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What You Should Know About Car Insurance Companies

From books and movies to commercials to musicals, any customer can see America's love for cars. According to Statista, a platform dedicated to market and consumer data, the United States is one of the world's largest automobile markets. Leading manufacturers, like Ford, turn out and sell millions of cars in the States alone. Meanwhile, the country simultaneously imports from countries like Canada, Japan, and Mexico.

For consumers waiting to snatch up these hot commodities, a car has a range of appeals. Some are simply car enthusiasts, while others can't resist the romantic notions associated with them. After all, many see owning a car as your first step towards independence.

While these ideals can make for good storytelling, they're an expensive investment. Most citizens in the U.S. have to purchase auto insurance to drive their vehicles legally. But beginning the journey to find the right insurance policy can be overwhelming. Before you hit the thrill of the highway, search for the best car insurance policy that will provide you the right coverage.

What Should I look For When Selecting the Best Car Insurance?

No one is exactly alike; each person has a unique set of needs. That's why it's essential to find a car insurance policy that accommodates your situation. A good goal to maintain when shopping for auto protection is to balance comprehensiveness and affordability. Too much insurance can raise premium prices, whereas too little will leave you vulnerable to costs down the line.

When you first start shopping, you want to look for a policy that compromises. First, though, you should know what types of coverage are out there, which are optional or not, and which ones help protect you best.

Find the Right Types of Insurance

There are different types of coverage that come with auto insurance policies. Sometimes, you may even hear the term "full coverage" when it comes to your car's insurance policy. In particular, those leasing or financing a vehicle are the most likely to have their lender tell them that "full coverage" is a necessity. That's because most lenders want to ensure that their investment in the car is protected. It helps them avoid losses that could result if the car is damaged, stolen, or totaled.

But, there is no one standard full coverage policy. Instead, it means that your lender requires you to have a combination of protections on your policy. There are certain forms of coverage that you will see required by your state. Here are the insurance options to look for:

  • Bodily Injury (BI) Liability – If you are in an accident that you are liable for, this coverage pays for any resulting medical expenses. These expenditures may include medical bills or compensation for lost income.

  • Property Damage (PD) Liability – This pays for any repairs needed if you damage another person's property during an at-fault accident.

  • Medical Payments – Sometimes called MedPay, it covers medical expenses you or others in the vehicle encounter if you're injured during an accident. Only some states offer this coverage, and when they do, it's typically optional.

  • Personal Injury Protection (PIP) – Also referred to as no-fault insurance, PIP pays for medical costs regardless of who caused the accident. Unlike medical payments coverage, many states require PIP.

  • Uninsured Motorist (UM) – This coverage is also called Uninsured Motorist Bodily Injury insurance. It helps cover medical costs for injuries sustained following an accident with an uninsured driver. It also kicks in if a driver causes a collision and runs. Another version is called Uninsured Motorist Property Damage insurance (UMPD) for when an uninsured driver causes damage to your car.

  • Underinsured Motorist (UIM) – Like UM, Underinsured Motorist pays for expenses resulting from injuries after a collision. However, it applies when the driver who causes the accident doesn't have enough coverage to fully compensate.

  • Comprehensive – Comprehensive insurance pays for needed repairs or replacements if your vehicle is damaged in a covered incident outside of collision. That may include fire, theft, or certain natural disasters.

  • Collision – If your car is damaged in an accident with another car or even an object, like a fence, Collision helps cover repairs or replacements.

Remember: if you lease or finance your car, your lender will likely require you to have full coverage auto insurance. That typically means you need a policy that includes liability insurance, collision insurance, and comprehensive insurance.

However, owning your car does not help you avoid required coverage. Most drivers still have minimums that their state requires for the motorist to legally drive on the road.

Choose Car Insurance Based on Need And State Law

While the particulars vary, almost every state requires drivers to maintain some level of coverage. You can see your state's automobile financial responsibility laws on the Insurance Information Institute's site or your state's respective insurance commissioner. The goal of mandating a minimum level of insurance is to ensure that drivers on the road are held responsible for any damage they cause. Moreover, it demonstrates that the driver will pay some level of financial compensation following an at-fault accident.

