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Why It Pays to Compare Auto Insurance Quotes

Fran
David Joy May 8, 2019

The main reason to compare auto insurance quotes is to save money on your car insurance policy. Indeed, unless you compare auto insurance rates from different auto insurance companies, how can you be certain that you're getting the lowest auto insurance rate? But the process of comparing auto insurance quotes and policies can be a lonely, frustrating, confusing, long-term endeavor—and that's if you do it right!

Many of us don't have the time or patience to undertake a full-scale car insurance comparison to find our perfect auto insurance policy. According to one survey, 30% of respondents said they chose their insurance carrier in one day, and 60% said they decided in less than a week.

Read on to get inspired! If you're seeking a low auto insurance rate, this article has all the facts, tips and helpful hints you'll need to comparison-shop for car insurance coverage that fits your needs and budget. You can also let SmartFinancial do all the work for you for free. Just enter your zip code to get started.

Get Serious About the Real Risks of Driving

Car insurance is a way of mitigating risk, and that risk is very real. Since we are in our vehicles so much—the average U.S. motorist clocks in about 13,500 miles a year, according to the Federal Highway Administration—driving in a vehicle is when most of us are exposed to the greatest danger.

Just like we all must fight against distracted driving, we all must fight against getting distracted from the grim realities that car insurance represents. According to the National Highway Traffic Safety Administration, two out of three motorists will be injured in an accident during their lifetime. According to another national survey, an average driver can expect to be in up to four fender-benders during their lifetime, filing an insurance claim about every 18 years.

You Are on an All-Important Mission

So, when you are comparing car insurance and rubbing your neck, don't forget that you are on an all-important mission to protect yourself, your loved ones and any passengers in your car, not to mention your fellow drivers on the road. What's more, you are protecting your financial stability in the face of a catastrophic event.

Think Before You Shop for Auto Insurance

You work hard for your money, so you want to get as much bang for your buck as possible. Before the savvy shopper buys anything—dish detergent, a bicycle, a leather couch, a two-bedroom rancher—they take the time to figure out exactly what they want to buy and how much they're willing to spend. After that, they comparison-shop by comparing the different prices against the relative value of the goods or services they seek to purchase. The same goes for buying auto insurance.

Just like buying a car, purchasing auto insurance is a major financial decision, so it's worth every bit of your time and effort to get it right. So, before you investigate any insurance companies or ask for any car insurance quotes, there's a couple of steps you can take right now: Take a good, hard look at your finances and budget and what kind of insurance you want to buy.

Calculate Your Budget for Auto Insurance

In the U.S., the average annual cost of car insurance is $1,445.04, or $120.42 per month. But your individual rate will be different, based on the auto insurance company, what insurance products you buy, and your age, zip code, driving history, credit score, the make and model of your vehicle, and other factors.

Your car insurance will eat up about 15% to 20% of your monthly auto budget. So, if your overall auto budget is $500 per month, you should look for a monthly car-loan payment of about $400 to $425 and a monthly insurance premium of about $75 to $100.

Figure Out What Car Insurance Coverage You Need

You should also take the time to figure out what kind of insurance you need. After all, the amount of insurance you buy is one of the biggest factors in the total cost of your annual premium—that is, the price you pay for having auto insurance for a 12-month period.

Everybody needs coverage for bodily injury liability and property damage liability. In fact, every state requires its drivers to purchase these two types of liability coverage.

But there are many other auto insurance products to consider, whether you're looking to insure your car, truck, RV, ATV or boat. Because these types of insurance products are not required by law, they are called "add-on" insurance.

Educate Yourself on Auto Insurance Products

Before you compare car insurance quote against car insurance quote, you need to know what insurance products are out there. Every insurance product covers a specific area of risk. Of course, every state requires its licensed drivers to purchase liability coverage—that's the law—but here are just some of the various add-on products that you should consider:

Collision

Collision coverage pays for damage to your car caused by an impact with another automobile, object or person. It is subject to a deductible. This coverage protects you if you are at fault. Liability coverage only covers the other driver's damages.

Comprehensive

This insurance product pays for damage to your car that's not caused by a collision. If your car hits a tree, that's covered by collision insurance; if a tree hits your car, that's covered by comprehensive coverage. Comprehensive coverage also protects you in instances of car theft and vandalism It is subject to a deductible. 

