The Smart Driver’s Guide to Shopping for Car Insurance

Navigating the road to the right car insurance policy can be as tricky as a congested highway during rush hour.

But just like finding the best route to your destination, shopping around for car insurance can lead to significant savings and better coverage.

In this comprehensive guide, we’ll explore why it’s crucial to compare insurance options and the different methods to purchase the coverage that best suits your needs, complete with the pros and cons of each approach.

Why shopping around for car insurance is essential

Even though there are probably a thousand things you’d rather do that shop around for car insurance, finding the right coverage at the right price should be viewed as essential, not optional.

Finding the “best” insurance for you and your vehicle is really a balancing act of customized coverage, maximized discounts, and a level of customer service that fits your needs.

Finding Competitive Rates

Insurance companies often change their pricing structures to account for new data, competition, and market trends. By shopping around, you can capitalize on these changes and potentially find lower rates for the same level of coverage.

Tailored Coverage Options

Every driver has unique needs based on their vehicle type, driving habits, and risk profile. By exploring different policies, you can find one that’s tailored specifically to your circumstances, ensuring you’re not overpaying for unnecessary coverage or underinsured in critical areas.

Maximizing Discounts

Different insurers offer various discounts based on factors like a clean driving record, safety features in your vehicle, or even good grades for student drivers. Shopping around helps you discover which discounts you’re eligible for with different insurers.

Customer Service and Satisfaction

The level of customer service varies significantly between insurance companies. By shopping around, you can find an insurer that not only offers competitive pricing but also excels in customer support and claims handling.

While keeping these factors in mind, let’s take a look at three distinct ways you can buy car insurance: buy direct online, buy from an agent, or use a comparison website.

Buying direct online from an insurance company

Purchasing car insurance directly online has become an increasingly popular method due to the rise of user-friendly mobile apps and the convenience of buying a policy from the comfort of your home.

Examples of buying direct online would be using companies like GEICO, Progressive, State Farm, Allstate, or Liberty Mutual and either going directly to their websites or using their respective mobile apps to buy a policy.

Buying or shopping direct is different than using a comparison website, since you will only receive a price quote for that specific company rather than from multiple companies.

Pros and cons of buying car insurance direct online

Here are some of the benefits and potential snags to watch for when buying direct online.

While buying car insurance directly online offers a high level of convenience and immediacy, it also demands a greater level of consumer savviness to ensure that you fully understand and select the appropriate coverage for your needs.

It’s ideal for those who are comfortable navigating the digital landscape but may not be the best option for everyone.

Buying from an insurance agent or broker

Buying from an insurance agent can mean either visiting their local office in person or having a conversation over the phone.

They will normally ask you questions related to the type of vehicle you drive and how you use it. The information you provide will help them discover any coverage gaps you may have or recommend optional coverages.

This method differs from buying online directly from a company in several key ways:

In-person Interaction with a Professional

When you purchase car insurance from an agent, you are dealing with a trained professional who can guide you through the process.

This human interaction can be invaluable for answering questions, clarifying doubts, and offering personalized advice based on your specific circumstances.

An agent can also help navigate more complex situations, such as finding the right coverage for a unique vehicle or if you have a complicated driving history.

Personalized Service

Agents often aim to build a relationship with you, providing a more tailored service. They can help reassess your coverage needs over time, make policy adjustments, and even assist with claims.

This ongoing relationship can provide continuity and a sense of personal care that is typically not available with online purchases.

Potentially More Coverage Options

Some agents work with multiple insurance companies and can offer a wider range of products and coverage options.

his means they can help compare different policies on your behalf and find the best deal that fits your needs, as opposed to direct online purchases where you’re selecting from only one company’s offerings.

Consistency and Follow-Up

With an agent, you have a consistent point of contact for any insurance-related questions or issues that arise. They can follow up on your claims and transactions, ensuring that your concerns are addressed.

In contrast, buying online directly from a company is a more self-service experience.

Pros and cons of buying car insurance from an agent or broker

Here are some benefits and potential drawbacks of buying insurance from an insurance agent as compared to buying direct online.

Choosing whether to buy car insurance from an agent or broker will largely depend on your preferences for personal service versus the potential cost savings and convenience of managing your insurance online.

Those who value guidance and expertise might gravitate towards agents, while those confident in their understanding of insurance and looking for a potentially quicker and more autonomous buying experience may prefer direct online options.

