Jessica Sautter is a Content Writer for CarInsuranceCompanies.com with a Bachelor’s Degree from Eastern Michigan University in Elementary Education with a Major in Reading and a Minor in Mathematics.

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Chris Harrigan has an economic degree from Limestone College and an MBA from Clemson University. He previously managed auto insurance claims for Enterprise Rent-A-Car. Currently, he is using his business and insurance expertise to provide insurance data analysis and visualizations to enhance the user experience.

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Reviewed by Chris Harrigan
Former Auto Insurance Claims Manager

UPDATED: Sep 30, 2020

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Key takeaways...

  • Younger drivers are involved in accidents more than any other age class, due to risky driving behaviors
  • A history of poor financial decisions is linked to poor driving habits in the eyes of car insurance companies
  • Your driving history plays an important role in your monthly premiums

Buying car insurance can seem like a daunting task, and many people put very little thought or effort into the process. If you want to save money and get great insurance, you need to really invest some time.

A perfect example of knowledge being power, knowing all the ins and outs of auto insurance and the top ten tips before buying, will save you money and headaches in the future.

Some of the most important information to know before you buy car insurance is how auto insurance companies establish insurance premiums and how you can lower those premiums before you buy.

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Table of Contents

How Insurers Set Car Insurance Rates

Car insurance companies are a bit like gamblers; they win when you pay your insurance premiums but they don’t have to pay the money back to you in the form of a claim.

To put the odds in their favor as much as possible, insurers assess your personal risk of getting into an accident or suffering a loss and having to file a claim.

According to the Insurance Information Institute, there are many factors that auto insurers use to evaluate your risk.

The most important factor used to evaluate your risk is your past driving history.

If you have a record of driving infractions and at-fault car accidents, then you will seem like a big risk for filing a claim in the future.

Conversely, those with clean driving records will get the best rates because their risk is low.

The next aspect insurers look at to set insurance premiums is how likely your vehicle is to be in an accident or be stolen.

The more you drive your vehicle every day, the more likely it that it will be involved in an accident, statistically speaking.

In the same vein, if your vehicle is commonly parked in areas that have high rates of vehicle theft, or your vehicle is one that is coveted by car thieves, then your car is more likely to be stolen.

Another really important feature is your age. Younger drivers are involved in accidents more than any other age class, due to risky driving behaviors.

Drivers under 25 have a statistically higher risk, so their rates are generally the highest. Similarly, drivers over 65 also have higher rates of accidents and higher insurance premiums.

The type of vehicle you drive also affects the assessment of your car insurance rates.

Safer vehicles, like those with five-star ratings from the National Highway Traffic Safety Administration, will lower your risk for making a claim and will garner lower rates.

Your credit history can also affect your rates. A history of poor financial decisions is linked to poor driving habits in the eyes of car insurance companies.

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How to Lower Your Risk

While some factors, such as your gender, your age, or where you live, can’t be changed just for the sake of saving on car insurance rates, you can lower your risk in the eyes of car insurance companies before buying new car insurance.

While such attempts usually take time and require that you change certain habits, you will reap a lot of benefits in return.

First, you need to improve your driving record. This certainly takes time as your days and months without an accident or ticket increase.

Taking extra care to follow laws and driving rules will keep you from being the cause of most accidents.

As a general rule, insurers will search for tickets, citations, and accidents for three to five years, and major infractions such a DUI will affect your premiums for much longer.

Another option that can be done in conjunction with an effort to drive safer is to take a defensive driving course.

Many car insurance companies offer a discount after such a course is completed. Benefits of better driving, beyond saving on car insurance, include lessening your risk of injury from an accident.

Another way to lower your risk is to reduce the amount of time you drive your car on average and try to park it in a garage or secured facility.

You can also improve your credit history. Check your credit report often with one of the three major credit bureaus. Have incorrect information removed, pay off old debts, and keep your current debt as low as possible.

While this also takes a fair amount of time, you will also reap the immense benefit of having good credit.

The last way that can have a great impact on lowering your risk is changing the vehicle you drive.

What Coverage You Need

The next thing you need to know is what coverage you need and how much coverage you should get.

Having too little coverage will leave you financially vulnerable during an accident or loss and having too much insurance will cost you unnecessary money.

Each state has its own minimums for required coverage of injury and property damage liability, which pay for damages and injuries you cause to others.

Some states also require that you buy minimum amounts of other insurance, such as personal injury protection and uninsured/underinsured motorist coverage, which is meant to pay for your injuries or vehicle damages.

Your state’s minimums might not be enough, so you need to really crunch the numbers to make sure you get the most insurance you can afford.

You will also have the option of getting coverage such as collision, comprehensive, and towing/rental car reimbursement.

Most lenders will require that you have these types of coverage until you pay off your vehicle.

These types of coverage will pay for your costs concerning your vehicle during an accident or other loss.

Where to Get the Best Quotes

There are many avenues for getting auto insurance quotes, but most people do not have the time to research each car insurance company’s offers one at a time.

Most people end up just going with the first or second company they look into–this is not the best way to get quotes.

If you truly want to save money and get the best insurance possible, then using a comparison site for car insurance is the way to go.

You can also use these sites whenever and wherever you choose, and quotes arrive very quickly. You might also even get your best quotes from auto insurers whose existence you were unaware of.

Once you have all of your quotes, you can see the range of prices available for you. From there, you can follow up with an agent or buy your insurance online as you choose.

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How to Protect Yourself from Fraud

Getting all of those quotes is great, but you still need to know a few more things before you buy your car insurance. One really important item is whether or not the car insurance companies you are looking at are legitimate companies.

Fraud is big business in the insurance industry, and it is always better to check out a company than to find out you were scammed when you try to put in a claim.

The Consumer Information Source website provided by the National Association of Insurance Commissioners will link you to your state’s insurance department.

An insurance company must be licensed with the state to do business, so if one of your prospective companies is not there, then there’s a good chance that they are a fraudulent company.

How to Choose the Best Car Insurance Company

Not only do you want a real car insurance company, you also want one that will be there for you if you need to make a claim because of an accident, theft, or other loss.

A company with a good reputation across the board will help you get through the headaches of an accident rather than try to pay as little as possible on claims.

The last thing you need to know before you buy insurance is how to choose a good company from all the rest.

One way to check out the reputation of an insurance company is with the Better Business Bureau. The BBB rates companies based on their resolution of customer complaints and other factors.

A low rating with the BBB is a red warning flag for you to instead go with a different company.

Another way to check the reputation of an auto insurer is to review the annual PowerCircle ratings conducted by J.D. Power and Associates.

These ratings are based on actual customer surveys and range in topic from buying insurance to the claims process. Run the other way from companies that consistently have a poor rating year after year.

All you have left to do now is to get those numerous quotes for car insurance by entering your zip into the FREE box below!

References:

  1. http://www.iii.org/articles/what-determines-the-price-of-my-auto-insurance-policy.html
  2. https://www.thebalance.com/how-to-get-your-driving-record-527249
  3. http://www.investopedia.com/terms/i/insurance-premium.asp
  4. http://www.safercar.gov/Safety+Ratings
  5. https://www.creditkarma.com/auth/logon
  6. https://www.libertymutual.com/auto/car-insurance-coverage/property-damage-coverage
  7. https://www.nationwide.com/personal-injury-protection.jsp
  8. http://www.21st.com/insurance-information/webpub/en/pages/pdf/il-um-uim-coverage-selection-form-b.pdf
  9. https://www.progressive.com/glossary/comprehensive-and-collision/
  10. https://www.progressive.com/auto/
  11. https://eapps.naic.org/cis/
  12. http://www.bbb.org/us/