How to Shop for a Car Insurance Company (7 Easy Steps)

Whether you’re unsatisfied with your current auto insurance company and looking to switch to a new one or moving to another state and need to find a different carrier, shopping for car insurance might seem like the most daunting task on your to-do list.

But, it doesn’t need to be.

Learning how to shop for car insurance and finding a company that suits the needs of every driver in your family can be accomplished in a few, simple steps. Today, we’re going to tell you everything you need to know about how to shop for car insurance, including some important questions you need to ask an insurance company before making your final pick.

To get things started, compare insurance quotes right away using our free online rate calculator.

Alright. Let’s jump right in!

Why Insurance Matters

If you’re on the fence as to why choosing a car insurance company is so essential in the first place, you’re not alone. Yet, the fact of the matter is that choosing the right car insurance company is one of the most important decisions you will ever make.

Why, you say? We’re glad you asked. Let’s get into it.

– The Purpose of Auto Insurance

In simple terms, auto insurance exists to offer a financial and economic security blanket to you in case you ever get into an auto accident. It protects you in case you get into a wreck and suffer injuries to your property or person, incurring damages like medical bills, lost wages, and potentially, attorney’s fees if you must take legal action.

The vast majority of states require anyone who owns a vehicle to purchase and maintain an auto insurance policy. In fact, every state except for New Hampshire and Virginia require vehicle owners to carry the minimum amount of auto insurance as required by state law. Furthermore, some lenders mandate that lendees buy an auto insurance policy in case of unexpected damage to the car.

The consequences of not purchasing and maintaining a state minimum auto insurance policy range in severity from lesser penalties like fines and community service to harsher ones like vehicle impoundment and arrest.

In short, you can’t afford not to have auto insurance.

– What Happens if You Are Uninsured and Get in An Accident?

Now that you know most states have strict requirements and penalties in place to ensure vehicle owners purchase and maintain current auto insurance policies, it’s time to examine what could happen if you are uninsured and get into an auto accident.

Spoiler alert—it’s not good.

– No-Fault States

A dozen states adhere to the no-fault car insurance system. This means that if you get into a car accident and are injured as a result, you must initially go through your own insurance company to receive compensation for any damages incurred.

The no-fault system can make it more difficult in some cases to seek compensation outside your own insurer, especially if the other driver was at fault.

If you’re injured and things like medical bills and lost wages start piling up, you could find yourself in a real bind. This rule also means that even when you’re at fault for an accident, the other driver typically can’t seek damages from you unless their injuries are severe based on the state’s legal threshold or if their medical bills go over a set amount.

However, in the event the other driver did file a lawsuit against you and you are uninsured, you could be held personally liable to compensate the other party for damages.

The no-fault states are:

• Florida
• Hawaii
• Kansas
• Kentucky
• Massachusetts
• Michigan
• Minnesota
• New Jersey
• New York
• North Dakota
• Pennsylvania
• Utah

– Tort States

The rest of the states that do not adhere to the no-fault system are known as tort states. In tort states, if you are at fault for an auto accident and the other party is injured, that individual has the legal right to file suit against you for all damages incurred. These damages include things like medical expenses, lost wages, pain and suffering, and property damage.

So, if you are uninsured and find yourself in this scenario, you will be held personally liable to compensate the other driver for these damages. Basically, you would have to foot the bill completely out of pocket. If the case were to go to trial and the court awarded the other driver a judgment against you, they have numerous ways to satisfy the judgment, including wage garnishment. 

– The “No Pay, No Play Rule”

Now, let’s say you were uninsured and got into a car accident that was not your fault. Even if the fault rests completely with the other driver, multiple states have another rule known as “No Pay, No Play”.

In “No Pay, No Play” states, if you did not have a current auto insurance policy when the accident occurred, you have certain restrictions limiting the amount of damages you can seek for your injuries.

You may receive compensation for medical expenses, but you will not be able to receive damages for pain and suffering

The train of thought behind “No Pay, No Play” is that if you do not carry an auto insurance policy that could cover the other driver’s losses in the event of an accident, you are not entitled to receive total benefits from the other party’s insurance even if you are the innocent driver.