Personal injury protection (PIP)

Also known as "no-fault insurance," PIP covers the medical expenses for both injured policyholders and passengers, even if some of them don't have health insurance.

Uninsured-motorist coverage

This coverage pays for medical expenses if you're injured in an accident caused by someone who doesn't have liability insurance. 

Underinsured-motorist coverage

This coverage pays for medical expenses if you're injured in an accident caused by someone whose liability limits are lower than what's needed. 

New-car replacement 

This coverage pays the value of a brand-new vehicle of the same make and model, minus the deductible if your car is declared a total loss. 

24-hour roadside assistance/towing and labor

This coverage helps you get back and driving if you have a roadside breakdown. 

Rental car

If you rent a car while yours is in the shop, you are eligible for $50 a day up to 30 days, if the damage to the car was a covered loss. 

Major parts replacement

Without charge, you can replace major parts like tires, brakes, and batteries regardless of wear and tear and depreciation value at the time of the accident. 

Loan-lease GAP coverage

Guaranteed asset protection (GAP) covers you if your car is declared a total loss and you owe more on the car than its covered depreciated value. 

Rideshare driver coverage

If you drive for a rideshare company like Uber or Lyft, this coverage protects you during that period of time when you're covered by neither your personal auto insurance nor your rideshare company's insurance. 

Accident forgiveness

Drivers with a clean policy may be fully forgiven for their first accident without seeing a price increase as a result of the accident. 

Original parts replacement

Do you know what replacement parts will be used to repair your vehicle after it's been in an accident? This coverage guarantees original parts made by the car manufacturer, not a third party. 

There are also insurance products designed to protect your sound system and your classic car! Besides acquiring the state-mandated bodily injury liability coverage and the property damage liability, many drivers elect to purchase collision, comprehensive, 24-hour roadside assistance, and medical coverage or PIP. Keeping in mind that one out of every eight U.S. drivers has zero insurance, many auto insurance customers decide that uninsured/underinsured motorist coverage is a wise investment.

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The One Thing Your Auto Insurance Agent Must Have

If you're looking for an auto insurance agent, that agent should be licensed by the state. If your auto insurance agent is legit, they won't mind at all if you ask for their insurance license number. So don't be afraid to ask—it shows you're a smart consumer and nobody's fool.

You can also visit your state's Department of Insurance website, which will allow you to search for your agent among all the licensed agents who are legally doing business in the state. Just enter the name of your insurance agent and/or their license number, then tap the "search" button. If you don't have access to the internet, you can call your state's Department of Insurance and ask to speak with someone in the licensing division.

If your agent's name is not listed or their license has expired, the agent in question is perpetrating a fraud. Steer clear and stay away! In the end, dealing with an unlicensed insurance broker will cost you money, not save you money. Better yet, let SmartFinancial pair you with a trusted agent. Begin by entering your zip code on this page.

Speak with More Than One Auto Insurance Agent

If you speak with one and only one auto insurance agent, that agent may represent just one insurance company, so they may not have access to other insurance products that would better suit your particular needs. Further, if you deal with one and only one agent, it will be hard to determine if you are paying a fair price—never mind the lowest price—for your auto insurance.

On the other hand, if you deal with an agent who represents several insurance companies, they can shop around on your behalf to snag a lower price. To get the big picture, you must compare car insurance rates among several companies. Don't be one of the 36% of drivers who don't compare rates or shop around at all!

Changes in Your Life=Changes in Your Auto Insurance

If you don't have auto insurance, you need auto insurance—at least your state's minimum liability auto insurance. However, even if you already have a car insurance policy, there are plenty of reasons to revisit your insurance policy:

  • When you buy a new vehicle (drivers purchase about 10 cars, on average, in a lifetime)

  • When you graduate from high school or college

  • When you turn 25, 30, 40, 50, or 60 years old

  • When your star student gets their own auto insurance policy and no longer has to be on yours

  • When you move to a new zip code within your state

  • When you move to a new state

  • When you get a garage or a different garage for your vehicle

  • When you get married

  • When you change jobs and your commute time changes

  • When you've been promoted at work and have a new job title

  • When you gain a new affiliation

That's right, some insurance providers will give you a discount for certain affiliations. If you recently have become a U.S. serviceperson, a federal employee, an educator, a college alumnus, or a member of certain clubs and organizations, you might qualify for this discount.

