If you’re reading this, chances are you’re savvy enough to know that Smokey Robinson’s “shop around” advice can apply to much more than matters of the heart. You know how to check a big-ticket item’s price across all your favorite retailers, and you’d never book a flight before first taking a gander at Kayak or Expedia (but also remembering to cross-reference airlines like Southwest and Virgin who don’t show up on such search engines). In short: You know how to comparison shop with the best of them.
But do you know how to comparison shop for car insurance?
Like all kinds of insurance, car insurance policies aren’t quite as straightforward as a seat on an airplane or a new TV (or nearly as thrilling—we know). But this necessary expense is also a big one: insurance accounts for more than 10 percent of the average family’s expenses, more than health care, clothes, or entertainment. When combined with general transportation costs, getting ourselves from point A to point B costs us, on average, nearly a third of our total expenses.
So how do you go about choosing the right car insurance company? In a $180-billion dollar industry with an almost unbelievable amount of advertising noise, how do you sort out what you actually need? There are three main things to look for in a car insurance company as you comparison shop:
Claims & Service Ratings
Your best bet is to start with the tried-and-true experts at J.D. Power if you’re interested in learning how well the car insurance company you’re considering handles both claims and customer service. Across most of the major companies, J.D. Power measures overall satisfaction, as well as more nitty-gritty details like service interaction, repair process, and settlement. The result is an annual study on claims that provides an accurate, unbiased glimpse into what life with an auto insurance company will actually be like. Even more companies are included in J.D. Power’s “Insurance Purchase Experience” Ratings—find 2015’s here.
Pricing and Discounts
Then of course, there’s the good old-fashioned price sticker to consider. Each company’s underwriting guidelines are different, which means you could get a slightly more competitive price if you do some legwork on the front end of your insurance search. Also keep in mind that car insurance is incredibly personalized—every person has their own history when it comes to accidents, claims, and personal factors, too. For example, military members and their families might choose to go with USAA, a military-only provider. Maybe you’ve got a household of exceptionally bright teenagers who could all qualify for a good student discount, or maybe accident forgiveness is exceptionally important to you for reasons you’d rather not discuss publicly. Do you need roadside assistance? Should you hop on the same car insurance policy as your spouse? These are all good questions to ask a licensed agent before making a policy choice.
The Actual Coverage You’re Purchasing
One of the trickiest parts of car insurance comparison shopping is that it can be difficult to make sure you’re comparing exactly the same kind of coverage. Liability limits can be confusing, so first educate yourself on the ins and outs of the insurance basics—or, if you’re strapped for time, use a comparison engine like The Zebra, which does that work for you, ensuring that you’re comparing each company and policy apples-to-apples. The key here is to make sure you’re not comparing, for example, one policy that’s full coverage, with substantial coverage for both comprehensive and collision deductibles, against a liability-only policy.
A Note on How Often to Shop
Experts agree that, unfortunately, remaining loyal to your car insurance company is not likely to pay in the end, thanks to a process called price optimization. Insurance companies use a variety of information to determine our car insurance premiums—including our zip code, age, driving record, and even factors like our marital status—and they also have access to our online and social media histories.
Price optimization is the process by which your insurance company can take the information they know about you, plug it into an algorithm (the details of which are industry secrets), and determine how you are most likely to behave, statistically speaking. USA Today explains in this report that stability might hurt customers: In other words, if you haven’t moved, changed marital status or jobs recently, there’s a very real chance your car insurance company is increasing your rate by small amounts each year—just enough that searching for a new car insurance company will likely not seem worth the hassle, but also enough for the company to increase its profit. USA Today explains that over years, these tiny tweaks can make a huge difference: Eventually you could be paying an average of $426 too much each year, thanks only to your brand loyalty.
Most auto insurance policies come up for renewal every six months, and ideally, you’d check with your agent or shop around each time your policy came up for renewal. But at minimum, you should be sure to check in anytime you have a big life event that could alter your rates, like a wedding, a move, or even a change in job, or every couple of years—whichever comes first.