State Insurance Requirements

Not all states have the same set of requirements. It's most common for a state to require both bodily injury and property damage liability insurance. Although depending on your zip code, you may also need either uninsured or underinsured motorist coverage as well as some form of personal injury protection. Once again, you may hear the combination of these coverages called "full coverage," but there is no definition for that. It shifts depending on whether you own or lease a car, as well as other factors.

One phrase you may encounter is a "no-fault state." There are twelve, including:

  • Florida
  • Hawaii
  • Kansas
  • Kentucky
  • Massachusetts
  • Michigan
  • Minnesota
  • New Jersey
  • New York
  • North Dakota
  • Pennsylvania
  • Utah
  • And Puerto Rico in addition

If you live in a no-fault state, then making a claim works differently for you. If you and another motorist get into an accident, both of you have to file a claim with your respective car insurance company, regardless of who is at fault. Each person's insurer then compensates its own policyholder. The overall goal with this is to keep small claims out of court.

Drivers in these states also have to purchase personal injury protection coverage with their auto insurance policy.

States With No Car Insurance Requirements

The only two states that do not technically require car insurance are New Hampshire and Virginia. However, that doesn't mean you can skip out on financial responsibility. New Hampshire still requires you to prove that you have enough funds to meet liability requirements. Virginia also requires proof; however, you have an alternative annual $500 Uninsured Motor Vehicle fee.

It's important to know your state's rules. Make sure you carry a policy that fits both the law where you live as well as your needs. If you don't have enough auto liability coverage, you may face repercussions. If you don't have any insurance or an insufficient amount of it, the other party in a collision you are at fault for could come after you with a lawsuit. This can lead to expensive legal fees that could even put you in debt. Even then, you may have sell your assets to compensate for the liability expenses. It is also possible that your drivers license and car registration may be suspended.

Select The Right Car Insurance limits For You and Your Passengers

Car insurance should fit the unique details of your life. One of the more vital things to consider for you and passengers is the coverage limits. Essentially, a limit is a financial cap. Whatever amount your buy for your policy is the maximum that your auto insurance provider will pay for a particular claim. When purchasing coverage, you choose either a split limit or a combined single limit (CSL).

A split limit is separate values. Your coverage will pay out a maximum per person as well as a total maximum per accident.

Alternatively, the combined single limit is a flat rate. You choose a dollar value for your insurance provider to pay out for any bills resulting from an accident.

Let's say you have $20,000 worth of bodily injury liability coverage to look at it simply. You have insurance limits of $25,000 per person and $50,000 per claim. In one scenario, you collide with another driver, causing the only person in the car $15,000 in medical fees. Since it's under your policy limit, it's covered by your car insurance company.

However, in another scenario, you cause a driver $30,000 and the other person in the car $1,000 in fees. The first individual is above your per person limit. So, you will be on the hook for the remaining $5,000. With the other rider, their fees only add the total cost up to $31,000. That's well below your per accident maximum. Therefore, your policy will cover the passenger's injuries.

Each state has its own rules, but the possibility of an expensive claim should encourage you to purchase a higher limit than the regulatory minimum. Accidents are often more costly than these enforced lower limits. Buying a higher limit will save you money in the long run and keep you from paying out of pocket.

Consider Additional Car Coverage Options

While you can purchase a basic auto insurance policy, you might want additional coverages. That's because not every policy is made the same way. Add-on coverage can help close the insurance gaps and ensure you're better protected. Here are some optional coverages your provider may offer:

  • Guaranteed Auto Protection (GAP) - Gap insurance covers the difference between the vehicle's current worth and the amount you still owe on it if the car is stolen or totaled. Essentially, this coverage pays the remaining balance between the two values. While it is an optional policy for car owners, it's often required for those leasing or financing a car.

  • Roadside Assistance Coverage – Roadside assistance applies when your car breaks down, whether it's on the side of a busy road or in a parking lot. It can cover situations like changing a flat tire, towing, or retrieving your keys from a locked car. You might not need this type of add-on if you are already a member of a group like AAA.