The “No Pay, No Play” states are:

• Alaska
• California
• Iowa
• Kansas
• Louisiana
• Michigan
• New Jersey
• North Dakota
• Oklahoma
• Oregon

– Possible Penalties

If you get into a car accident and it is discovered that you are not carrying a valid auto insurance policy, there are various possible penalties that your state could impose. Most states impose at minimum hundreds or thousands of dollars worth of fines.

Furthermore, the DMV in the majority of states also inflicts penalties such as revoking or suspending your driver’s license anywhere from a few months to a full year.

Without further ado….

7 Easy Steps to Find the Cheapest Car Insurance Rates

There are hundreds if not thousands of companies vying for your business. How do you know which one to choose and which one will provide you enough coverage with the cheapest auto insurance rates?

We’ll take the guess work out of the process if you follow these seven steps below:

#1 – Determine Your Coverage Options

Alright. Now that you have a solid understanding of why it’s so essential to purchase and maintain a current car insurance policy, it’s time to delve into how to shop for car insurance.

The very first thing you need to do is determine your coverage options so you can separate mandatory policy requirements from the potential add-ons you might want to include.

Ready to dig deeper? Let’s go!

– Types of Coverage

The table above goes over the different types of coverage options available to you, and whether they are required or optional. As you can see, liability insurance is required across the board, while other coverage requirements vary based on your state or your vehicle ownership status.

Then there are options like GAP and PUP policies which are always optional. It’s really up to you to determine which coverage you require beyond your mandated state coverages. That said, it’s always wise to ensure you have sufficient coverage that aligns with what you can afford, the cost of your car, the state you reside in, and any additional coverages you might have.

Let’s take a closer look at the primary coverage options available to you when choosing a car insurance company.

– Liability Coverage

Liability coverage offers compensation for injuries and property damage sustained by other drivers, passengers, and/or pedestrians in the event you cause an auto accident. This type of coverage does not provide compensation for any damages you incur following an accident.

Most states set a state minimum for liability coverage, typically from $15,000 to $20,000 per person and $40,000 to $50,000 per accident.

Here are average rates by state for liability coverage:

– Collision Coverage

If you get into an auto accident, collision coverage is there to pay for the cost of repairing or replacing your vehicle, regardless of who caused the accident. Collision coverage comes into play if your car hits another vehicle, if you collide with a stationary object, or your car rolls over.

Here are average rates by state for collision coverage:

– Comprehensive Coverage

Comprehensive coverage offers compensation for damages to your car that take place when it is not in motion, such as when you have it parked somewhere. This type of coverage pays for repairs from events like fire, theft, or a falling tree.

Here are average rates by state for comprehensive coverage:

– Uninsured/Underinsured Coverage

While most states require drivers to carry the minimum required amount of auto insurance coverage, this doesn’t stop many drivers from going out on the open road uninsured. Even when another driver obtains the state minimum, this is may not be enough to cover the cost of your damages should you get into an accident with that individual.

Uninsured/underinsured coverage is only required in a few states and is typically a policy add-on. If you get into an accident with another driver who is at fault for the accident but does not have any auto insurance (or insufficient insurance to cover all your damages), your uninsured/underinsured motorist coverage will make up the disparity.

– Personal Injury Protection (PIP)

Remember when we talked about no-fault insurance states, where you have to go through your own insurance for compensation even if you were the accident victim? Personal Injury Protection or PIP coverage will cover your medical bills in the event of an accident, along with expenses incurred by anyone else in your vehicle who was uninsured at the time of the collision.

PIP coverage is mandatory in no-fault car insurance states.

– Medical Payments Coverage (MedPay)

Medical Payments Coverage is much like PIP in the sense that it covers medical costs for you, your passengers, and any authorized drivers. However, MedPay covers fewer expenses than PIP.

#2 – Choose Your Policy Type

Once you’ve determined which coverage options you want on your policy, the next step in how to shop for car insurance is to choose your policy type.

Let’s take a quick look at the main types of policy options available.

– Traditional Policy

Most drivers have traditional auto insurance policies. If you go the traditional route, any potential insurer you look at will base their quotes for your coverage based on factors such as your age, driving history, gender, credit score, etc. The higher level of risk you pose based on your background and driving history, the steeper your rates will be.

