How to Shop for Car Insurance and Find the Best Possible Deal

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Shopping for auto insurance? Here’s what you need to know if you’re looking for low-cost auto insurance in 2021.

Finding ways to save money on your vehicle expenses isn’t hard if you know where to look. From getting free air to your tires and learning how to shop for car insurance, the savings can add up to lower your car expenses.

The need for car insurance has seen a commendable rise with recent legislation in some states making it mandatory for vehicles to be insured. Few of the large insurance companies have gained a huge market share above 60% of the insurance Industry.

Hundreds of companies sell car insurance, but what are the top car insurance companies that you can name? Allstate, Geico, Progressive, and State Farm likely come to mind. These four companies make up over half of the auto insurance market share in the U.S.

But what companies offer cheap insurance and how can you shop for it? You need to outreach on your own to both local and national insurance companies for getting cheap auto insurance.

Still, many individuals don’t feel like the need of getting their vehicles insured but car insurance has brilliant financial advantages. Whenever you are met with a car accident, the financial burdens are covered up by the insurance companies. If you don’t have car insurance then you have to foot the bill.

In case you are looking for cheaper rates for your auto insurance, we have formulated 5 proven ways which you can use to find cheap auto insurance.

Car Insurance 101: Defining the Basics

Shopping for car insurance can be complicated. From choosing the right coverage for your vehicle and deductibles, it can get tricky.

But before we dive any further, it’s wise to learn about some car insurance basics:

Premiums

Premiums are the amount of money you’re paying for the insurance policy. Typically you pay an insurance premium annually or monthly, with many insurance companies offering discounts if you pay upfront for the entire six or twelve-month policy.

Deductibles

A Deductible is money that you’re paying before your insurance kicks in. To chalk it up, if you get in a fender bender that causes $1,500 worth of damage to your bumper, and your deductible is $1,000, you’re paying $1,000 and your insurance company pays the remaining $500.

Coverage Limits

Coverage limits are basically the total amount of money that your insurance company will pay. So any damage that exceeds your coverage limit, won’t be covered, and you’ll have to pay for the difference.

Claims

Claims are reports filed to your insurance provider when you’re in an accident. Your car insurance company will appoint you a claims adjuster to evaluate the claim and let you know how much they will cover.

What Factors Affect My Car Insurance Premium?

The average cost of car insurance is $1,502 per year, or $751 per six-month policy ($125.16 per month) according to an auto insurance comparison site, The Zebra.

However, auto insurance costs vary widely based on individual rating factors:

Your Deductible Amount

Your Deductible Amount is a factor that affects your car insurance premium. The higher your deductible, the lower your premium and vice versa.

Your Location

Your location also affects rates. If you live in a city where a lot of accidents occur or reports of stolen cars, guess what, your rate will be higher. Location, location, location… it matters.

Your Vehicle Type

Your vehicle type is also a metric that car insurance companies will use to calculate your premium. The higher your vehicle value is worth, expect to pay more. Also, if your vehicle is larger (like a truck or SUV), you’re paying more. The reasoning behind this is that a larger vehicle is able to cause more damage.

how much should i spend on a car

Your credit score also affects your rate. In fact, there is a correlation between your credit score and driving record, the higher your score the better the driving history. The FTC study found that credit-based insurance scores are effective predictors of risk under automobile policies. This is not allowed in all states though, and there are easy ways to improve your credit score.

Other factors include your driving history, if you have a history of late payments, lapses in coverage, and your age.

Types of Car Insurance Coverage

There are six common primary types of coverage offered by the majority of car insurance providers. They include liability, collision, comprehensive, underinsured motorist coverage, medical payments coverage, and personal injury protection.

According to insurance company All-State, depending on where you live some of these coverages will be mandatory and others remain optional.

Choosing the Right Car Insurance Company

There are several car insurance companies but not all of them will always meet your expectations. If you don’t know where to look, start your search with these carriers:

  • Metromile Insurance option offers a big difference with their pay-per-mile insurance structure that can help you save big. Whether you barely drive, commute around town, or use the car to get away on the weekends, per-mile car insurance could cut your bill in half.
  • You can save up to 54% on your car insurance by learning about Root. They offer a rate based primarily on how you drive, so it’s fair insurance and you can get a quote in 5 minutes.
Get a quote in less than 5 minutes
Root Insurance

You can save up to 54% on your car insurance by learning about Root. They offer a rate based primarily on how you drive, so it's fair insurance and you can get a quote in 5 minutes.

CONTINUE →

How to Shop for Car Insurance

Looking to learn how to shop for car insurance? Here’s what you need to know if you’re looking to save money on car insurance.

Step 1: Don’t fall for the big fish quickly

You may want to buy insurance policies from the popular insurance companies (Allstate, Geico, Progressive, and State Farm) who are known to you due to their marketing and branding.

They might be slightly expensive due to their existence as a brand. You always have the option to evaluate all the options you have in your city. Do a quick search for local car insurance companies and get quick quotes for your vehicle.

Step 2: Negotiate prices

Never underestimate the negotiation process. You can crack a handsome discount if you are able to communicate effectively with the car insurance agents.

Discuss all the requirements and environment in which vehicle will be driven most, insurance companies can usually find ways to offer you a discount for your business.

For example, a proven strategy to get exclusive discounts is to buy multiple insurance policies from one company. You can buy home insurance or multiple auto insurance and which can lead to a lower car insurance premium.

Step 3: Take advantage of good credit history

If you possess a strong credit history with all bills and installments paid on time then companies will be preferred to get you as a client.

Credit history is considered to a great extent to determine insurance rates. So, always schedule your dues and bills to be paid on time and they can reap benefits to negotiate lower car insurance prices.

