HOW TO CHOOSE THE RIGHT AUTOMOBILE INSURANCE COMPANY

There is no one best auto insurance company for everyone. Auto insurance is regulated at the state level and coverage costs may vary depending on where you live.

As a result, if everything else is the same, a friend or family member who has the same insurer and coverage in a different state may pay more or less than you. To make sure you get the best coverage for your needs, here are some tips.

Compare every year or two.

Contrary to popular belief, auto insurance companies don’t just calculate rates just for risk. It goes much deeper than that. Many insurers use what is called «price optimization,» which is the practice of setting rates based on how much insurers believe customers are comfortable paying.

Large insurance companies analyze a large amount of personal customer data, such as social media posts, credit scores, and even their shopping habits on the web. Then, they record the data through a proprietary algorithm that calculates the probability of turning around or simply renewing their existing policy each year. By doing so, they can increase their premium enough to increase their profit margins without attracting your attention and asking you to buy a new policy.

The Washington Post found that auto insurance rates have increased 20% in the past ten years, due in part to price optimization.

The best way to avoid becoming a victim of this practice is to buy a new policy every one to two years. Even if you like your current auto insurance company, chances are they know about your online activity, so the more quotes you get, the less likely you are to be labeled someone who won’t jump off the ship for a better deal.

DECIDE WHETHER TO USE AN INSURANCE AGENT OR CONNECT ONLINE.

Depending on the companies you consider, you will have to decide whether you want to do business with an insurance agent or buy a policy online. If you value face-to-face relationships and personal service, it’s hard to beat an agent.

But all agents are not created equal. Some are «captive,» which means they sell auto insurance to a single company. Others are «independent» and can sell auto insurance for multiple companies. Here are some things to consider for each scenario.

Captive Agents – The greatest benefit of captive agents is that many are not primarily motivated by commission. That means they have fewer reasons to «sell you» and more reasons to spend quality time educating yourself.

That being said, going with a captive agent makes sense if you are already committed to a particular company. These agents will know your company’s policies and coverage from top to bottom, but will not help you compare rates with other insurers.

Independent Agents – Independent agents have special access with various companies and help you find the best available rate. However, some companies pay higher commissions than others, and that means you may face pressure to choose a particular company or coverage plan.

During our investigation, we interacted with several independent agents who declined to give us a single detail about the higher-priced plans. Despite our persistence, we were repeatedly asked, «Why would you want to consider something that costs more?» and we didn’t get the information we wanted.

On the other hand, if your rates go up after committing to a policy, independent agents are best suited to help you negotiate a lower price.

Online shopping: Some companies allow customers to do business directly online. If you are an entrepreneur, this could be the most convenient option. In some cases, it will be the cheapest option.

The biggest drawback to buying a policy on your own is the risk of underinsuring yourself. Buying the wrong policy or a policy that doesn’t have state-mandated coverage levels could cost you a little money if the worst happened.

Helpful tips to keep insurance costs low

Selecting the right auto insurance company for you doesn’t mean your job is done. There are still a few steps you can take to keep insurance costs low.

Some are obvious, like comparing prices and comparing insurance costs before buying a car. But here are some others to consider:

• Take advantage of employer and affinity discounts: working for a certain employer or belonging to certain organizations can reduce costs. Some insurance companies, such as Liberty Mutual, specialize in group discounts for members of various groups, from alumni to Subaru owners.
• Keep all your insurance under one roof: Some companies offer discounts to drivers who bundle multiple types of policies, such as auto, renter, and homeowner insurance. You can even get a discount if you have more than one car insured with them. This is not a guarantee, but it doesn’t hurt to know if the option is available.
• Apply for a higher deductible: Selecting a higher deductible can cut coverage costs anywhere from 15% to 20%, depending on your deductible amount. However, keep in mind that you will want to make sure you have enough finances saved to cover the deductible in the event of an accident.
• Keep an eye on your credit score: It is recommended to keep a solid credit score no matter what, but it is especially important when referring to your score in developing your auto insurance policy. Just when you research a car’s accident history before buying it, insurers in most states use a credit-based insurance score to help determine rates. The higher the risk, the higher the costs of the policy.

The bottom line

When it comes to auto insurance companies, the best are the most versatile in their coverage options and services. While price is the most important factor for many car insurance buyers, look at other factors as well, such as coverage types and levels, discounts, and customer satisfaction. In the end, you’ll need to determine your exact coverage needs, and then buy an affordable policy.