for you. Let’s get started!
How Are Premiums Calculated?
What you failed to consider was that insurance companies use a complicated methodology to determine who pays what, and it will vary considerably depending on each situation.
In your case, a new, expensive sports car is going to be costlier to ensure in comparison to your friend’s older, safer minivan.
And those are just some of the factors.
Underwriters exist to take a look at the risks for every particular driver profile and determine what the appropriate premium should be, weighing the potential risk (the probability the insured driver will make a claim) versus the amount the insured pays in premiums.
Underwriting guidelines affect what you will pay, whether you realize it or not.
Many factors contribute to this decision. Some of them are beyond your control.
You might have command over your driving record but, unless you’re endowed with magical powers, you cannot change your age.
Some of the factors used in establishing underwriting guidelines are:
- Your age
- Your gender
- Your marital status
- Personal credit history
- Your previous insurance coverage
- Location of your residence
- Your driving experience (how long you’ve been driving)
- Your driving record (infractions or accidents which you’ve been involved in)
- Make and model of your car
- Mileage driven in a year
These are just a few of the many factors insurers look at.
However, their importance in affecting your premiums will vary by provider; some companies might heavily favor customers who live in rural areas, while others might not give much weight to your personal credit history.
Because of all these variables, shoppers really need to explore all available options. Getting online quotes from multiple providers is a must-do.
Enter your ZIP code below to view companies that have cheap insurance rates.
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The Truth About Auto Insurance Providers
Here’s The Truth: There is no single auto insurer that works the same for everybody.
Since drivers each have different characteristics and needs, the most appropriate insurance will depend on each particular situation and the available offerings in the market.
Different insurers have preferred customer types and focus their products and services on enticing these to sign up.
Are you tech-savvy and prefer to manage your accounts online? Then you might be better off selecting a newer company with a seamless online and mobile experience.
Do you prefer a well-established company with a strong financial reputation? You might prefer to look into the larger, older insurance companies.
Do you use your car sparingly and wish to pay for the number of miles you actually drive? Maybe usage-based insurance (UBI) is for you.
In this sense, we always encourage consumers to assess their car insurance needs and know their circumstances.
With very few exceptions, nearly every state in the nation has minimum requirements for car insurance coverage.
You need to familiarize yourself with these requirements as your jumping off point.
Even though it’s tempting to go with basic liability coverage to meet the mandated state minimums, this can lead to exorbitant out-of-pocket expenses in the event of a collision.
Remember, the company (or coverage) with the cheapest rate is not always your best option. Low premiums can come back to haunt you if you don’t have sufficient coverage.
Go online. Research. Peruse each company’s website.
Get quotes. Compare pricing.
Read up on car insurance requirements.
Save on Auto Insurance Premiums Today
You’ve seen the ads. Every auto insurance company guarantees a certain amount of savings if you switch over to them from your current provider.
There isn’t a way to refute these claims; they very well may be correct.
In fact, many insurers do offer savings by way of discounts to those customers that change companies.
However, it’s more probable that the savings being touted come from changes in coverage levels and policies rather than merely switching carriers.
As such, it’s always a good idea to periodically review your current coverage.
Your driver profile now is probably not the same profile you had when you first bought your insurance. Neither is your car; older cars If your premiums are too high, you might have more insurance than needed.
Make sure you’re paying for the exact level of coverage you need. Some insurers, like Progressive, even allow you to name what amount you wish to pay in premiums and then offer coverages available in that price range.
Another way to save is by exploring all the different discounts insurers offer. These discounts can substantially reduce your premium and are available from all major car insurance providers.
Of course, discounts vary significantly from company to company; some might offer a large selection of options while others only offer one or two.
Some of these discounts can be related to:
- Driver’s History (safe driving, driving courses, recent accidents)
- Vehicle Features (airbags, alarms, anti-theft systems, anti-lock brakes)
- Payments (online quoting, full premium payments, direct debit)
- Customer Traits (homeowner, multi-policy, multi-car)
In addition, providers will favor certain types of drivers, offering specific discounts to their preferred customer profiles.
For example, veterans are more likely to find attractive savings options with USAA and GEICO, while customers affiliated with certain membership organizations might look at Esurance and AARP.
Very few insurers automatically apply discounts to policies, making it the customer’s responsibility to choose the applicable ones.
This extra bit of effort is worth the potential savings.
The Best Car Insurer In A Nutshell
It’s important to understand how car insurance companies operate. Knowing how premiums are determined and recognizing the different ways you can save are essential if you wish to have appropriate coverage at an affordable price.
Online shopping and comparing quotes is a necessary part of the process, but hardly the only one. Besides pricing and policy options, other factors need to be considered to make a full, informed decision.
Looking at an underwriter’s financial ratings is essential when considering a company’s ability to pay out claims.
The grades given by credit agencies (A.M. Best, Fitch, Moody’s, Standard & Poor’s) will inform you about an insurer’s financial strength and their capacity to meet their obligations.
Furthermore, it’s important to look at a company’s overall customer and claims processing satisfaction, as well as their registered complaints.
Searching out ratings for these factors paints a clearer picture of an insurer’s relationship with their customers.
For this, you can look at the NAIC complaint ratio and J.D. Power’s customer satisfaction studies.
You can check out our article, The Best Car Insurance Ratings & Reviews, to get a better idea of everything that goes into determining what company might be best for you and make your shopping experience a bit easier.