Step 4: Figure out usage-based insurance policy

If the automobile being insured is for family use or limited traveling has to be done then you can consider usage-based insurance policy. You will be paying per mile to the insurance companies and it can help you save a considerable amount of money.

This type of insurance policy is offered in specific locations and states. Ask out for mileage-based quotes to determine which option can be beneficial for your driving preferences.

Step 5: Avoid comprehensive coverage for old aged cars

The comprehensive coverage provides insurance if your car is destroyed completely or gets stolen. The overall amount returned is based on the market value depending on the existing condition. You can cancel out comprehensive coverage to avoid extra insurance bills since your car value does not make this insurance worth it.

Evaluation of options is always a good idea and making decisions hastily can sometimes cost you. Consider consulting with friends and family of their past experiences with some local insurance companies. Spend some time with insurance agents to get the complete analyses for the suitable insurance policies.

8 Ways to Get the Cheapest Car Insurance Rates Possible

Getting lower car insurance rates can be difficult, but investing your time and effort into locating the perfect policy will pay off. Here are some more tips:

1. Don’t assume any one company is the cheapest

Though some companies spend a lot of money on commercials trying to convince you that they offer the lowest rates, no single company is consistently the cheapest for everyone.

The only way to ensure you’re getting the lowest possible car insurance rate is to compare them through a company like Insurify.

A NerdWallet analysis of premiums reveals the importance of shopping around.

Here are the rates for a hypothetical 40-year old driver buying standard full coverage insurance on a 2018 Toyota Camry LE. The example driver has good credit and no accidents, but the driving record is considered “good” by most insurance companies as opposed to “clean.”

  • The average yearly insurance rate for drivers in Florida without a military connection is $1,766 is through State Farm. This is the cheapest in Florida and Geico’s average price was up to $239 more.
  • It’s the opposite in California: Geico offers lower rates, with an average of $1,458.
  • Progressive is the cheapest option by far in New York, at $1,298 a year. But Florida drivers are forced to pay nearly triple that amount with Progressive’s whopping $3,015 yearly average cost.

2. Don’t ignore local and regional insurers

When shopping for car insurance, many consumers automatically head to a major national company.

However, smaller regional companies offer competitive rates and may have higher customer service ratings.

3. Ask about discounts

Insurers offer discounts for car insurance, which can lower rates for customers who:

  • To assist in the savings process, bundle your car insurance with other policies such as homeowners insurance or renters insurance.
  • Create a single car insurance policy for multiple cars.
  • To avoid the risk of being offered higher premiums, strive to have a clean driving record.
  • Pay the full annual or six-month premium with one payment.
  • Save a step in the process by agreeing to receive documents online.
  • Consider obtaining a car with anti-theft or safety features.
  • Members of certain professional organizations or affiliate groups.

Don’t rely on a long list of possible discounts. Compare rates with several insurers before committing to one with companies like Insurify.

Insurify: Compare Insurance Quotes

Whether you’re looking for auto, home, life, or renters insurance, Insurify can show you 10 or more quotes from top-ranked and regional companies within 2 minutes, and let you buy within 5 minutes or less!

Start Saving →

4. Work on your credit

If you live in California, Hawaii, Massachusetts, Michigan or Washington your credit score does not affect your car insurance rates.

However, in other states, your credit score can impact how much you pay. In New Jersey, for example, a poor credit rating will increase your car insurance premium by an average of $841 per year.

In most cases, the higher rates are caused by higher default risk among those with lower credit scores.

Improve your credit — and lower your insurance rates — by always paying on time and reducing debt. Track your progress using a free credit score service like Credit Sesame.

5. Skip comprehensive and collision coverage for an older car

If you have an older car with a low market value, it is unwise to buy insurance coverage of repairing collision-related damage.

6. Raise your deductible

Purchasing comprehensive and collision coverage can save you money with high deductibles.

Liability insurance will always have a deductible but both policies offer other benefits outside of this expense.

7. Consider usage-based or pay-per-mile insurance

If you are a safe and responsible driver, consider signing up for usage-based insurance programs like Allstate Drivewise or Progressive Snapshot.

It’s also possible to sign on with State Farm’s Drive Safe & Save if relevant. The automobile insurer will track your driving in exchange for discounts based on how much mileage you drive and how well you drive.

If you drive less than 10,000 miles per year, a pay-per-mile insurance plan might be an option like Metromile might be a good option.

8. Check insurance costs when buying a car

When picking a car to buy, you should consider insurance premiums as well. A NerdWallet analysis of the cheapest cars to insure found that low-risk routes come from Jeep Wrangler, Subaru Outback and Honda CR-V among popular models.

Shopping for Car Insurance

Shopping for car insurance is a major hassle for many Americans. With too much information to sort through and prices that vary from state to state, consumers often feel intimidated rather than empowered.

But if you can shop around and research a little and consider these tips, you can get cheap car insurance with ease.

While you’re at it, take a look at how save $500 this month with our most creative money saving hacks revealed.

Related Resources

If you’re interested in learning how to shop for auto insurance, check out the following articles that you may be interested in:

About the author

Brian Meiggs
Brian Meiggs is a personal finance expert, and the founder of My Millennial Guide, a personal finance site helping you put more money in your pocket. He helps millennials follow the smart money in order to increase their earning potential and start building wealth for the future. He regularly writes about side hustles, investing, and general personal finance topics aimed to help anyone earn more, pay off debt, and reach financial freedom. He has been quoted as a top personal finance blogger in major publications including Yahoo! Finance, NASDAQ, Discover, MSN Money and more.
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