Many or all of the products here are from our partners. We may earn a commission from offers on this page. It’s how we make money. But our editorial integrity ensures our experts’ opinions aren’t influenced by compensation. Terms may apply to offers listed on this page.
When it comes to car insurance, drivers need comprehensive protection at an affordable price. And with so many insurance companies to choose from, finding the best car insurance coverage can take time.
The Ascent can help. We've researched auto insurance companies, compared prices from insurers nationwide, reviewed customer experiences, and performed in-depth research into dozens of different insurers. With a focus on price, claims handling, and customer service, we've chosen the best types of insurance for drivers in different circumstances.
Drivers from all walks of life -- from typical motorists to high-risk drivers; teens to veterans -- can find recommendations for the best car insurance companies to meet their needs.
Key Links
The Ascent's best car insurance companies for 2021
- State Farm: Best for bundling coverage
- Auto-Owners Insurance: Best for bundling policies
- Geico: Best for price conscious consumers
- Farm Bureau: Best for claims handling
- USAA: Best for military members and their families
State Farm
Bottom Line
State Farm offers multiple opportunities for discounts, including for bundling coverage. But the best savings comes from the different programs it offers for young drivers including Steer Clear as well as a good student discount. With comprehensive coverage options and low premiums, parents and teens can rest assured they're protected in case of an accident.
Pros
- Young adult drivers can save up to 15% on coverage
- Discounts for good grades can provide another 25% savings for young drivers
- High customer satisfaction rankings
- Nationwide agent network
- Access to array of insurances under one roof
Cons
- A low credit score can increase premiums
- Agent quality within its network can be inconsistent
Stand-Out Coverage Options
- Steer Clear program offers discounts for policyholders under the age of 25
- Optional car rental and travel expense coverage pays not just for a rental vehicle but also travel expenses to the driver's home or destination if an accident happens 50 or more miles home
- Rideshare insurance is available
Read State Farm review
Auto-Owners Insurance
Bottom Line
Auto-Owners insurance offers more coverage than its name implies, but it does shine for its auto coverage, among other policy types including homeowners or renters insurance, life insurance, and business insurance. People can buy all the insurance they need from one company while earning generous premium discounts for bundled coverage. Additional discounts for those who pay in full annually or who make at least 36 months of on-time premium payments can provide even more savings for the budget-conscious buyer.
Pros
- Bundled coverage discounts
- High customer satisfaction
- Roadside assistance coverage available in the U.S. and Canada
Cons
- Policies are only available in 26 states
- Policy must be purchased through an independent agent
Stand-Out Coverage Options
- Gap insurance to pay off a remaining loan or lease balance if the car is totaled
- Additional expense coverage, which pays for rental cars, food, lodging, and other incidental expenses in case of an accident far from home
- Personal Automobile Plus package which groups 10 popular additional coverage options including cellphone replacement, lock rekeying, and more
Geico
Bottom Line
Geico is one of the most affordable insurers available, and it offers comprehensive auto insurance coverage options at premiums that beat out most competitors. Geico promises to save people 15% or more on car insurance, and assessments of policy premiums shows it lives up to its promise. Insurance is available in all 50 states, and there are additional discounts for military members, good students, federal employees, seniors, and others who belong to certain groups or organizations.
Pros
- Nationwide coverage
- Affordable premiums
- High customer satisfaction
- Efficient claims handling process
- Great online application and account management experience
Cons
- Limited insurance coverage beyond auto insurance
- Fewer local agents than competitors
Stand-Out Coverage Options
- Mechanical Breakdown Insurance, which provides coverage for repairs and is available for new or leased vehicles that are less than 15 months old and have less than 15,000 miles
- Auto Repair Xpress® program can get motorists back on the road faster after an accident as they'll get priority repairs and streamlined claims processing
- Rideshare insurance is available
Read Geico review
Farm Bureau
Bottom Line
With a claims satisfaction rate of more than 90%, Farm Bureau has proven it'll be there if something goes wrong. Farm Bureau also shines with affordable premiums and multiple ways to save, including by signing up for Driveology and earning reduced premiums by letting the insurer collect data about the motorist's driving habits. With top-notch claims handling service and replacement cost coverage for newer vehicles, policyholders have the confidence of knowing their claims will be handled swiftly and efficiently with minimal out-of-pocket losses if a crash occurs.
