7 Things You Need To Do When Shopping for Car Insurance
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It’s crucial to shop around before you purchase an auto insurance policy since each insurance carrier has its own formula for evaluating risk and one insurer may offer you a more favorable rate than another. Online comparison tools like SmartFinancial make it easy and efficient to compare quotes from multiple top insurance companies.
Read below for an overview of the steps you need to take when shopping for car insurance, from collecting relevant information to activating your new policy.
Why Is It Important To Shop for Car Insurance?
You shouldn’t necessarily purchase auto insurance from the first company you obtain a quote from because every insurance provider uses its own unique formula to calculate the risk of insuring you. This means a different insurer could view your specific set of circumstances more favorably and offer you coverage at a lower price.
As you shop for car insurance, you should make sure you are comparing apples to apples rather than apples to oranges. For example, a cheap policy that only includes liability insurance is preferable to a more expensive liability-only policy with the same coverage limits from a different insurer. However, it may not be better than a more expensive full coverage policy.
How To Get the Best Rates When Shopping for Car Insurance
Follow these seven steps on how to shop for car insurance quotes to improve your odds of finding a policy that meets your needs at an affordable price.
1. Make Sure You Have the Right Information and Documentation
Whenever you reach out to an insurance company for a quote, you will generally need to share information such as the following:
- Name and date of birth
- Marital status
- Home address and, if different, the address where you will park your car
- Phone number and email address
- Vehicle year, make and model or vehicle identification number (VIN)
- Vehicle mileage
- Prior insurance history
- Driver’s license number
- Ticket and accident history
- License suspension information
- Financing or leasing information
Keep in mind that you will likely need to provide the above information for every vehicle and person your policy will cover including any cars owned or driven by you, your spouse and your driving-age children. It’s also possible that a prospective insurer will check your credit information when setting your rates, although you shouldn’t have to provide this information yourself.
2. Learn Your State’s Minimum Car Insurance Requirements
Car insurance is required by law in every state besides New Hampshire and Virginia. As a result, most drivers throughout the country will need to obtain a minimum amount of liability insurance and potentially other coverage types in compliance with their state’s laws.
The following table goes over the coverage types that are most commonly required by state law along with the range of mandatory minimum coverage limits that apply to the majority of drivers across the nation.
Minimum Coverage Limit (varies by state)
$15,000 to $50,000 per person, $30,000 to $100,000 per accident
$5,000 to $25,000 per accident
Uninsured/underinsured bodily injury coverage
$20,000 to $50,000 per person, $40,000 to $100,000 per accident
Uninsured/underinsured property damage coverage
$5,000 to $25,000 per accident
$10,000 to $250,000
3. Identify What Type of Coverage You Need
While you will be allowed to drive after purchasing enough car insurance to satisfy your state’s legal requirements, you may want to consider buying a policy with more coverage types and higher coverage limits than is required by law.
For example, it’s generally recommended that you purchase $100,000 worth of bodily injury liability insurance per person, $300,000 worth of bodily injury liability insurance per accident and $100,000 worth of property damage liability insurance, even though no state requires drivers to buy that much coverage.
In addition, you will likely have to maintain comprehensive and collision insurance if you are financing or leasing your vehicle. See the below table for more details about the types of car insurance you may have to get or may want to purchase as optional add-ons to your policy.
