What Is the Best Way to Compare Auto Insurance Quotes?
In this month’s blog I’ll write about the best way to compare automobile insurance quotes.
As always, I like to start my assignments with an Internet search. I chose the exact phrase “auto insurance quote” and punched it into Yahoo Search. That yielded an insane 4,280,000 hits. Moving over to Google Search the results were narrowed down to a lower, but equally insane number – 743,000. At 10 seconds per page, you should be able to breeze through each of the sites in 86 days.
Shopping for insurance has never been easier. And shopping for insurance has never been harder. Well, which is it? Realistically it’s both. The reason is that there is an overabundance of auto insurance information online, on network and cable television and in numerous other media sources. So let’s try to boil this down to a more manageable number of pertinent facts.
- You cannot compare auto insurance quotes until you know what you need to know.
Well, gee, that’s not particularly helpful! I agree, but let me elaborate. In any comparison, it is imperative that you start with identical products. It’s no different for auto insurance. However, auto insurance shopping is definitely more difficult than comparing two bags of Macintosh apples. So what is it that you need to know?
Start with the coverages that you need to or want to purchase. This is typically driven by state minimum liability limit requirements, the age of your vehicle, your financial situation, how much risk you are willing to bear, etc.
- Liability (BI) and Property Damage (PD) coverages.
Pretty much all insurance policies have these two coverages included and most states have some minimum limit requirement. So for example, as you’re searching this limit will very likely be expressed as $50,000/$100,000/$25,000 or some other two number combination. In this case, the $50,000/$100,000 means that for any specific accident/loss/claim, the insurance company will pay no more than $50,000 for bodily injuries you caused to a single individual and no more than $100,000 total for all bodily injuries you caused in that specific accident, even if actual damages exceed this limit. The $25,000 is the maximum amount your auto insurance company will pay for property damage in a claim situation. So if you bump someone’s car in a parking lot and their vehicle sustains $5,000 damage, your PD coverage will pay for those damages. But if the vehicle sustained $30,000 in damage, the insurer will only pay $25,000 , the limit on the insurance policy.
- Uninsured (UM) and Underinsured Motorist (UIM) coverages
Many drivers are uninsured (they carry no liability insurance) or are underinsured (they do not carry enough limits to pay for a particular claim). As a result I recommend that drivers purchase UM-UIM coverages. Typically insurers offer UM/UIM coverage limits at or below your Liability limits. Your uninsured motorist will reimburse you, up to the limit carried, for an accident caused by an uninsured driver. Your underinsured motorist coverage will reimburse you, up to the limit carried, for an accident with damages greater than the liability limit carried by the underinsured at-fault driver.
- Medical Payments (Med Pay) coverage
In some states you can purchase Medical Payments coverage. This coverage pays for yours and your passengers’ reasonable and necessary medical expenses resulting from an auto accident. Limits available typically run from $1,000 up to $100,000. Many policies now require that health insurance coverage be used before Med Pay kicks in, but Med Pay also can be used for items not covered by health insurance such as deductibles, co-pays, etc.
- Personal Injury Protection (PIP) coverage
Currently 12 states and Puerto Rico have no-fault auto insurance laws - insurance statutes requiring the purchase of PIP coverage.1 For example, in Minnesota the legislature passed the Minnesota No-Fault Automobile Insurance Act. This Act required Minnesota residents and nonresidents at all times to maintain basic economic loss benefits and automobile liability coverage (also known as Personal Injury Protection or PIP) on vehicles they own. In some no fault states you are allowed to waive the coverage in writing. Available PIP limits vary from state to state. PIP pays for medical expenses, rehab, lost wages, damage to other people’s property and more. The intent of the no fault laws are, supposedly, to limit and reduce lawsuits due to auto accidents and to help speed automobile claim settlements.
- Collision & Comprehensive coverages
These coverages provide protection for your vehicle. Collision coverage pays for the repair of your automobile if you are involved in an accident, regardless of fault. Comprehensive coverage will pay for the repair of your vehicle in the event your vehicle is damaged by anything other than a collision loss. Examples include broken glass, vandalism, animal collision, hail, falling objects, etc. These coverages do generally have deductibles.
Claims for Collision and Comp are typically paid on an actual cash value basis (ACV) unless you specifically purchased replacement cost coverage (not offered by all insurance companies). Remember that as soon as you drive your new car off the dealer’s property it is worth less than you just paid because it is now a “used car.” This can be problematic if you lease a vehicle or have a bank loan. If at the time of the loss your vehicle is valued at an amount less than your outstanding lease or auto loan, you may have the added expense of paying for that “gap.” As a result, most auto insurers offer Gap Insurance coverage.
Collision and Comprehensive coverages typically do not have a limit. However, if you have a high valued or pristine older vehicle, you may need to purchase Agreed Amount coverage, or even insure the vehicle with a company such as Hagerty Insurance that specializes in collector vehicles.
- Ancillary coverages
Most auto insurers offer various additional coverages as add-ons to your auto insurance policy. Several common examples are Towing, Emergency Road Service (ERS), and Rental Reimbursement coverage. These coverages typically require that you also carry Collision and Comprehensive coverages and are fairly self-explanatory. Towing can be used in a vehicle breakdown situation or after an accident. ERS often includes towing along with a suite of other offerings, such as paying for a locksmith when you lock your keys in the car while getting fuel. Rental Reimbursement provides payment for a rental car after an accident. This will generally have a daily limit and a maximum limit (e.g. up to $30/day and no more than $1,000 per incident).