  • Rental Car Reimbursement – This coverage compensates you for transportation fare or the cost to rent a car while your vehicle is in the shop receiving repairs. It generally does not apply if your car is just in for maintenance or you need a rental car while away from home.

  • Glass Coverage – Some auto insurance policies include no-deductible glass coverage, which includes the windshield, side windows, rear windows, and sunroofs. In the case that they don't, you may be able to buy it as a supplemental policy.

  • Associated Legal Fees – When you're at fault for a collision or damage, there are plenty of legal costs to deal with. Investigating or assisting your insurer with a claim may result in unexpected losses outside the major legal fees, though. This coverage provides payment for any days you lose out on your regular wages.

Additionally, collision and comprehensive coverage are optional if you own your car. But if you are financing or leasing your vehicle, then your lender will likely require you to purchase both.

Look for a Cheaper Car Insurance Rate

What Should I look For When Selecting a Car Insurance Company?

A great car insurance company provides great customer service and values their policyholder's time. So, the best car insurance provider should respond quickly to your concerns and claims. A top-notch company often brings higher settlement amounts and smoother processing, too. To determine if an insurer is right for you, check third-party reviews. These evaluations typically base their scoring on factors like the efficiency of claims filing, the time it takes for claims to be approved, and general customer service. Researching scores from an array of reviewers can help lead you to the best bang-for-your-buck company.

For example, you can check out J.D Power releases satisfaction ratings for car insurance companies. When the ratings are released, car insurance companies are rated based on several factors, including:

  • The efficiency of the claims process
  • The amount of time it takes for a claim approval
  • Customer service performance as a whole

Don't be afraid to comparison shop, either. Go to the insurers you're most interested in and get auto insurance quotes from them. One may offer a more competitive premium for the exact same or similar amount of coverage.

How To Get Auto Insurance Quotes

To compare auto insurance quotes, you can either visit the car insurance sites directly or use a comparison site like SmartFinancial. Once you review the ratings from J.D Power, you can take a closer look at some car insurance options that may work for you.

You can also contact some prospective auto insurance companies to speak with an agent directly. An agent can provide several car insurance products that fit your needs and budget.

How To Access Lower Auto Insurance Premium Costs and Save Money

Premium costs can be intimidating at first, especially when you're just starting to receive quotes. But keep in mind: a variety of factors go into a car insurance coverage premium's total cost, which isn't set in stone.

One of the easiest places to start is by looking at the range of available auto insurance discounts offered by your insurer. You can refer to the list below titled "Car Insurance Discounts" for some ideas. They are only a fraction of the possible choices you may run into, though.

Overall, a lower premium cost depends on your profile as a driver. Car insurance companies use these traits to determine how likely a driver is to file a claim. The Insurance Information Institute provides a list of things that most commonly influence your auto policy:

  • Your driving record – Insurers prefer safe-driving policyholders. So, the cleaner your record is, the lower premium you will pay. Drivers with an accident or traffic violation are not the only ones with increased premiums, though. Drivers without a previous history of insurance may also face the same price hike.

  • How frequently you use your car – If you consistently take your car out on the road, it introduces more opportunities to get into an accident. So, if you rely on your car to commute to work or for long road trips, you'll have a higher policy price.

  • Your zip code - Suppose you live in a metropolitan area. According to Progressive, if that urban area has high rates of crime or claim filings, then you're riskier to insure. That ultimately leads to a pricier premium. Anti-theft devices and parking your car in safer areas can mitigate this risk.

  • Your age - Drivers with experience under their belt tend to have fewer accidents. However, novice drivers, typically teens, aren't the only ones who can spike insurance prices. Seniors over the age of 70 may also begin to see their policy rate growing with them. 

  • Your gender – Women are generally less risky to insure than men. They tend to get in fewer automobile accidents, whether it's driving-under-the-influence (DUI) or classified as a severe accident. So, men may generally pay more for an auto policy than women.