Of course, some folks are just on the hunt for cheaper auto insurance rates. No matter your particular situation, it's always a good time to compare car insurance rates.

Looking for a New Auto Insurance Provider? Here's a Tip

When you're comparing car insurance policies and getting quotes from multiple auto insurance companies, make sure your current auto insurance policy stays active. Having lapses in your auto insurance history works against you in a big way. For one thing, car insurance companies associate such insurance coverage gaps with risky behavior, and risky behavior means higher auto insurance rates when your purchase or renew your auto insurance policy.

Also, keeping your current auto insurance policy active means you won't be financially vulnerable in the event of an at-fault accident and you won't get your license suspended for driving without insurance. 

So when you finally do sign up with a new auto insurance carrier, make sure to overlap your auto insurance coverage by at least a few days to avoid any issues and any lapses in your auto insurance history.

Method No. 1 To Compare Car Insurance Rates

When you compare auto insurance rates, you must make apples-to-apples comparisons, not apples-to-oranges comparisons. There are two ways to do this.

With an insurance quote comparison between different auto insurance companies, you have to compare them against the same baseline criteria, otherwise it's not really an auto insurance comparison. In order to maintain those baseline criteria, you must compare the same package of auto insurance products at the same levels (dollar amounts) of coverage. That way, you can evaluate the real differences between car insurance rates even though they are from different auto insurance companies.

In other words, there's no way to compare rates if you ask one company for a quote on liability and uninsured-motorist coverage, but you ask another company for a quote on liability and full coverage (collision coverage + comprehensive coverage=full coverage). In the same way, you would never compare different auto insurance companies' car insurance quotes using two different vehicles, each a different make and model.

Method No. 2 To Compare Car Insurance Rates

The other way to conduct an apples-to-apples insurance quote comparison is to use one, single car insurance company to compare different combinations of insurance. Using this method, your baseline criteria is the car insurance company itself.

For example, you could compare the difference in car insurance rates for different liability limits—for example, between minimum coverage and higher-than-minimum liability limits. Or you could compare auto insurance rates for liability and full coverage, then compare the insurance costs for liability with and without comprehensive or collision coverage.

This method gives you a basic frame of reference for auto insurance rates for various insurance packages. Since you are employing a consistent baseline—the one, single auto insurance company—you can be confident you are making an apples-to-apples car insurance comparison.

This company-specific information will give you some perspective when comparing auto insurance quotes from other companies. However, by itself, this second method is no substitute for the first method. To get the best car insurance at the lowest price, you have to do an auto insurance comparison of several companies.

Take Advantage of an Internet Comparison Tool

Nowadays, one great way to compare car insurance quotes is to use an insurance-comparison service. Whether a website or an app, these services sift through the policies of many different carriers to find you auto insurance rates that fit your budget and insurance needs. All you have to do is fill out your personal information on a form, then—presto!—you'll get a variety of auto insurance rates for the insurance coverage you're looking for. What's more, these sites are free, so you don't have to pay out of pocket to comparison-shop.

SmartFinancial Offers the Best Comparison Tool

Did you just get your driver's license and you're looking to purchase minimum coverage? Are you thinking about adding full coverage to your liability coverage? Do you have a low credit score, a spotty driving record or two teen drivers? No matter your situation, SmartFinancial can help to lower your insurance costs.

SmartFinancial uses artificial intelligence and next-gen algorithms to pinpoint the best car insurance, and it can do that just for you in just minutes. Please enter your zip code on this page or call 855-214-2291 to speak with one of SmartFinancial's insurance experts.

Why Do Auto Insurance Quotes Always Vary?

Great question. There are two major reasons why you will always get quoted different car insurance rates: insurance companies and market forces.

In short, car insurance companies employ their own analytics to weigh risk. In fact, no two insurers recognize the same combination of risk factors, nor do they weigh those risk factors in the same way. As a matter of course, each carrier will have its own interpretation of your overall risk profile, which includes your date of birth, driving history, credit score and other personal information.

