Shopping your car insurance every few years can be a necessary evil. Why? Because insurers, like the economy, operate in rate cycles. Often times the industry rate cycle mirrors the broader economic conditions, but there is rate differentiation from insurer to insurer too. While one insurance company may be raising rates to shore up their financial capacity, another insurer may be getting aggressive in a bid to capture additional market share. Here are my Top 3 tips for buying car insurance:
1. Understand your needs BEFORE you shop
I can't stress this enough. How do you know you are getting a good deal if you don't understand the coverages you are paying for? Yes, it takes a little bit of homework (or working with a professional), but what good is going cheap for coverage that won't scratch the surface of a claim, or the reverse, overspending on coverage that you'll never need (or want) to use. The first thing you need to do is gain an understanding of the Liability, Physical Damage and Medical Coverages on your auto insurance, determine the appropriate amount for you, and then make sure the quotes you receive are "apples to apples". This will allow you to truly determine which insurance company can offer you the most competitive rate.
2. Don't think that lower deductibles are necessarily better
Perhaps one of the most common car insurance misconceptions out there is that the lowest deductibles are best. The reality is that you should not be filing claims for minor damage. Your rate will go up at renewal if you do. A $100 deductible sounds really nice, but the best way to keep your costs down in the long run is to go with a higher deductible and save a "rainy day" fund for exactly those instances in which you need to cover minor damage. You may get frustrated when an agent tells you not to file a small claim (after all, you do pay for insurance) but it truly is in your best interest to cover as much as you comfortably can to make sure your premiums are contained in the long run. Cost containment in the long run will lead to better financial health, which will lead to even more competitive rates.
3. Do shop with many different carriers
As I previously mentioned, insurance companies operate in rate cycles. If an insurance company has a particularly rough year with losses, they may need to adopt a defensive approach and increase rates. On the flip side, another company may lower rates after favorable loss history. Insurers also have different "appetite" for business. An insurer's "appetite" is its desire to write certain types or characteristics of business. Some companies prefer to build a portfolio based on risk criteria that another company may not value as much. It is therefore important to receive many different quotes from many different companies to find the one that has an appetite for your particular risk profile. Then, every few years, check again. The beauty of an independent agent is that we do the checking for you, with our 15+ insurance company partners.
To sum up, understand your needs and coverages to ensure uniformity and transparency across insurance quotes. Go with the highest deductible that you can comfortably cover should a claim arise. Make sure you check with many different insurance companies to find the one most competitive for you.