– Usage-Based Policy

Usage-based or Pay-As-You-Drive policies are offered by select auto insurance carriers. Unlike traditional policies that assess the risk to insure you based on factors like your age and driving history, usage-based policies take a whole different approach.

If you select a usage-based policy, the insurance carrier will give you a telematic device to install in your car. The device monitors your driving patterns and any bad habits like quick braking or accelerating. If you are a low-risk driver, this type of policy could save you thousands of dollars in premiums in the long run.

On the other hand, if you frequently engage in risky driving, you probably won’t save much at all with this kind of policy. Not all companies offer usage-based policies in every state either.

The moral of the story is, stay safe on the road and foster good driving habits, and you’ll have better rate options all around.

– Per-Mile Policy

Per-Mile policies are similar to Usage-Based policies in that they also employ a telematic device to monitor your driving. However, Per-Mile insurers only care about how often or how little you drive your vehicle.

Per-Mile policies are the new kid on the block and are not offered in all states or by all insurance carriers. Companies that offer Per-Mile coverage still assess your rates based on the same factors as traditional insurers, but you have the potential to save later once the device tracks your level of vehicle usage. If you don’t drive much, you’ll probably see some significant savings.

If you drive an average amount or have a long commute though, this policy type probably isn’t for you.

#3 – Decide How You Want to Purchase Coverage

The next step in choosing the right car insurance company is to decide how you want to purchase your coverage. There are several, primary avenues through which you can purchase your car insurance.

Let’s take a closer look.

• Broker: Brokers work with various insurance companies to help you secure the policy that is right for you. They represent you as the insured and serve as an intermediary with the insurance carrier to help you get coverage.
• Independent Agent: Independent agents are very similar to brokers, however, they actually represent the insurance companies themselves. Independent agents typically work with several carriers and help you determine which is a good match to get you the coverage you need at the price you want.
• Captive Agent: Captive agents work with one insurance company only. For instance, if you were to walk into a Geico office to speak with an agent, you would be dealing with a captive agent. This is the route most consumers take to secure a policy.
• Direct Online or by Phone: Some auto insurance companies let you interact directly with them to sign up for your auto insurance policy and secure the coverage that best meets your needs. This way, you don’t have to speak with an agent, but you probably won’t get as many questions answered as you would when interacting with a company representative.

#4 – Shop Around (Plus Ways to Save!)

The next thing you need to do for how to shop for car insurance is to do some shopping around. It’s always better to compare car insurance companies and see which offers you the best rates before making a final decision.

– The Benefits of Rate Comparison

You might be wondering why shopping around is so important. After all, isn’t it easier to just find a carrier with rates you like and stick with them?

Here’s the thing.

The factors that car insurance companies use to assess your ratings are in continuous fluctuation. For instance, maybe you got into an auto accident or perhaps your credit score is looking up.

Different carriers could either raise or lower your rates depending on these types of factors, so the premiums you can expect to pay vary widely according to the insurer. You wouldn’t want to miss out on a better rate deal by picking the first carrier that offers an acceptable premium.

– Top Ways to Save on Coverage

There are plenty of ways to save on coverage so you can ensure the security and safety of all the drivers in your household without breaking the bank.

Let’s take a closer look!

– Discounts

The table above shows the many potential types of discounts you could receive and need to ask about when shopping for car insurance. Discounts can make a world of difference in the ultimate premiums you pay, so be sure to ask about these if applicable when hunting for policies.

The graph below details the top providers that offer the most discounts to insureds.

– Compare Costs

You should compare car insurance companies every six to 12 months to ensure you have the coverage you need at the cost you require.

While you could spend hours getting individual quotes from auto insurance companies, a comparison tool will save you considerable time and effort. Our online rate tool offers a list of quotes as soon as you input your information.

Take a look below at the data our researcher’s collected from the Arizona Department of Insurance’s website. There’s an almost $3,000 difference in average annual premiums between the most and least expensive insurer listed!

This is why it pays to check out different quotes before making a final decision.

– Consider a Higher Deductible

Another way to save big with how to shop for car insurance is to consider a higher deductible. Your deductible is the amount you pay before your insurance policy comes into play. If you ask for a higher deductible, you could lessen your overall costs considerably.

For instance, having a $1,000 deductible could save you as much as 40 percent and beyond in overall insurance costs. If you do select a higher deductible, you just need to make sure you have sufficient funds saved to cover costs if a claim arises.