Another reason auto insurance companies offer unique car insurance rates is the state of their own finances. In other words, your insurer's relative financial health will affect your insurance premium.

Market forces are a major factor when it comes to an insurer's relative financial health. After a catastrophic natural disaster or, for example, a rise in auto-related crime in a particular zip code, every insurance carrier must adjust their rates to protect their bottom line.

Discounts for Multiple Policies

You can lower your insurance rate if you have more than one car on your policy. You can also get a multi-policy discount if you insure your car and your house with the same insurance provider.

Not every insurance company offers the same discounts. One company's multi-policy discount may be the pits, while another's will actually save you a substantial sum of loot. If you recently bought a home, boat, RV, Jet Ski or motorcycle, you should definitely shop around to see what insurance companies are willing to offer you for having two or more than one policy.

Other Discounts That Could Save You a Bundle

We've already mentioned several kinds of discounts, including for affiliations and multiple policies, but there are plenty of others! Check out these money-saving breaks, which almost all insurance providers offer:

  • New vehicle
  • Good student
  • Air bags
  • Anti-lock brake system
  • Anti-theft devices

If you're looking to buy a new vehicle, get one that has the latest security devices. These new anti-theft technologies—steering-wheel locks, car alarms, kill switches, GPS tracking—help to reduce the risks associated with vehicular criminal activity. Moreover, they help to reduce the cost of the average annual premium.

More Discounts That Can Lower Your Premium

When you compare auto insurance carriers, you end up comparing their respective discounts. Indeed, discounts can add up to a nice tidy sum. is another is to compare

  • Drivers with a spotless driving history
  • Defensive drivers
  • Student away at school
  • Driver training
  • Annual mileage
  • Telematics

Auto-tracking devices provide car insurance companies with a wealth of real-time information about their drivers. For example, telematics can document your actual day-to-day mileage, which could well make you a candidate for pay-per-mile insurance. Further, telematics can track your driving habits—when your carrier finds out you're a true-blue defensive driver, they'll probably give you a discount.

Remember, Auto Insurance Companies Love To Incentivize New Buyers

Make no mistake, car insurance carriers want your business. If you are a first-time buyer or you're thinking about changing carriers, many auto insurance companies will offer a discount just for signing up with them!

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What Does "Price Optimization" Mean in the Auto Insurance Biz?

For insurance carriers, price optimization is the practice of incrementally raising their drivers' insurance rates. Just like the price of bread, milk and jam, the cost of auto insurance is subject to the market's inflationary forces. This sad reality means that adjusting for inflation, your rates will be raised by a few bucks each year, even if you haven't filed any claims.

Some drivers like to take advantage of the free-market competition between auto insurance carriers by changing their carrier every 12 months. On the one hand, your current insurance company may offer incentives and discounts in order to keep you as a loyal customer. On the other hand, a new customer is always attractive to other carriers, so they'll try to figure out a way to beat the price of your current premium.

Be the Hero of Your Own Due Diligence

There are many unbiased, not-for-profit organizations that have the auto insurance consumer's best interests at heart. Of course, your state's Department of Motor Vehicles, Department of Insurance and Department of Consumer Affairs are excellent places for the official low-down on auto insurance in our state.

But you may want to check out other fact-based sources, such as Consumer Reports and the Insurance Information Institute. The websites of J.D. Power, Moody's, Standard & Poor's and the Better Business Bureau give stats and facts on an insurer's relative financial strength as well as customer reviews and ratings for consumer satisfaction and other metrics.

For instance, let's look at State Farm:

  • Year State Farm was founded
    • 1922
  • Market share of State Farm
    • 10.1%
  • Financial strength of State Farm
    • Excellent
  • J.D. Power ranking
    • About average
  • Better Business Bureau rating
    • NR
  • National Association of Insurance Commissioners' complaint index
    • 2.58
  • Moody's rating (AAA=highest rating)
    • A
  • Standard & Poor's rating (AAA=highest rating)
    • AA
  • State Farm's iOS mobile app rating (5.0=highest rating)
    • 4.8
  • State Farm's Android (5.0=highest rating)
    • 4.1

With 48,000 insurance agents and almost 100 years of experience, State Farm underwrites about 83 million policies every year. Sounds good! But if you really want to be confident that State Farm is for you, you have to shop around and compare car insurance quotes.