Pros
- One of the highest claims satisfaction rates of any insurer
- High overall customer satisfaction
- Offers an array of discounts (multi-driver and savings for good students)
Cons
- Policyholders need to be a member of the bureau in their state
- Farm Bureau insurance is not available in all states
Stand-Out Coverage Options
- Replacement cost coverage, which is available when a vehicle is either four or five model years old or newer (depending on the state)
USAA
Bottom Line
USAA offers military members and their families some of the best auto insurance coverage available. Premiums are lower than most competitors, there are plentiful coverage options, and many opportunities to save further with premium discounts. Free accident forgiveness coverage after five years also means premiums won't go up if a crash happens. USAA is open only to military members, veterans, and their families. For those who qualify, it's likely their best bet for car insurance.
Pros
- Premiums are cheaper than with most competitors
- High customer satisfaction ratings
- Policy discounts (for good students, for housing a car on a military base, and more)
Cons
- No coverage available outside of current and former military members, and their families
Stand-Out Coverage Options
- Free accident forgiveness after five years
- Rideshare insurance is available
What is car insurance?
Car insurance is a type of insurance policy that protects against financial loss. Auto insurance pays the bills if the policyholder causes an accident. Depending what kind of coverage a person buys, it also helps pay for repairs or replacement of their own vehicle.
Here are some of the costs car insurance can cover:
- Repairing or replacing the vehicle after a fire, theft, or other disaster
- Medical bills if the driver is hurt in an accident
- Lost wages if injuries from an accident stop the driver from working
- Losses another motorist causes if they are uninsured or underinsured
- Damage to other people's property the policyholder causes with their vehicle
- Injuries others experience if the policyholder causes a crash
- Rental car expenses if the vehicle is in the shop for repairs
- Emergency roadside assistance
Motorists don't have to buy all of these types of car insurance coverage. But they should buy the best car insurance coverage to protect against losses they can't afford to pay for out of pocket.
How can I find the best price on car insurance?
To find the best car insurance rates, drivers will need to get personalized quotes from different insurers. That's because prices can vary dramatically depending on an individual motorist's circumstances.
Drivers should get multiple auto insurance quotes from at least three to five different insurers, and more if possible. There are many online websites that make it easy to get multiple quotes at once, which simplifies this process.
The fastest way to compare multiple quotes is to provide a vehicle identification number (VIN) so the car insurance company can automatically obtain important details about the vehicle.
Motorists should also be sure to look for discounts, including for safe driving or vehicle safety equipment, as well as for good grades for teens or membership in certain organizations.
How much car insurance do you need?
When selecting an auto insurance policy, drivers need to look for more than just the cheapest car insurance. They need enough coverage to ensure an accident doesn't cost thousands of dollars, which may require paying a higher monthly premium.
How much car insurance coverage a person needs depends on their situation. However, most states have certain minimum requirements. Drivers may also wish to purchase additional protection beyond the minimum coverage required under their state's auto insurance rules. Here are some different kinds of auto insurance drivers may need, or want, to buy.
Liability insurance
Liability insurance covers losses that the policyholder causes other people to experience. For example, if a driver caused a crash, injuring the victim and damaging their vehicle, liability coverage would pay for the victim's injuries and damages.
The majority of states require liability insurance coverage, both to pay for bodily injury and property damage. Under California auto insurance requirements, for example, a motorist must have:
- $15,000 in injury liability coverage per person
- $30,000 in injury liability coverage per accident
- $5,000 in property damage liability coverage
Many people may want to buy more than the minimum required insurance if they want the best car insurance. If drivers don't and they cause an accident, they could be held personally liable. If a motorist gets into a collision and causes a death, they could be sued for millions of dollars. Having just $15,000 in coverage would do little to protect their assets.