Required by Law
Bodily injury liability coverage
Pays for another person’s medical bills, lost wages and funeral expenses plus legal fees if they sue you after an accident you are responsible for
Property damage liability coverage
Pays to repair or replace another person’s vehicle, home and belongings or any public property that is damaged in an accident you are responsible for
Covers your medical expenses or car repairs if you are hit by someone who doesn’t have car insurance or if you are the victim of a hit-and-run
Underinsured motorist coverage
Makes up the difference if you are hit by someone who doesn’t have enough car insurance to fully cover your medical expenses or car repairs
Personal injury protection (PIP)
No-fault states only
Pays for your medical bills, lost wages and funeral expenses after an accident regardless of who was at fault
Medical payments coverage (Medpay)
Pays for your medical bills and funeral expenses after an accident regardless of who was at fault
No, but lenders and lessors usually require it
Pays to repair or replace your vehicle after you crash into another vehicle or object regardless of who was at fault for the collision
No, but lenders and lessors usually require it
Pays to repair or replace your vehicle after it is damaged by a non-collision source like fire or vandalism
Covers the difference between your outstanding loan balance and the actual cash value (ACV) of your car after a total loss
Pays for tows, jumpstarts, locksmithing, fuel delivery and other services if your car breaks down
4. Compare Car Insurance Quotes and Policies
The best way to shop for car insurance that meets your needs and budget is to compare car insurance rates from at least three to five insurance companies. There are numerous ways to obtain quotes from car insurance companies including contacting them directly or talking to an independent agent or broker.
Keep in mind that you can only receive quotes one at a time if you go to an insurer’s website or talk to a captive agent who works for the insurer. Meanwhile, independent agents may be knowledgeable about multiple insurance carriers and could help guide you through the auto insurance shopping process. However, agents also tend to work on commission, meaning they may be incentivized to convince you to buy more coverage than you need.
As a result, the simplest way to compare policies is by going through an independent marketplace like SmartFinancial. We only need you to fill out a single questionnaire before we share your information with agents in your area who can provide you with auto insurance quotes for free.
5. Ask for Discounts
Before settling on an insurance carrier, you should also ask each company whether it offers any car insurance discounts you might be eligible for. Even if one insurance company can offer you a lower base rate, another could end up providing a cheaper policy overall if it offers more discounts that you qualify for.
Some of the actions you could take to potentially earn a discounted car insurance rate include the following:
- Bundle your home and auto policies
- Add multiple cars to the same policy
- Install anti-theft devices and other safety features
- Maintain a clean driving record
- Take an approved defensive driving course
- Get good grades in school
- Pay your premiums in full at the beginning of your coverage period
- Practice safe driving behaviors as measured by a telematics device
- Purchase a new vehicle
- Buy a new insurance policy or renew your existing one before it expires
- Join an approved church, company, university or organization to get an affinity discount
- Stay with your current insurer to earn a loyalty discount
- Use an electronic funds transfer (EFT) or some other preferred payment system to pay your premiums
- Drive a hybrid or electric vehicle
6. Be Transparent
It’s important to be transparent with your insurance company regardless of your circumstances. Although it could be tempting to conceal information like how many traffic citations you’ve received or how often you drive your car in order to secure lower premiums, misleading your insurance provider will likely cost you more in the long run.
Lying to an auto insurer in any capacity is considered insurance fraud. If you are caught, your insurance carrier could cancel your policy or refuse to pay you after you file a car insurance claim and you could even face fines or jail time.
7. Buy Your Car Insurance Policy
Once you have settled on the right insurance company, you will be ready to purchase your new car insurance policy. You can activate your policy with an upfront payment, which will usually be the premium for your first month of coverage.
In order to avoid a lapse in coverage that could raise your rates in the future, you should set up your new policy so that it begins before your existing policy expires.
How Often Should I Shop for Car Insurance?
It’s generally recommended that you review your car insurance needs and shop around if necessary at least once a year and anytime you experience a major life event such as getting married or sending a child off to college. You could also compare quotes every time your current policy is up for renewal, which should happen once or twice a year.
What Factors Affect Rates When Shopping for Car Insurance?
Insurance companies may take the following factors into account when setting your car insurance rates:
- Driving record
- Vehicle make and model
- Vehicle use and mileage
- Policy details like your coverage types, coverage limits and deductibles
- Prior claims
- Insurance history
- Applicable discounts
Insurers could also consider personal details like your age, sex, marital status and credit score to determine your auto insurance rates. However, some states have laws that restrict the ability of auto insurers to use these characteristics as rating factors.