I know you're dying to start shopping, but let’s complete a few important tasks before you dive in too quickly. Knowledge about the insurance company you ultimately choose is very important. Is the company financially stable? Do they do a good job of paying claims fairly? Do they have many consumer complaints against them? Just because a company has the lowest price doesn’t mean that it’s the best deal for you.
Most Departments of Insurance maintain company and agent complaint files. This can be a great resource. Do a Google search for “Department of Insurance Consumer Links” to find your state. Here’s one example of an online complaint log (https://insurance.ohio.gov/Consumer/OCS/CompleteGuides/ComplaintRatios/AUTO_2013.pdf).
A.M. Best maintains records and rates insurance companies’ financial results. This is always a good thing to check before purchasing a policy. Here’s a link (http://www3.ambest.com/ratings/entities/search.aspx?bl=0).
J.D. Power surveys insurance customers annually and ranks insurers for their claims-paying satisfaction. Here’s a link to the 2015 results. (http://www.jdpower.com/press-releases/2015-us-auto-claims-satisfaction-study)
Social media is also worth a quick review. Ask your friends which insurance company and/or which insurance agent/agency they are using and whether they would recommend them. But beware; just because one person had a bad experience, you shouldn’t eliminate a company solely for that reason. Conversely, just because a friend highly recommends an insurer, that insure may not be a great fit for your needs. In these cases you’re only receiving one side of the story.
What are other important details you should consider when comparing auto insurance quotes? Gathering all of your information before you start shopping will certainly make the process more enjoyable. I suggest you have the following information at your fingertips.
- Your current auto insurance policy declarations page (showing your current coverages, limits, deductibles, etc.)
- The vehicle identification number (VIN) for each vehicle being quoted
- Driver’s license number and dates of birth for all drivers in your household
- Dates and details for any accident(s) and moving violation(s) (e.g. speeding) for every driver
- Some companies offer the initial quote before ordering your motor vehicle record (MVR) or before checking your insurance bureau score (often mistakenly called a credit report). Therefore some will require your social security number to quote and others will not. The actual final price for your automobile policy purchase cannot be finalized until these reports are run.
- All companies offer discounts! Check / ask for them. Examples include bundling (e.g. Auto & Renters), mature driver, good student, pay-in-full, defensive driving course, etc.
- Insurance companies offer policy periods of differing lengths (e.g. 6-month policy; annual policy). Be sure you know the exact time period a quote is covering.
When you finally begin to compare auto insurance quotes, be sure that you are comparing “apples to apples.” That means identical coverages, identical limits, identical deductibles, identical vehicles, identical drivers on a specific vehicle, identical time periods and identical discounts. Failure to do so will most certainly make any comparisons significantly less useful or totally invalid. Once you’ve narrowed down the companies to just a few, then it is wise to review costs and savings from higher deductibles and different coverage limits.
I think we all enjoy starting our shopping adventures online. Gathering quotes for auto insurance via various websites is definitely something you can do and is often a great place to start.
Each individual site will require that you enter, at a minimum, basic personal and vehicle information. Be certain that you use only secure websites (http://www.webopedia.com/TERM/S/SSL.html).
When you begin your Internet search you’ll come up with insurance company names, insurance agent/agency names and insurance aggregator sites. So what’s the difference?
Insurance Companies: Many insurance carriers offer the ability to get a direct online quote. When you do this you should receive this company’s best (lowest priced) quote for the options that you selected. Some of the companies may also show you premiums for ancillary coverages, for alternative deductibles or for different coverage limits, which is very helpful. Many of these companies offer a call or chat option as well. Some allow you to purchase and bind the coverage online. Others require you to speak with a company agent or customer service representative before finalizing the sale.
Insurance Agent or Agency: A significant number of agents and agencies offer online quotes. Be aware that some agents offer insurance for a single company (e.g. Allstate, State Farm, etc.). At these sites you will only receive a quote for that specific company.
Other agents, known as an Independent Agent or an Independent Insurance Agency, will offer quotes from several (many) companies. These sites may allow you to quote and purchase a policy or you may be required to speak with a licensed agent before coverage can be provided. Agency sites will require that you provide the same data and information as company-direct sites.
Insurance Aggregator sites: The term aggregator may be a bit of a misnomer, but for the sake of clarifying, these are websites where you can get comparison quotes for several insurance companies. (Aggregators may also be groupings of independent agencies, but that’s not what I mean here.) Each of these aggregators represent many different automobile insurance companies. Not all of these aggregator sites are designed for the purchase of auto insurance, but rather once you select a quote, you are forwarded to that insurance company (their website; their agent; their customer call center). Aggregator sites will require that you provide the same data and information as agent and company-direct sites.
Some insurance buyers would rather just speak to a live person. You can most certainly get an auto quote via phone just as easily as online. The options of going directly to an insurance company, an agent or an agency are identical when calling for the information outlined above.
And finally, you can meet with an agent, in person, at their office or at your residence.
So, what is the best way to compare auto insurance quotes? The best way requires you do your homework, gather everything you’ll need before you start shopping, compare identical products, get at least three or four quotes, and finally, research the insurance company before buying. The savvy shopper will often end up with better coverages and more appropriate pricing by following these suggestions.
1 Source: Insurance Information Institute. February 2014. http://www.iii.org/issue-update/no-fault-auto-insurance
Jonathan Farris is a retired insurance executive and president of InsuranceRescue Services, LLC, a property & casualty insurance consulting firm based in Madison, Wisconsin. Mr. Farris can be reached at firstname.lastname@example.org