THE BLOG
11/16/2015 02:55 pm ET Updated Dec 06, 2017

8 Must-Know Tips When Shopping for Auto Insurance

Shopping for auto insurance in the 80s was a time consuming and fickle affair. It often meant you were scouring the phonebook, making phone calls and meeting with various agents. Thanks to the internet, however, things are much more proficient and streamlined for those who are seeking auto insurance these days.

 

But just because the internet can make everything easier does not mean that you shouldn't have a solid game plan in place for when trying to find the right insurance company and coverage level for you. The following eight must-know tips can help you get off on the right foot - so you can get the coverage that you need, be in compliance with state law and enjoy the peace-of-mind that comes with knowing that you're covered.

How Insurance Auto Rates Are Determined

Companies use a complex set of algorithms to determine your insurance rate. Two factors apply: underwriting and rating. Companies will assess risk when underwriting your policy, using a risk ratings system. The rating system helps the company assess the risk so they can determine a rate, which is based upon what they could expect to encumber if you are involved in an auto accident. The most influential aspect of this system, and your rate, is the claim frequency. The more claims - or higher value claims - that you make, the higher that your annual premium will be.

What Affects Your Rate?
  • Driving record, accidents and violations.
  • Where you live - rural or urban areas.
  • How old you are and your gender; males are a higher risk.
  • Whether or not you are married; married people have fewer accidents.
  • Previous coverage and whether it was canceled for nonpayment.
  • How often you use your vehicle; which increases risk the more you use it.
Your Financial Situation

Everyone is different, and we all need auto insurance coverage. If you fall into a lower income bracket and have an older car that is not financed, you'll benefit from a higher deductible and a lower monthly premium. If you are making a lot of money and have a newer financed or leased car, you'll benefit from higher coverage limits and a lower deductible, but you will pay a lot more for your premium. Often, your financial situation will determine what insurance company you can afford to use, or what company that you want to use because they offer higher coverage limits.

Leased, Financed and Owned Vehicles

Whether you lease, finance or own your vehicle will also change the rate you can hope to pay. Leased and financed vehicles have to carry full coverage, which costs more, and you will want to consider upping the coverage limits to protect yourself in case of an accident, property damage or medical payments. If you own your vehicle outright, you may better benefit from a higher deductible and no collision coverage, but you'll still want to pay out for the medical payments and property damage.

Don't Forget About Gap Coverage

For those seeking auto insurance who are financing or leasing their vehicles, look into gap coverage. If you are in an accident and the car is totaled, the insurance company usually only pays the "market price" of its current value. Typically, this is much less than what is owed on the car. Gap coverage adds a small monthly fee to your premium, but covers you if you total your car by paying the difference in value. Always consider this option, so you don't get stuck with a car you can't use but are still paying each month on.

Use an Auto Insurance Rate Comparison Tool

As mentioned above, the internet has made things far easier to research during the modern era. And you don't necessarily have to go shuffling about from website to website to generate quotes. Instead, use a rate comparison and quote tool like the one offered by Nerd Wallet (you can easily research a lot of other insurance quote tools with a quick search on Google). This tool lets you enter in your details and then collects quotes from dozens of auto insurance companies. Before you take out a plan and sign on the dotted line, make sure you read the last two tips first.

Check for Special Discounts You Can Use

You may be applicable for special discounts on insurance, something that may require that you speak to an agent about.

Common discounts that can decrease your premium include the following:
  • Bundling two or more vehicles.
  • Bundling multiple insurance plans via one company; e.g. home, life, auto.
  • Being married.
  • Safe driver.
  • Home ownership.
  • College graduate.
  • Military veteran.
  • Over the age of 25.
Vet the Insurance Company You're Considering

Lastly, don't presume that the insurance company you are considering is on the up-and-up. Always take the time to vet them before you consider using them. This involves researching the company online to find out what other customers or past customers had to say. You may find that the company you like has a flawless reputation. Or you may find that, to the contrary, they are sticklers when it comes time to pay out on claims.

One vital resource that you can use in this regard is the Better Business Bureau. Check the rating of the insurance company in your state before you get under contract. This way, you can enjoy the comfort of knowing that you are covered by a forward-thinking company in the event that the unthinkable occurs.

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