Uninsured/underinsured motorist coverage
This pays for losses another driver should cover but can't because they don't have any or enough insurance. Without this, a driver who was involved in an accident with an uninsured motorist or with a driver who had no insurance could be forced to pay for medical bills and vehicle repairs out of pocket.
A few states require uninsured or underinsured motorist coverage. For example, in Connecticut, drivers must have $25,000 per person and $50,000 per accident in insured motorist coverage.
Personal injury protection (PIP)
Personal injury protection, or PIP, pays for the policyholder's medical bills and lost wages in cases of minor accidents, regardless of who is at fault for the crash.
A total of 15 states require PIP. These are called "no-fault" states. People who live in no-fault states must use their own insurance to pay for losses after minor accidents. That's true even if another driver were to blame.
New York is an example of a no-fault state. It requires drivers to buy at least $50,000 in PIP coverage when purchasing New York auto insurance.
There are also three "choice" no-fault states. There, motorists can opt to buy PIP coverage or choose a different policy often called a "full-tort" policy. A full-tort policy always allows someone to sue other drivers, even after minor collisions.
Collision insurance
Collision insurance is optional, but it is important coverage many people will want to purchase. Remember, liability insurance won't cover anything that happens to the policyholder's own car, even with the best policy. A driver could buy collision insurance to repair or replace their vehicle in the event of a crash.
Comprehensive coverage
Comprehensive coverage is also optional, but many drivers will find they need it. It pays for any losses to a vehicle that don't result from a car crash. For example, comprehensive coverage pays for windshield damage or to repair or replace a vehicle after a tree falls on it.
Getting car insurance discounts
Most insurers offer car insurance discounts that can help reduce the cost of auto insurance. Commonly available discounts include:
- Accident-free driver discounts: These are available to drivers who have gone a certain length of time without becoming involved in a collision.
- Discounts for driver monitoring: Motorists who agree to download an app that tracks their driving habits may be able to save.
- Defensive driving discounts: Completing a state-approved defensive driving discount can help motorists to save.
- Driver education discounts: Young motorists who complete driver's education can save money.
- Driver behavior discounts: Drivers who have a clean driving history can save money, as can motorists who don't go many miles per year.
- Good student discount: Young motorists who get good grades may be able to save. These discounts usually require at least a B average.
- Distant student discount: This provides savings on a family's insurance policy when teen drivers are away at school.
- Bundled coverage discount: Motorists who buy multiple types of insurance policies, such as auto and homeowners insurance, will usually qualify for discounted premiums.
- Multi-car discounts: This savings is available for people who insure several cars with the same insurance company.
- Continuous coverage: Drivers who maintain their insurance year after year may find they can save on premiums.
- New-car discounts: These are available to motorists with a late model vehicle (usually one that is less than two or three years old).
- Vehicle safety feature discounts: Airbags, anti-lock brakes, anti-theft devices, and other safety features can also result in low premiums.
- Driver affiliation discounts: Savings are available from many insurers for motorists who are in the military, who work for certain employers, or who are members of certain groups
- Pay-in-full discounts: It's often possible to save on insurance by paying premiums one time per year, rather than taking advantage of the option to pay quarterly or monthly.
- Online-only discounts: Many insurers reduce costs for drivers who purchase their policy online and manage their accounts on the internet.
- Paperless statement discounts: Drivers who sign up for paperless statements may reduce car insurance costs.
How are car insurance rates calculated?
The best car insurance companies calculate rates based on the risk of an accident. Factors that insurers consider include:
- Which drivers are on the policy: If a motorist is buying a family policy, insurers will consider the driving record of everyone in the household.
- Driving record: Insurers consider accident history and risk of speeding tickets.
- Number of miles driven: A car that is driven more frequently is more likely to become involved in a crash.
- Type of car: Vehicles more prone to accidents or theft will be more expensive to insure.
- Vehicle safety features: If a car has features that reduce the risk of theft or the chances of a crash or serious injury, this will result in lower premiums.