  • The model and make of your car – Your coverage should match the value of your car. So, if you have a luxury or custom-tailored vehicle, you'll need a more significant amount of protection. That leads to a pricier premium. It may be because if your vehicle needs repairs, it requires specialty parts that aren't common on the market. Or, it may be less safe to drive, making it more likely for you to have an accident. Having a high-value car also increases the threat of vandalism or theft.

  • Your credit-based insurance score – Car insurance companies use this as a tool to predict how likely it is that you will file a claim. It can also indicate how expensive that future claim may be.

  • The type and amount of coverage – The details of your auto policy directly influence the cost of your premium. That includes the limits, deductibles, and optional protections you choose to add on.

However, there are measures you can take to lower even traits like zip code and age. You can install anti-theft devices to mitigate the risk of theft. Or, you can take a provider-approved driver's education course to improve the increased rates associated with your age. So, whether the factor driving up your rates is your ZIP code, credit score, or driving history, don't let it impact your outlook. Many times you can improve on it within a few years. Shopping around for quotes will also bring you to the best-priced auto insurance group. Each one evaluates factors differently, meaning a more comprehensive range of rates to choose from.

Choose a Car Insurance Coverage Deductible

Auto insurance policies' customization opportunities apply to more than the types of car insurance coverage available. When you purchase a policy, you also have to choose the type of deductible you want. This is the dollar amount you pay when you file a claim. The money used comes directly out of your pocket. Once you pay up to your car insurance coverage deductible amount, your insurance kicks in and covers the remaining balance. So, your deductible applies on a claim-by-claim basis, which is different from annual deductibles.

Suppose you get in an accident and your vehicle is damaged as a result. When you take it into the shop, you learn that it will take $8,000 in repairs to fix it. Meanwhile, you have collision coverage that takes effect once you make a claim. The collision deductible is $1,000. So, you have to pay $1,000 out of your own funds before your insurer covers the remaining $7,000.

Alternatively, the accident isn't as bad, and your vehicle only requires $600 in repairs. As a result, the total cost to fix the car is on you because it doesn't exceed your $1,000 deductible.

Generally, you can expect a deductible to range somewhere between $100 to $2,000. The most common deductible amount that policyholders choose is $500. Since this is a lower deductible, though, it may mean you pay more in premiums. That means a more significant responsibility on your end when your car needs repairs. You can lower your premium by taking on a higher deductible instead.

However, regardless of possible future savings, you want to choose an insurance deductible that you are comfortable paying. It should only cost as much as you can afford to pay out if a claim does roll around. You can also take into consideration your vehicle's current value. If it's relatively low, then it wouldn't make sense to choose a higher amount.

The types of insurance you have determines what kind of deductible you are looking at and may not require a deductible at all in some situations. Collision and comprehensive coverage commonly need a deductible. In contrast, the state you live in may determine if you have to choose coverage like personal injury protection or uninsured motorist. On the other hand, there is no deductible for a liability claim.

Car Insurance Discounts

The cost of car insurance can stack up. That's why you have to look at more than just an approximate premium estimate online to get a full idea of the possible price. Your personal situation will affect the quotes that your potential provider shows you. So, it's crucial that you take into account the factors that can increase your rates.

However, it's possible to save money on your overall insurance policy price using available discounts through your insurer. While there are many unique savings opportunities, here are some of the basic ones to look for:

Paid In-Full Discount – If you pay a year's worth of your insurance policy upfront, your provider may offer you a discount.

Safety Equipment Discount – Some auto insurance companies offer discounts if you install qualifying safety features into your vehicle.

Good Student Discount – If you have a student on your policy, they can prove they meet certain criteria to earn a discount. It typically involves maintaining good grades in school.

Safe Driving Discount - Some auto insurance companies may reward you for being a cautious driver, whether it's thanks to your clean driving record or your attendance at a driver's ed course. For example, you can enroll in State Farm's Drive Safe & Save app, which tracks your driving habits for up to 30% in savings.

Multi-Policy Discount – Individuals who bundle their auto insurance with an additional policy, like Homeowners, from the same provider can earn a discount.

