Auto Insurance
Buyer's Guide

Shopping for and purchasing auto insurance can be

a complex process. It's not like buying an online

airline ticket. There are many factors to consider:

price, company financial strength, claims handling, customer service,

coverage limits, deductibles.

To what extent are each of these items critical to your final carrier selection? How much pertinent information can you obtain by shopping online? To what extent do you need an agent to help guide you? These are all important factors that will impact your insurance-buying experience.

Following are several questions you should ask yourself regarding the process of shopping and purchasing an auto insurance policy:

Question #1: How important is brand?
We all know the major players in the auto insurance industry -- the ones spending hundreds of millions of dollars per year on advertising. Their objective is to enhance consumers' "top-of-mind-awareness" for their company. In other words, when it comes time to shop, which insurers will the consumer remember above all others?

How critical is a carrier's brand to your shopping list? Does a strong brand equal a financially strong company? Or, will you want to dig a little deeper and possibly find carriers that aren't household names, but might provide greater value-added service for your needs?   

Question #2: How important is price?
There is no doubt the potential price savings is the single largest factor in most insurance-buying decisions. The more you shop, the more likely it will be that you can find significant savings from a variety of companies. Some consumers will shop their auto insurance policy every year. Some consumers are content finding a competitively priced carrier, and sticking with that company for many years -- even if rates may fluctuate -- provided they are receiving adequate service. 

What is your price-point? In other words, how much potential savings would you need to realize before you would be compelled to switch to that carrier, no matter what their brand image, financial rating or service issues?

Question #3: What coverage is right for you?
Many auto insurance shoppers simply want to buy their state's minimum required limits. If you have any assets to protect, this is a foolish decision. Insurance is designed to protect your assets. Your insurance company enters into a contract with its policyholders, agreeing to defend you in case you are in an accident and you are sued by someone else for damages or liability. Why would you expose your assets to a potential lawsuit, when your insurance company offers to protect you? Since the law requires you to carry insurance, you might as well make sure your coverage is adequate.

Familiarize yourself with some of the basic insurance coverage terms and whether you will need these products. In particular, understand deductibles, medical expense coverage, rental car coverage, uninsured motorist coverage, umbrellas/excess coverage. These are all aspects of your auto insurance policy that may benefit you, depending on your specific needs.

Insurance agents and many service reps are trained to assist consumers in understanding what coverage limits are right for their needs. If you are not clear on what limits are best, you will want to seek the advice of an agent.

Question #4: How does your driving record impact your rates?
Many consumers are confused about how and why one's driving record will have such a major impact on their auto insurance rates. It's really simple: insurers use what is called the "law of large numbers" to predict the likelihood that someone may incur a loss. Insurance actuaries crunch gobs of data in order to determine each driver's potential risk. Of course, there is no way to guarantee that any individual will have an accident, that their vehicle will be stolen, etc. But there are many indicators that will cause a driver to be a higher risk on average: age, gender, number of miles driven...and driving record...are some of the strongest indicators of one's potential for an insurance claim.

Question #5: Is it OK if I fudge some of the information on my application?
Abolsutely not. Some applicants will omit information about citations or accidents on their application. Some will under-estimate the mileage or the driving distance to work. Your insurance company will find out if you are fibbing. There are national and state databases that insurers tap into that will reveal one's accurate driving and claims history. If you have "enhanced" your driving record on the auto insurance application, the carrier will either increase your rate, or they will cancel your policy for misrepresentation.

Question #6: How many competitors' quotes should I obtain?
There is no definitive answer to this question. Some consumers are statisfied with one quote; others won't rest until they've obtained as many quotes as possible. Sites like ours offer an excellent way to shop, because we can provide numerous quotes at one stop, with several reputable carriers. The number of potential companies eager to take your business will often depend on your state. Regulatory challenges and the overall business climate will impact the number of companies willing to write auto insurance in a particular state.

Question #7: What are some resources for comparing insurance companies?
Obviously, quote comparisons are important. Available discounts are important, as well. Does the company reward good students? Do they offer multi-policy discounts? What about discounts for vehicle safety features? Additional information that may be helpful might include a company's A.M. Best rating (which gauges the carrier's financial strength) and the consumer complaint ratio. Some of this information may be available on your state's insurance department web site.

Beware of the "hate-filled" web sites that spew negativity against various insurers. These postings are almost always written by an angry consumer who did not get their claim paid to their liking. A better option would be to simply ask around. Ask your friends, neighbors and family members about their insurer. Some of them will certainly have input, pro or con, about various carriers.

Question #8: Can I cancel my old policy before its renewal date?
Great question! Many policyholders believe they have to wait for their policy renewal date to terminate their policy. This is not true. Any consumer may cancel their policy at any time -- and their prior company should refund any unearned premium.