The biggest advantage to using an agent it their ability to ask questions in order to understand your total insurance needs. Often times small details you provide an agent, such as your Uber sideline gig, can help prevent coverage issues down the road.

To read about the differences between independent and captive insurance agents, see our Introduction to Car Insurance.

Buying online from comparison websites

Comparison websites have revolutionized the way consumers shop for car insurance by providing a platform to compare multiple policies from different insurers quickly.

These sites have the advantage of only requiring you to input your information once, then it is shared between multiple companies that return a price quote.

This process differs from buying direct online, as the comparison site acts as the “middleman” between your information and many different car insurance companies, rather than just a single company.

Comparison websites are not car insurance companies, but rather just provide the interface and technology to compare multiple rates at once. They may hold insurance licenses in different states to act as a broker, but most do not actually provide insurance coverage.

Pros and cons of using comparison websites to buy car insurance

Despite giving drivers a lot of different rates, there are some things to watch for when using a comparison site.

Using a comparison website to buy car insurance can simplify the shopping process and help ensure you are getting a competitive rate.

However, it’s crucial to be aware of their limitations, particularly when it comes to personalization and understanding complex insurance needs.

They are a useful starting point for price comparison, but it may still be beneficial to follow up with individual insurers or agents directly for a more tailored approach and more comprehensive price quote comparison.

When to shop your car insurance around

Shopping around for car insurance is not just a one-time event but a strategy that can yield continuous savings and ensure your coverage meets your changing needs.

The general recommendation is to reassess your car insurance options every six months to a year. This aligns with the typical insurance policy period and can be a natural time to review your rates and coverages.

However, there are certain life events and circumstances that may indicate it’s time to shop around for new car insurance more immediately:

After any major life change

Major life changes often necessitate a reassessment of car insurance needs because they can alter the risk assumptions that underpin your premiums.

Significant life events such as marriage can lead to lower insurance rates, as insurers consider married individuals to have a lower risk profile.

Conversely, going through a divorce could mean losing out on discounts associated with being married, such as multi-car discounts, prompting a search for more cost-effective individual policies.

Adding a young driver to your policy, typically after they obtain their driver’s license, could significantly increase your rates due to their inexperience. In such cases, it’s prudent to look for insurers that offer favorable rates for households with teen drivers or provide good student discounts.

Moving to a new residence, particularly across state lines, is another trigger. Insurance rates are partly based on location-specific variables like traffic patterns, crime rates, and weather conditions.

Lastly, a change of employment, such as starting a new job, could impact your commute and the amount of time you spend on the road, which insurers take into account.

These lifestyle shifts can affect your car insurance premiums, making it beneficial to shop around to ensure your policy continues to meet your needs at the best price.

After vehicle-related changes

It’s important to shop around for car insurance after a vehicle-related change because the specifics of the vehicle—such as make, model, safety features, and the likelihood of theft—can greatly affect insurance premiums.

For example, if you purchase a new car, especially if it’s a different type of vehicle (such as moving from a sedan to a sports car), insurance rates may change due to differences in repair costs, safety ratings, and the vehicle’s value.

Additionally, if you’ve paid off your car loan, you may not be required to carry as much coverage as the lender required, potentially reducing your insurance costs. Conversely, adding a car to your policy might qualify you for a multi-car discount.

Changing use of the vehicle is a factor that can trigger a price change. If your current vehicle is rated for business use but you no longer use it in that manner, having the vehicle rerated for personal use can potentially lower the premium.

Another factor that a lot of insurers use to determine premium is how many miles you drive each year. If your commute or daily driving pattern changes and the mileage driven is less, you may save some money by specifying this on your policy.

The policy that was cost-effective for your old vehicle may not be the most economical or appropriate for your new circumstances. Shopping around ensures that your car insurance reflects the most accurate rate for the specific risks associated with your current vehicle, potentially saving you money and optimizing your coverage.

After adjustments in driving habits

Adjustments in your driving habits can have a direct impact on your car insurance premiums, making it a prime trigger for shopping around for better rates.

When you drive more or less than you used to, the risk of being involved in an accident changes, and your insurance should reflect that.

For instance, if you start working from home or retire, which leads to significantly reduced mileage, you may qualify for lower premiums because you’re less likely to be involved in an accident. Insurance companies often offer low-mileage discounts to drivers who aren’t on the road as frequently.

