I’ve been writing about car insurance for over a decade, and during that time, I’ve gotten over 1,000 quotes from every major insurer and a few you’ve probably never heard of. If there’s one thing I’ve learned, it’s that “shop around” isn’t just a saying — it’s the single most effective way to reduce your car insurance premiums.
It’s more important than ever with the average American spending $1,775 annually on car insurance, according to Motley Fool Money’s research on the cost of car ownership. Ideally, you should compare rates — click here for our top car insurance companies to find your best offer. But there are a few important things to know before you start getting quotes.
There’s one factor more important than price
I know there are some who would argue that nothing matters more than price when choosing a car insurance provider. But let me ask you this: What happens if you pay for all your premiums but your insurer doesn’t have the money to pay your claim when the time comes? That’s why the insurer’s financial strength should be the first thing you focus on.
It’s not something you really have to worry about with large, nationwide insurers, but you probably should check the financial strength of smaller insurers before getting quotes from them. You can do this by looking up the company’s ratings with organizations like AM Best or Standard & Poor’s. An internet search for the company name and “financial strength ratings” may get you what you need.
Every company has its own rating system. AM Best’s highest rating is A++, while for Standard & Poor’s it’s AAA. Generally, if you see any sort of A, you’re in good shape. If you see a B or lower, you may want to remove that company from your list of contenders.
Consider price alongside other key factors
For those of you on a tight budget, a low price will probably come second only to the company’s financial strength. Save yourself some time by starting with our best cheap car insurance providers list.
If you can afford to purchase more than bare-minimum coverage, though, you’ll want to consider available coverage and customer service alongside premium costs. And you may want to prioritize these other factors first to narrow down the list of companies you get quotes from.
Evaluating coverage first is important if you have special requirements. For example, if you drive for a ride-hailing company, you must choose a company that offers a ride-hailing endorsement or you won’t be fully protected while you’re working. Make a list of these non-negotiables and check which companies offer them. Eliminate any that don’t from your list.
Next, research their customer service by checking out rankings from J.D. Power and online reviews. You don’t have to eliminate companies with below-average reviews from your list. But if that company’s premium is only a few dollars cheaper than a company with better reviews, it’s probably worth paying more for better service.
You may want to evaluate companies based on their available discounts as well, but be careful with this. More discounts don’t always translate to a better rate. You may want to explore a company with more discounts or specialized discounts that apply to your situation first. But don’t rule out companies with only a few, generic discounts.
How to lower your premiums with all car insurance companies
After you get initial quotes, you have one final opportunity to lower your premiums and that’s by adjusting your coverage limits and deductibles. Opting for lower liability coverage limits with few extras will save you money on premiums, but you’re also assuming more of the risk. That means bigger out-of-pocket costs when filing a claim.
Raising your deductible will also lower your car insurance premiums, possibly by 40% or more. This depends on your insurer and how much you raise the deductible, but it should make a substantial difference with most companies.
Again, this will increase your out-of-pocket costs in an accident, but you may be able to save for this in an emergency fund beforehand. Consider stashing your emergency fund in one of our favorite high-yield savings accounts for an APY of around 4%.
Once you’ve settled on your final coverage limits and deductibles, compare your quotes from all the insurers you looked at to see which one offers the best deal. And remember that might not always be the same as the one with the lowest price.