- Credit score: Drivers who have a stronger credit history will often pay less for insurance.
Best cheap auto insurance
For drivers focused primarily on getting the lowest priced premiums, here are The Ascent's picks for the best cheap car insurance.
- Geico
- Nationwide
- State Farm
- The Hartford
- USAA
- Erie
Click here to learn more about our selections for most inexpensive car insurance.
Best insurance for veterans
The Ascent's picks for the best car insurance for military members include:
- USAA
- Armed Forces Insurance
- Esurance
- Geico
Best insurance for teens
The Ascent's picks for the best car insurance for teens include:
- Allstate
- Progressive
- Liberty Mutual
- State Farm
- Geico
What to do if you can't get car insurance
Motorists must not drive without their state's required minimum insurance. Doing so could lead to criminal penalties as well as devastating financial loss if an accident occurs.
Fortunately, there are coverage options for drivers who can't buy car insurance from traditional insurers. These include:
- State-assigned risk pools: States provide an option of last resort for drivers who can't get conventional insurance coverage. They can join the state's assigned risk pool and will be assigned to an insurance carrier that works with the state. This may also have other names, such as a Joint Underwriting Association or shared market.
- High-risk insurers: High-risk car insurance could be the best option for motorists turned down by conventional companies. These insurers specifically work with drivers who other insurers won't cover. While they typically charge high premiums, they can often provide more coverage than a state's assigned risk pool would.
Car insurance agents can help drivers to enter the assigned risk pool or to find high-risk insurers.
A recap of the best car insurance companies
Outside Experts Weigh In
Robert P. Hartwig, Ph.D.
Director of The Risk and Uncertainty Management Center at the University of South Carolina
How can shoppers feel more confident when selecting an auto insurance provider?
It’s never been easier to ensure you’re getting a good price on auto insurance. Drivers can get dozens of quotes online in minutes, either through one of many online portals or directly through insurer websites and apps. A call to an agent can also generate one or more quotes within minutes. But as with any important purchase, price isn’t everything. Here are several suggestions to help you get the best insurance for your money:
- Ask friends, relatives, and neighbors for recommendations based on their own claims experience. At the end of the day, an insurer’s reputation is made (or lost) on the quality of its claims operation.
- Check state insurance department websites, many of which publish complaint data by insurers.
- Make sure your insurer is rock solid financially. You can do this by searching for an insurer’s A.M. Best ranking. A.M. Best is an organization that evaluates the financial strength of insurers (and hence their ability to pay future claims). Most insurers publish their rating on their website. Look for companies with a rating of A- or higher.
What additional coverage(s) would you recommend that shoppers pay for?
Even though not required (unless you have a loan or lease on your vehicle), you should consider carrying collision and comprehensive coverage if your vehicle is less than eight or nine years old. Most people should also carry bodily injury liability insurance coverage with limits of at least $100,000 per person and $300,000 per accident. Most states require minimum liability limits of just $25,000 per person. If you’re sued as the result of your involvement in an accident, costs could add up quickly, driving you into bankruptcy unless you have adequate coverage.
What tips would you offer for someone looking to lower their car insurance rate?
- Shop around. It’s never been easier or faster for drivers to get quotes from competing insurers -- and prices for similar coverage can vary widely.
- Consider carrying a higher deductible. Increasing your deductible from $500 to $1,000 can lower your auto insurance costs by 10% or so.
- Improve your credit score. Because people with better credit file materially fewer claims, improving your credit score can lead to a material reduction in your premium.
- Pay your premium in full upon policy inception and renewal. You’ll pay more if you pay on a monthly or quarterly basis. And by paying in full, you’ll avoid any rate increases that might occur during the year.
PV Viswanath, Ph.D.
Graduate Program Chair of the Lubin School of Business at Pace University
How can shoppers feel more confident when selecting an auto insurance provider?
- Look at the reviews online -- in particular, as to how quick the insurance company is in reimbursements in the occurrence of a covered event, i.e. an automobile accident.