On the other hand, if you take on a new job with a longer commute or start using your car for business travel, your exposure to risk increases, and your current insurer may raise your rates accordingly. This would be an opportune time to see if another insurer offers better rates for high-mileage drivers.

Furthermore, changes such as carpooling, relocating to an area with a different traffic pattern, or a shift in the primary use of the vehicle (e.g., from personal to ride-sharing service) can also affect your insurance rates.

In any case, when your driving habits shift, it’s a signal to reevaluate your car insurance. Shopping around can help you find the most favorable terms and premiums that align with your current driving patterns.

After changes in your financial situation

A change in financial situation can be a significant trigger for shopping around for better car insurance rates.

Financial upturns such as an improved credit score can positively impact insurance premiums, as insurers often use credit information to price policies under the premise that higher credit scores correlate with more responsible driving behavior.

If your credit score has seen a marked improvement, you might be eligible for lower rates and should explore options with various insurers.

Conversely, if your financial situation tightens, you may need to find ways to reduce monthly expenses. Car insurance is a logical place to start, as there may be opportunities to adjust coverages, increase deductibles, or find discounts that you weren’t previously eligible for, such as reduced rates for paying the entire premium upfront rather than monthly.

Additionally, reaching a more stable financial position might mean you can afford to take on a higher deductible, which can substantially decrease your premiums. This risk-reward balance should be carefully considered with any new quote.

Regardless of whether your financial change is positive or negative, it’s an important time to reassess your car insurance to ensure it not only fits your budget but also provides the necessary level of protection without unnecessary extras that inflate costs.

After an accident or violation

Shopping around for car insurance after an accident or violation is advisable because these incidents typically lead to increased premiums.

Once these blemishes are on your driving record, insurance providers see you as a higher risk and adjust your rates accordingly.

However, not all insurers assess risk in the same way. Some may be more lenient with drivers who have had an accident or violation, offering more competitive rates than others.

As points from violations or accidents begin to age and eventually drop off your record, your risk profile improves. This can be a prime opportunity to seek out insurers who are willing to offer lower rates for drivers with improving records.

Additionally, some insurance companies offer accident forgiveness programs, which can prevent your rates from increasing after your first at-fault accident. If your current insurer does not provide this benefit, it might be worth looking into companies that do.

After receiving a rate increase

Insurers often adjust their rates based on their claims experiences, which can vary widely from company to company. What might lead to a significant premium hike with one insurer might not with another, making it possible to find more favorable rates elsewhere.

Secondly, a premium increase is an opportunity to review your current coverage to ensure it’s still aligned with your needs. Perhaps there are discounts you’re now eligible for or coverage adjustments that can be made to lower costs without sacrificing protection.

Furthermore, a rise in premiums without a corresponding change in your driving history or personal circumstances is a signal to revisit the market. It suggests that your insurer is recalculating its risk or costs, which might not reflect your individual risk profile.

By shopping around, you can leverage competitive offers from other insurers who may be eager to earn your business, thereby getting a better deal.

After a claim or other company interaction

Experiencing poor customer service or dissatisfaction with an insurer’s claims handling is a valid trigger for shopping for new car insurance.

Effective customer service is a cornerstone of any insurance policy – you’re not just buying coverage, but also the promise of support when you need it most.

If an insurer falls short in providing timely, respectful, and helpful service, it can leave you feeling undervalued and vulnerable.

Moreover, how an insurer handles claims is critical. The claims process should be smooth and transparent, providing you with clear communication and a fair, prompt resolution.

If your experience is fraught with delays, poor communication, or outcomes that don’t meet the terms of your policy, it undermines the trust you place in your insurer.

Seeking out a new insurance provider can lead to not only potentially better rates but also improved service quality.

It’s worth exploring options that align with your expectations for customer service, ensuring that during times of stress and need, your insurer will be a reliable ally.

Final thoughts from an agent perspective

When it comes to car insurance, the adage “don’t put all your eggs in one basket” rings particularly true.

Diversifying your search and exploring all avenues can lead to better pricing, coverage, and service. It’s worth investing the time to shop around.

From my experience as an independent insurance agent, drivers who have basic needs and do not have complex financial situations or compromised driving records will in most cases be fine buying direct online, with a couple of caveats.

My primary concern with buying car insurance online

My primary concern with the average consumer handling their own insurance is the lack of understanding of both liability insurance and actual coverage provided by a policy.