– Lower Coverage on Older Vehicles

Another way to save when shopping for auto insurance is to lower your coverage on older vehicles. For instance, if you have an older car, you might consider taking comprehensive or collision coverage off your policy for that vehicle.

In reality, if your car is worth under 10 times the cost of your premiums, these add-on coverages could be draining your bank account needlessly. Kelley Blue Book is a fantastic tool to determine the value of your car so you can select the right coverage amounts when choosing a carrier.

– Purchase Your Auto and Homeowner’s Insurance From the Same Carrier

You could also save big by purchasing your homeowners and auto insurance from the same carrier. Numerous insurance companies will offer you rate reductions if you purchase two or more types of coverage from them.

You can also potentially enjoy a rate reduction if you insure more than one vehicle with the same insurance carrier.

– Maintain Your Credit Score

Having a good credit score can substantially lower your rates in the long run. The majority of insurance companies factor your credit score into their rate pricing. Studies have even shown that individuals with healthy credit scores file fewer claims.

Simple approaches to maintaining your credit score include paying your bills when due, not securing more credit than you require, and always keeping your credit balance as low as you can.

– Inquire About Group Insurance

Some auto insurance carriers offer lower rates to individuals who have a group-sponsored plan through their employer, alumni, business, or professional entities, or similar organization. If you think you might be eligible for group insurance, inquire with your employer or any associations you are apart of to see if this is a potential route for you.

– Low Mileage Discounts

Certain auto insurance carriers have discounts for drivers who drive under a certain average amount of miles annually. This discount could also be relevant if you carpool to work.

– Low-Income Programs

Three states offer low-income car insurance programs for drivers who earn below a particular income threshold. These states and programs are:

• California (CLCA)
• Hawaii (Low-Cost Disability Auto Insurance Program)
• New Jersey (SAIP)

#5 – Research the Insurer

Before you make your final decision and select the carrier you want to go with, the last (and arguably most important) step of how to shop for car insurance is to research the insurer.

If you’ve obtained some initial quotes and have narrowed things down to your short list of preferred insurance providers, you need to confirm that they are legitimate, have excellent financial ratings, and are highly rated by customers.

If a company has poor financial ratings, they may not have the ability to pay out your claim if one does arise. Likewise, if an insurer has low ratings from consumers, you could end up having the same, unsatisfactory experience down the line. It’s best to know exactly what you’re dealing with so you can make the right decision to fit your insurance needs and avoid any unwelcome surprises.

– Licensing

Not all insurance carriers are licensed to operate in all states. You should also purchase insurance from a company licensed in the state in which you reside. Insurance purchased from a provider not licensed in your state will be invalid.

Another reason you always want to stick with a licensed state insurer is that if an issue ever arises, you can get in touch with your state insurance department and receive assistance without issue. You can find out whether the insurance carriers you are considering are licensed in your state by visiting the National Association of Insurance Commissioners (NAIC) website and navigating the search bar.

The table below includes the websites and contact information for every state’s insurance department. If you have additional questions, you can easily get in touch with your state insurance department to get all your queries answered.

– Financial Ratings

The first kind of car insurance company ratings you need to examine are financial ratings. You want to make sure that any insurance carrier you’re considering is solvent and in a stable place financially to handle any claims that might arise.

Your best resource for any insurance carrier’s financial ratings is the independent rating agency A.M. Best. All you need to do is create a free profile on their website, search for the insurance provider in the search bar, and see A.M.’s grade and the outlook for that particular carrier.

The table below includes data our researchers gathered from A.M. best detailing the insurance carriers with the best and worst ratings.

Check it out!

– Customer Ratings

Once you’ve confirmed whether the insurance providers on your short list are licensed in your state and have excellent financial ratings, it’s time to move on to customer ratings. Wouldn’t you want to know what other consumers think of your preferred insurance provider? Of course!

The good news is, there are a number of independent companies who put together comprehensive, annual reports to offer consumers customer ratings for insurance providers all over the country.

One such company is JD Power. Each year, JD Power releases a comprehensive insurance study in which they rank insurance carriers based on customer satisfaction.