- Look at how long the insurance company has been in business; the longer the better.
What additional coverage(s) would you recommend that shoppers pay for?
- Before buying coverage, think about whether you are a good driver; if you believe you are, then you can opt for a higher deductible. Think also about your liquidity; if you don’t usually have excess cash on hand, you may be better off paying higher premiums on a predictable schedule rather than being on the hook for an unexpected high deductible.
- If you’re able to, it’s a good idea to buy coverage for your own expenses/losses in case of an accident and not only third-party coverage. This is particularly important if you depend upon your automobile for earning your living.
What tips would you offer for someone looking to lower their car insurance rate?
- Drive carefully, and control your impulses to speed, to overtake cars -- anything that might lead to accidents. This won’t be easy -- you will need to decide that getting somewhere quickly is not important. Make rules for yourself as to when you will overtake/speed etcetera and keep to those rules. Once you reduce your insurance claims, you can get a lower rate from your current insurance company or you can switch to a new one. At this point, you can increase your deductible as well.
- You can buy high-deductible coverage and/or minimum coverage in any case; this will reduce your premiums. But keep in mind that this may open you up to unexpected cash outflows, especially if you’re not a careful driver.
Benjamin Shiller, Ph.D.
Assistant Professor of Economics at Brandeis University
How can shoppers feel more confident when selecting an auto insurance provider?
Shop around. Each insurer has a different pricing algorithm, and the insurer that offers the lowest price for one person might not be the insurer that offers the lowest price for someone else. Furthermore, it isn't necessarily obvious that the insurer with the lowest price is the best choice. Quality matters, too (e.g., customer service, insurer ratings/solvency). Consider looking up A.M. Best insurance ratings in the process.
What additional coverage(s) would you recommend that shoppers pay for?
Many people are worried about the size of the deductible, assuming smaller is better. However, insurance is intended to prevent someone from incurring a devastating expense that leaves them with poor finances in the long term. For example, if someone only has $100,000 of coverage, but then is sued and is forced to pay $500,000, they still owe $400,000 after the insurance payout. If choosing between higher coverage and a lower deductible, I always recommend higher (and broader) coverage. For those with more significant assets or high expected future earnings, umbrella insurance should be strongly considered.
What tips would you offer for someone looking to lower their car insurance rate?
The best way to lower your insurance rate is to opt for one of the programs that monitors drivers (e.g., Progressive's Snapshot). If you drive safer while monitored, your insurance premiums are reduced. These programs have the added benefit that they save lives.
Additionally, consider the insurance cost when buying a new vehicle. A quick Google search can reveal which vehicles are in general cheapest to insure. Finally, opt for a higher deductible.
Deanne Butchey, Ph.D.
Teaching Professor in the Department of Finance at Florida International University
How can shoppers feel more confident when selecting an auto insurance provider?
Shoppers need to ensure the reputation of the auto insurance provider is pristine. Specifically, they need to investigate the following:
- An excellent A+ Rating by AM Best
- Efficiency in resolving claims
- Efficiency in resolving issues related to underinsured motorists
- 24/7 customer support, preferably with a live agent, but good artificial intelligence coverage may be a good start
- Convenient local offices for inspection of claims purposes
- Offers customers the option of using their preferred collision centers
- Guarantees the repairs for the life of ownership if the customer uses recommended collision centers.
What additional coverage(s) would you recommend that shoppers pay for?
It is important to review deductible coverages to ensure the ability to receive adequate compensation depending on your personal circumstances. You can offset the risk you are comfortable assuming to obtain a lower premium. For example, if you are able to borrow a car while your car is being repaired, avoid rental car coverage.
What tips would you offer for someone looking to lower their car insurance rate?
It is important to:
- Take advantage of multi-line discounts by bundling different coverages -- for example car, house, and life insurance
- Utilize current options offered by some companies that track your driving habits to offer safe driver discounts and those offered to college graduates, etc.
- Shop around at renewal times, as companies offer lower rates to attract new customers.