In past meetings with insurance company claim departments, I received access to information regarding different liability claims they have paid, and the circumstances behind them.

The amounts of these claims can be astronomical, and most people do not realize how important having higher amounts of liability insurance is.

State Minimum Liability Amounts are Not Enough

State minimum liability requirements are not nearly adequate in a lot of cases, especially when extensive medical expenses or property damage is involved.

For most people, my minimum recommendation for liability coverage is 100/300/100, which means you have bodily injury liability of $100,000 per person and $300,000 per accident, as well as property damage liability of $100,000.

This is just a starting point. As your wealth increases or you start building an asset portfolio, the need for liability insurance increases, even to the point where a car insurance policy cannot provide adequate coverage and a personal umbrella policy is required.

Not Everything is Covered on a Basic Car Insurance Policy

A lot of people just assume that because they have car insurance, everything is covered.

There are a lot of things that are definitely not covered by a basic policy, or only up to specific limits, and can only be covered if a specific endorsement is added to the policy.

You can view an endorsement as simply an “add-on” or “change” to the policy to either add some specific coverage or remove an existing exclusion.

For consumers who choose to buy insurance online, these specific nuances of a policy can easily be overlooked and only come to the surface at claim time when they find out they do not have coverage.

Here are a few examples of the types of endorsements that can increase the coverage on a basic car insurance policy:

• Gap Insurance – This endorsement is needed to pay the difference between the actual cash value of a vehicle and the financing amount owed. Without it, if your car is totaled and you owe more than it’s worth, you will be stuck paying the difference.
• Rental Reimbursement – This coverage add-on provides a set daily amount for a rental car when your vehicle is being repaired for a covered claim.
• Custom Equipment – The basic policy only covers a limited amount of custom equipment like wheels, lift kits, and stereo equipment. This endorsement is needed to pay a higher amount for these types of items.
• Personal Item Coverage – As with custom equipment, a basic car insurance policy has a set limit on the amount it will pay for personal items. This endorsement increases that amount.
• New Car Replacement – As soon as you drive off the lot in a new car, the value decreases substantially. But you still owe the full cost of the vehicle. This endorsement provides full replacement cost for a new vehicle if your car is totaled.
• Ride Sharing Coverage – A lot of basic policies exclude coverage for ride sharing since it’s a commercial activity. This endorsement ensures you have coverage if you work companies like Lyft or Uber.
• Glass Coverage – Under a basic policy, coverage for broken glass falls under your policy deductible. This endorsement either provides a lower deductible or no deductible, plus possibly additional covered losses.
• Non-Owned Vehicle Coverage – If you do not own a car, but have access to other people’s vehicles with permission, this endorsement will provide needed coverage.

That is by no means an all-inclusive list of policy endorsements, but it should give you an idea of the types of scenarios where a basic policy has coverage gaps.

These gaps are not easily discovered by the average driver, so that’s where an insurance agent can potentially find them and plug them.

These endorsements are optional, and policyholders can choose them to enhance their car insurance coverage based on their individual needs and concerns.

The cost and availability of these endorsements can vary significantly between insurance providers, so it’s essential to review what’s offered when shopping for car insurance.

How to ensure you are covering all the bases

If you’re shopping around for a policy for a new-to-you vehicle, or just wanting to find a better rate, I recommend including an insurance agent in the mix.

I’m probably slightly biased in this opinion, but having dealt with many clients in the past that simply did not understand how insurance works indicates that it’s more common than one may realize.

Having a mix of price quotes will allow you to make a decision based on price, but that alone should not be the deciding factor.

Car insurance is complex and the worst time to find out you have inadequate coverage is when you file a claim.

Having an insurance agent learn about your situation and lifestyle can uncover possible coverage gaps that may not be possible when buying car insurance online.

The best way to ensure that you’re getting the right combination of price and coverage is to include as many avenues as possible when shopping around.

Get price quotes online, visit an agent or two in your area, and then decide based on price, service, and your comfort level of the coverage offered.

About the Author

During his career as an independent insurance agent, Ryan Grabenstein was appointed with Progressive, Allstate, Nationwide, Travelers, and many smaller regional and mutual companies. He has a Bachelor's degree in Finance from the University of Nebraska at Lincoln and Certified Insurance Counselor (CIC) personal and commercial lines training.