Buy a Safer Car

The safer your car, the lower your insurance rate. So, if you are thinking about buying a car, check out the Insurance Institute for Highway Safety (IIHS). Every year, the IIHS and the Highway Loss Data Institute release their list of the safest cars. Don't miss out on this resource!

Read Reviews with a Grain of Salt

Drivers who have a positive impression of their insurer are not likely to post a positive review on the internet. So, read reviews of auto insurance companies with a grain of salt.

Your Favorite Trendy Company May Not Have the Best Price

Don't let commercials sway you. For example, Liberty Mutual promises that you can "customize your insurance," but many auto insurance companies lets you do that! It pays to do your own research and investigate the actual facts and figures.

Always Be Honest About Your Personal Information

If you don't provide all the facts about your personal circumstances, you won't get accurate auto insurance quotes. What's worse, partial transparency could backfire once you start paying your premium.

For example, if you omit to tell your insurer that you have a DUI-convicted driver in your household, your liability coverage and, say, full coverage will go up once your insurer finds out—and insurers have a way of finding out. Further, if you say you are only using your RV to go on vacation once a year but are actually living in your RV as a primary residence, you could be outright denied coverage.

Busting Some Myths About Auto Insurance

There are some urban legends out there about buying car insurance, but we're here to tell you they are not true. Let's take a look at a few of them:

  • Auto insurance rates are not negotiable.
  • The color of your car impacts your insurance rate.
  • Parking tickets affect car insurance rates.
  • You have to wait for your current policy to end before you switch insurers.

These are simply not true!

Often Overlooked Factors To Consider

Customer satisfaction is a high priority for many drivers. If you have become disenchanted by your carrier's level of customer service, that's a legitimate reason to seek out another auto insurance company. Remember, it's an open market, and you are in charge.

While most insurance carriers have websites and apps that offer new information and allow their customers to review and even update their insurance documents, some drivers would much rather have a face-to-face consultation. SmartFinancial will pair you with a knowledgeable local agent if you prefer to meet that person in their office.

Loyalty Discounts Are Not a Sure Thing

If you're sticking with the car insurance company you've been with for years because you're expecting a loyalty discount, that may never happen. In general, insurance companies are not known for the magnanimous allocation of loyalty discounts.

While some do offer it, you're still probably paying too much for your coverage if you haven't shopped around for vehicle insurance in the past year or two. It takes just a few minutes for you to save hundreds of dollars each and every year. Why wouldn't you do it? Even when prices are about the same, coverage protections will be different, and one company may have a stronger reputation when it comes to paying out claims in an efficient and timely manner.

Good Credit Makes a Difference

In many states, you get a "soft pull" on your credit to determine your rate. However, in states such as California, your credit is not a factor. If you're in debt, your outstanding balance may affect your credit negatively. Unpaid bills can be a crushing blow to your credit score, and they may render you a higher-risk driver, according to some insurance companies' intricate formulas. Even if you have good reasons for extending your credit (a new mortgage, for example), it will still be reflected in your credit score and not necessarily in a positive light.

High-Risk Drivers Will Hike Your Premium

Are you now living with someone with a messy driving history? Do you have teen drivers who just got a driver's license? The licensed drivers in your household can raise your car insurance rate, especially if they have a spotty driving record. Remember, it's up to you to list the designated drivers on your policy.

However, if you exclude one of your household drivers, they could surreptitiously use your car and get into an accident, causing property damage and perhaps injury or death. Please note, your coverage will not extend to that nightmare scenario, leaving you in the lurch, hurting your driving record and good credit, and hiking your premium on your car insurance policy.

Get a Ticket for a Moving Violation? Here's a Tip

If you get a ticket for a moving violation, you can take a driver safety course right away and your insurance company will never find out about that ticket. To save money, opt for an online course to save money.

SmartFinancial

SmartFinancial has helped thousands of customers find the best insurance rate for their insurance, whether that's minimum coverage, comprehensive coverage, uninsured-motorist coverage or any other kind of insurance product or package.

Please enter your zip code or call 855-214-2291 to speak with one of SmartFinancial's insurance experts. They are on your side!

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