Aniruddha Pangarkar, Ph.D.
Assistant Professor of Marketing at The University of Wisconsin-Green Bay
How can shoppers feel more confident when selecting an auto insurance provider?
Whether you are a first-time shopper looking at getting a car insurance policy for your new car or you are someone who is looking at switching to a new company, one of the most critical things before you embark on the process of contacting insurance companies is to first do your own research. By this, I refer to gathering information about each driver on the policy (their name, address, license numbers, date of birth, etc.), information about the car (make, model, VIN number, anticipated annual mileage, etc.), and driving history record (tickets, accidents, etc.). Once you collect this information, it is important to look at some of the auto insurance companies you have in mind online and compare them. In particular, shoppers should look at their coverage needs liability, which is required by most states, full coverage/comprehensive insurance (important and required if your car is financed), uninsured and underinsured motorist coverage, collision coverage, personal injury protection insurance, etc. Each individual's situation is different so it is important to evaluate what kind of coverage you need. The next step is to call up auto insurance companies, either captives (working for a single insurance company, for example State Farm), or an independent insurance agent who might represent several companies, or look up third-party comparison websites for insurance policies.
Lastly, if you feel you need to also renew/get renters' insurance, then many companies can give you a bundled option that can save a lot of money. In short, shoppers need to be smart in doing their research, get quotes, and ask relevant questions before finalizing their auto insurance company, which would make them feel more confident of making the right decision.
What additional coverage(s) would you recommend that shoppers pay for?
- Liability insurance is mandated by most states
- Collision insurance covers you regardless of fault
- Comprehensive/full coverage insurance covers you in case of damage to cars caused by unforeseen calamities or "acts of God" -- events such as hail or a fallen tree resulting from severe weather conditions, or your car hitting an animal, etc.
- Uninsured/underinsured motorist coverage is important if the other person you are involved with in an accident does not have auto insurance or their liability coverage is too low
- Medical payments coverage and personal injury protection insurance in case your insurance does not already cover medical expenses and death
Shoppers should consider that if the individual has taken a car loan, then they may be required by law to take liability, collision, and comprehensive insurance. Taking liability-only car insurance is quite risky. However, it could work well in certain cases for an individual who has economic constraints wishing to save money, provided they do not have any loan on the car, or if the value of the car being insured is very low (such as if the insurance cost is higher than the value of the car. For example, if the car's market value is $1,200 but an annual full insurance coverage policy for such a car is costing $1,350).
Full coverage car insurance charges will vary for each customer depending on their credit history and driving and accident history. Therefore, each individual's situation is unique. If you are a new driver or teenage driver or even someone who is risk-averse, then it is better to take comprehensive, collision, and uninsured/underinsured, along with medical payments coverage and personal injury protection, in addition to the liability insurance that most states mandate. This will give you peace of mind. If an individual is financially constrained or willing to take the risk, then they might prefer only liability insurance coverage.
What tips would you offer for someone looking to lower their car insurance rate?
It is important for all shoppers to be smart and discerning. For example, if you are a teenage driver, then certain insurance providers offer good discounts for taking driver education programs or public safe-driving courses, which can alleviate higher insurance normally charged. A teenager with good grades can qualify for a discount from the insurance company. Many insurance companies provide drivers with a device that can be installed in their cars to rate driving tendencies, along with tracking daily mileage, hard braking, rapid acceleration, etc., which can lower insurance rates. There are other ways consumers can lower their insurance rate, such as increasing your deductible (which can result in a lower monthly payment), special discounts for serving in the military, teacher/educator discounts, reducing coverage on older cars, bundling of services (auto and renters' insurance/homeowners insurance from the same company), maintaining a good credit record, getting a low-annual-mileage discount, loyalty discount, discount on multiple vehicles, and accident-free record discount, etc. Lastly, it is important to also be on the lookout for cheaper car insurance policies at all times because the auto insurance industry is very competitive. Therefore, many companies will be pleased to get your business and looking at developing a long-term relationship with new customers.
