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Car Buying

5 Steps for Choosing Auto Insurance

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author photo by Russ Heaps March 2012
  • A new car or life change are reasons to shop for new insurance
  • Choosing the best insurance involves more than comparing costs
  • Don't base your decision on a TV ad

Shopping for and buying insurance is something like going to the dentist; we need to do it, but afterward all we really remember is the discomfort. With all of its mouse print, addendums and wherefores, any insurance policy is a confusing mishmash of language seemingly designed to confound all but the most experienced experts.

Sure, finding the ideal company and the right agent can eliminate some of the anxiety from the process, but doing some research on your own will elevate your knowledge, as well as confidence, providing some peace of mind.

Obviously if you've never had auto insurance before or have been without it for a while, buying a car will trigger the need for auto insurance. Because the car itself can affect insurance costs, it makes sense to shop for your insurance before buying a car.

Any one of a number of life changes, according to Kimberly Lankford, a contributing editor for Kiplinger Personal Finance Magazine and author of The Insurance Maze, like a new teenage driver, moving, a new job and so forth should also spark shopping around your auto insurance business.

"The company that offered you the best deal before," she said, "may not be the best with new changes."

Here are five steps to help you organize your search:

Determine How Much Coverage You Need

Minimum-liability limits established by the state where you live, and collision-coverage requirements of your auto-loan lender take some of the coverage decisions out of your hands.

Each state has its own minimum-coverage limit for liability; some are as low as $10,000 per person and $20,000 per accident, as in Florida, to a state like Wisconsin where they're $50,000 per person and $100,000 per accident. Although such amounts will meet the state's minimum requirement, they won't be adequate in the event of a serious accident.

Lankford recommends at least $250,000 per person and $500,000 per accident.

The amount needs to be large enough to protect your assets, such as home and investments. If your coverage isn't sufficient to cover expenses and you are sued, anything you own can be in jeopardy.

A single person with few assets may be tempted to skimp on the liability coverage, but anyone with a job runs the risk of having their income garnished, even future earnings.

There are other ways to save money on your auto insurance; scrimping on the liability coverage shouldn't be one of them.

Evaluate the Insurance Companies

Cost is an important factor in your decision-making process, but it's not the only one. "You get what you pay for" is often as true with car insurance as it is with anything else.

No matter how cheap the insurance premium is, what you want is attentive customer service in the event of a loss, whether through accident, theft or act of nature. Sitting on the curb with your car smashed to smithereens in an intersection at midnight is not the time to discover your insurer doesn't have a 24-hour hotline.

Many websites like Insureme.com provide a description of the better known insurance companies with ratings for each. Choose the carriers you will consider from those with A ratings, which typically indicate the company is financially sound.

Most states keep track of complaints against auto insurance carriers, either through their attorney general's office, consumer affairs office or insurance commissioner's office. This is typically done in the form of a compliant to premium ratio. The lower the ratio, the more reliable the company. It may take a little searching to find the information - at Ohio.gov it required four mouse clicks to get there - but it's a good tool for weeding out unresponsive companies.

Of course, ask your friends and relatives which auto insurance they use and what their service experience has been.

Compare Costs

Now that you've found a few companies that seem reliable, it's time to compare costs.

In the Internet age, there is no excuse for not shopping around for the lowest cost insurance. Web sites like Insureme.com and Netquote are one-stop sources for comparing insurance costs.

If you watch their TV commercials, every insurance company claims it's less expensive than the next for the same coverage. Don't believe everything you see. Sometimes they can save you money and sometimes they can't.

Your needs are unique. Don't take a TV ad at face value. Do your own cost-comparison research.

Find an Agent

At this point in your research, you've probably narrowed your choices to the two or three least-expensive, most-reliable companies.

Start with the least expensive company and find an agent. Some companies are represented by independent agents who may represent several carriers, and others have dedicated offices and agents.

Most insurance company websites offer an agent locator, providing a list of agents close to you. This is the best place to begin. Choose three to five agents near you and call for an appointment. Insist on meeting with the agent and not an office manager or some other employee. Let them know you are interviewing for a new insurance agent. If they don't have time to meet with you at this stage, they probably won't have time for you when you really need them. Move on to the next agent.

Arrange to meet at their office. Is it neat? Does it seem organized? Is the staff friendly and helpful?

When meeting with the agent, get some background. Ask how long they've been in auto insurance, how long they've represented the company, and how long they've been in the area. Remember, at some point you may need them as an advocate for you; are you comfortable with them and do you trust them?

You have a list of agents; keep moving through them until you find the one that fits.

Ask About Discounts

Before giving the agent you've chosen your business, ask about discounts. Discounts may be offered for a wide range of reasons, such as paid-in-full plan, bundling your auto policy with home or other cars and good-driver history. Some companies, like Geico, give discounts for anti-lock brakes, daytime running lights and airbags. Make sure you get every discount for which you qualify.

If you follow these steps, you should be able to find an insurance company you can count on at a rate you can afford.

This image is a stock photo and is not an exact representation of any vehicle offered for sale. Advertised vehicles of this model may have styling, trim levels, colors and optional equipment that differ from the stock photo.
5 Steps for Choosing Auto Insurance - Autotrader