Multi-Car Discount – If you are a part of a household with more than one driver, insuring multiple cars with the same car insurance company can help you earn auto insurance discounts.

Membership and Work Discount – Certain auto insurance companies will offer auto insurance discounts to individuals who either have a membership with an approved group or have previously worked with one. This can include professional organizations, alumni associations, and more.

Above is only a fraction of the auto insurance discounts you can possibly access, so look around for savings near you. Even seniors who experience higher rates have auto discounts targeted directly at them. In fact, the state of Pennsylvania mandates an auto insurance discount for citizens above the age of 55 who complete a qualifying driver improvement course. When you get a car insurance quote, make sure to ask about possible discounts.

However, keep in mind: some discounts may not be available depending on your zip code. Your car insurance company may not offer certain discounts if you live in a specific state. Alternatively, the company may still give you the savings, but the rates or rules may change between two different places. Consider talking with your insurance agent to review the opportunities best suited to your situation and auto policy.

Average Auto Insurance Cost by Company

SmartFinancial collected and compared data from 8 of the top insurance firms to see how their auto policy prices compare. The data points amount to approximate average rates that each company would put out as a monthly payment. The eight firms include Allstate, American Family, Farmers, Liberty Mutual, Nationwide, State Farm, Travelers and USAA.

Among these companies, Liberty Mutual clocks in with the highest monthly rate at around $312. In contrast, the lowest priced insurer is USAA at an estimated $121. The remaining companies sit within the limits of these two prices.

  • State Farm is $162 per month.
  • American Family is $171 per month.
  • Travelers is $179 per month.
  • Nationwide is $213 per month.
  • Allstate is $237 per month.
  • Farmers is $282 per month.

With a lower threshold of $121 and a higher threshold of $312, this may give you a roundabout guess of what a monthly insurance payment may look like with a popular insurance provider. However, your experience may vary. Since policy rates shift based on various factors like your zip code, car model, and claims history, you might have an extremely different premium.

Something to keep in mind: these prices might continue to rise collectively. The National Association of Insurance Commissioners (NAIC) reports that auto insurance rates rose 5% between 2017 and 2018. While they dropped in 2021, according to Insurance Business America, they are still, "106% more expensive when compared to prices in 2011."

Save Money on Your Car Insurance

Best Car Insurance Companies (Including Customer Service)

You may look to neighbors or family members for advice on the best auto insurance companies. But there are also third-party groups that assess auto insurance companies. You can refer to these rating systems to help inform your choice. Across the board, each third-party group has a different set of criteria that helps them decide their grade. So, if you're comparing apples-to-apples, make sure you know how these organizations create these rankings. Again, generally, they assess customer satisfaction and the insurance provider's service.

  • Better Business Bureau (BBB) Rating – The BBB is a nonprofit organization that helps consumers navigate businesses and charities. Users can search the platform to find the most trustworthy and legitimate options on the market. The BBB assigns each company a grade that shows up alongside the business's profile as well as consumer reviews or complaints.

  • Moody's Corporation (MCO) – Moody's Corporation gives credit scores to corporate and municipal bonds. The designations are designed to help customers find the safest places to put their money. The higher the rating, the less likely the bond or insurer is to default.

  • NAIC Complaint Index – The National Association of Insurance Commissioners' (NAIC) Complaint Index takes the number of complaints an insurance provider has received and compares it with its size. It also indicates whether a company has received more complaints than its fellow insurers or less. Customers can use the NAIC's database of these complaints to research a potential insurer. According to the NAIC, 3 out of the top 5 reasons in 2021 for complaints focus on how a provider handled a claim.

SmartFinancial took these third-party organizations and used their rating systems to compare the top ten car insurance companies. You can review the full comparative chart here under "Best Car Insurance Companies." However, looking at the table will show you the differences between ratings.

You'll also see if a company performs well in one rating but lackluster in another. For example, USAA has one of the highest grades for Moody's, indicating that the company is very creditworthy. On the other hand, USAA has the lowest rating with the Better Business Bureau.

So, take your time to investigate different aspects of your potential insurer. You want to make sure they are a reliable company with a good record that provides a service fit to your unique needs.