The example below is last year’s Auto Insurance Study for the state of California. Visit JD Power’s website to find your region and the top rated insurance carriers in your area by clicking here.

– Complaint Ratio

Another thing you need to know when choosing a car insurance company is the complaint ratio for that carrier. While a number of the state department of insurance websites offer this information to the general public, some are less comprehensive and don’t make the information easy to obtain.

Check out the table below, detailing each state and if its state department of insurance website offers complaint information or not. If they do, go the website for your state’s insurance department (listed previously) to get the complaint data for any carrier you’re considering before making a final decision.

– Consumer Reports

Another fantastic data resource to assess what consumers really think of any given insurance carrier is Consumer Reports. The table below details Consumer Reports’ ratings for top insurance carriers nationwide. If you want to access additional information, their website does require a subscription to get back full results.

#6 – Questions to Ask Yourself

Prior to making your final choice when shopping for car insurance, here are some key questions the Insurance Information Institute recommends you should ask yourself beforehand.

• How often do you drive?
• Will you be driving your vehicle for work?
• What type of vehicle do you drive?
• How much do you love your vehicle?
• Where do you live and park your vehicle?
• Will anyone else be driving the car?
• What are your legal obligations in terms of state minimum required coverage?
• Is your vehicle financed or leased?

#7 – Questions to Ask a Car Insurance Company

The NAIC has published a helpful guide, including essential questions you need to ask a car insurance company before purchasing a policy with them. They are:

• What coverages do my state require me to have?
• What is the minimum amount of liability insurance I am required to have under my state’s law?
• Are these limits of liability sufficient to cover me in case I get into an accident and am found at fault?
• What is the price difference if I purchase over the state minimum required amount of liability coverage?
• Do I need to purchase comprehensive and collision coverage?
• What deductible should I carry for comprehensive and collision coverage?
• Does this policy cover me if I allow someone else to drive my vehicle?
• Does this policy cover me if I get into an auto accident while I’m on vacation?
• Does this policy cover me if I get into an auto accident while traveling on business?
• If my car is totaled in an accident, how does your company assess the value of my vehicle?
• Am I able to select my preferred body shop or glass shop for repairs? Does the policy cover the costs of the original manufacturer’s parts or aftermarket parts?
• If my car is being repaired, will my policy cover the cost of a rental car while I wait? Is there a limit to the time the policy will cover rental car costs?
• Will the policy cover the costs of having my vehicle towed to a body shop or garage?
• What would my savings be with a higher deductible?
• What discounts do you offer?
• What other kinds of property does your company insure? Will I receive a discount if I purchase both policies?
• What payment options do I have (monthly or quarterly)?
• How do I report a claim if I get into an accident? Does your company offer a 24-hour claims service?

Frequently Asked Questions

Here are your answers to some frequently asked questions all insureds need to know:

1. How can I file a complaint against an auto insurance company?

You can easily locate your state on the NAIC’s consumer complaint map, which will send you to your state’s website with details for filing your complaint. Your state’s department of insurance site will lay out exactly how to file a complaint against a car insurance company.

2. How much coverage do I need?

Each state has its own minimum required coverage amounts. Go to your state’s insurance website to see what requirements you need to meet for valid coverage.

3. Is there a limit on how often I can switch insurance carriers?

No, there’s no limit. Just be sure you don’t let your policy lapse when switching.

4. Am I able to purchase homeowners insurance from my auto insurance company?

Yes, you absolutely can if your insurance company offers both kinds of coverage. In some instances, you might even get a discount for purchasing both types of insurance from the same company.

5. How can I be sure I’m paying a fair price for coverage?

Getting a car insurance rate quote comparison is the fastest and simplest way to be sure you’re not paying an overinflated price for coverage. Make the time to look over your policy and current coverages at least once every year to ensure everything still meets your driver needs and no changes should be made.

To make this part just that much easier, the table below details the average annual premiums for full coverage nationwide. Full coverage includes liability, comprehensive, and collision coverage types.

Take a look for yourself!

While it may take some time and research, learning how to shop for car insurance and finding the carrier that best suits your needs is worth its weight in gold.

If you want to make sure you’re paying a fair price for auto insurance coverage, kick off your journey today by performing a quote comparison from multiple companies in a single report with our online rate tool. Enter your zip code below for your free quote!