Which Company Has the Cheapest Car Insurance?

While we can talk about preferences and customization, that may not be the first priority for a customer. Instead, many focus on prices when choosing a car insurance company. According to SmartFinancial's study on car insurance premiums, U.S. drivers pay an average cost of $1,450.92 per year. That's an approximate monthly payment of $120.91.

If you want to aim for a regular monthly below that average, you have a range of options to look at. Based on estimated policy prices, you likely have over 20 auto insurance companies to review who can offer you that kind of competitive pricing. Below are the top-rated cheapest companies to get you started in your search.

  1. American National P&C is $51.54 per month.
  2. American National P is $56.40 per month.
  3. Concord Group is $69.01 per month.
  4. Countryway Insurance is $76.68 per month.
  5. North Caroline Farm Bureau is $86.35 per month.
  6. Buckeye Insurance Group is $92.53 per month.
  7. Bear River is $92.64 per month.
  8. Pekin Insurance is $96.74 per month.
  9. Virginia Farm Bureau is $96.94 per month.
  10. MMG Insurance Company is $96.96 per month.

Remember: the rates above are approximate. Numerous factors go into an auto insurance policy's total cost. That can lead to you having a drastically different insurance rate in comparison. Speak to your insurance agent if there are questions you have regarding your policy's pricing. Or, consider asking is there are ways to save money to help drop the insurance cost a little. 

If you are leaning more towards any of the top 8 firms previously mentioned (Allstate, American Family, Farmers, Liberty Mutual, Nationwide, State Farm, Travelers, and USAA), remember that they sit between $121 and $312. That's approximately $70 between the two lowest from each group, which can add up if you're concerned about a monthly budget.

What if I'm Denied Auto Insurance?

Often times, an insurance policy premium is negotiable. You can either shop around to find a competitive price or an insurer with better offerings. Or, if one of the factors that contribute to your premium price is a little riskier, it's liable to change. Although it may take years, you can steadily improve traits like your credit score or driving record. Eventually, you'll have opportunities for a lower premium.

However, being too risky can jeopardize your ability to get accepted for an insurance policy. In some cases, the company allows you to purchase a policy, but it will come at an extremely high premium. In other situations, they may reject you entirely. Where does that leave you?

If you're consistently denied coverage, for whatever reason, you have three options moving forward. First, you can join a state-assigned risk pool. The insurance providers voluntarily participate in these risk pools. Once they do, they have to accept the motorists the state assigns them. Unfortunately, choosing this may result in very high premiums. However, the insurer has to accept you. Therefore, it's up to you whether the increased costs are worth obtaining the insurance you need.

Secondly, you can turn to a private insurance company specializing in "high-risk" drivers. These insurers only create auto insurance policies for individuals who traditional companies find to be too risky. They may have a poor driving record with multiple accidents, a collector of high-performance luxury cars, or even live in a neighborhood prone to claims. There are two benefits of a private insurance company over a state assigned risk pool:

  • They can sell comparatively more comprehensive coverage.
  • They may be able to insure you for a lower premium.

Your third option, however, is more of a long-term practice you can adopt. If you want better policy options, wait until you've improved yourself or your situation. Several factors that a traditional insurance company looks at can get better with time. You may have to repair your credit or take a defensive driving course, but that just shows that the rejection is not permanent.

Which Auto Insurance Company Is The Right Fit?

Once you know the insurance products you need, the rate you want, and the minimums to work by, you can ask yourself, "Which car insurance company is right for me?" You want to take on the role of a reviewer yourself and break down your potential provider. Scrutinize the service it provides and its financial security. You want an auto insurance company that will be stable for the long run so that it can support you. The internet provides a wealth of sources to check on a company's performance.

Sometimes all the information available can send you in a tailspin, though. If you want to find the policy that fits in your budget, you may need to look at more than lists. As an online auto insurance comparison tool, SmartFinancial helps you find the lowest insurance costs. When you can lay your options out, it ensures that you can see which auto insurance company offers the best price rate per year.

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