James Philpot, Ph.D.
Director of the Financial Planning Major Program at Missouri State University
How can shoppers feel more confident when selecting an auto insurance provider?
Check out the ratings/reviews for the company’s customer service (claims, etc.) and financial stability. Insurers receive stability ratings from AM Best that grade them (A++ being the top rating) based on financial stability. Greater financial stability translates into greater capacity to pay claims. Generally, any company rated A or higher is very safe. J.D. Power also rates insurance companies for consumer satisfaction, awarding a score out of 1,000 points possible based on consumer surveys. This allows an easy comparison among companies. Both AM Best and J.D. Power ratings are available via online search.
What additional coverage(s) would you recommend that shoppers pay for?
Consumers should consider their coverage under Part C, which is uninsured motorist coverage. The base coverage provides payment for your medical expenses received due to a crash caused by another motorist who has no liability insurance or less than your state’s legal minimum. A consumer might want to consider adding coverage for property damage due to an uninsured motorist. A surprisingly large number of people are driving cars with no current insurance, and, as you might guess, they are generally not very good drivers.
What tips would you offer for someone looking to lower their car insurance rate?
- Obviously, drive safely. Fewer accidents and points on the driving record translate into lower premiums.
- Maintain good credit. Many companies use credit scores in their rating decisions, as there is a strong association between general creditworthiness and safe driving.
- Shop around occasionally. Insurance shopping is a time-consuming task, but the market is very competitive, and premiums can vary greatly among companies. It’s probably worth doing a shop-around every three years or so.
- Bundle home, auto, and other property coverage. Most companies offer either premium discounts or coverage upgrades when you buy multiple products from them.
- Check with an independent agent or two. Independent agents represent multiple insurance companies. When you get a quote from an independent agent, you are effectively checking for the best deal from among the several companies that agent represents. This can make shopping easier and more efficient.
Susan Hume, Ph.D.
Associate Professor of Finance at The College of New Jersey
How can shoppers feel more confident when selecting an auto insurance provider?
Learn, Shop, Confirm.
Most states require you as a car owner to have insurance. This is a form of financial protection against the possibility of loss of your car as property, damage to others, and injury or loss of life to you and others. Car accidents are the most common causes of risk when compared with the loss from a house flood or fire, for example. This means that you as a consumer usually have more companies to cover auto risk, which is tempered by the state patchwork of regulations regarding mandatory coverage. This competition provides you with the best opportunities for keeping costs low.
Your confidence in making an auto insurance decision is important to finding the best provider. Studies suggest these ways to boost your confidence and keep your costs in line with your needs.
- Learn some key insurance terms. There are many short, informative videos you can find with an online search. Consult consumer webpages. Be up to date on mandatory and optional coverage lingo. Mandatory auto coverage is of two types: Bodily liability insurance covers the costs from the loss of injury or death to you and others, and property damage insurance covers the costs from an accident that may affect property. This includes the cars in the accident, or other property such as a fence or building, for example. In no-fault states, you may be required to have personal injury protection (PIP), which covers medical treatment for you and passengers from your accident and loss of wages. Further, many states require coverage for uninsured drivers involved in the accident.
- Shop by comparing prices for the same coverage. With online price quotes, you can get an indication of expected cost. Shop around, which in today's online world is easy. You will be surprised at the range of prices. Studies suggest that the largest insurers may not be the cheapest, and you may find the best prices from a smaller regional provider. The state where you live will have an impact on the price quote. Finally, consider the quality of service provided. When you have a claim, you also don't want to sacrifice good assistance at the expense of a cheaper policy.
- Confirm that your insurer (or if through a broker) is legitimate. This is through your state insurance department or at https://content.naic.org.
What additional coverage(s) would you recommend that shoppers pay for?
Most states require liability-only auto insurance. This insurance covers the damage and injury of an accident to others, not you, including the uninsured motorist. Full coverage is more comprehensive insurance -- it is a combination of liability-only insurance that adds collision and comprehensive insurance to cover the loss to you. Full coverage can have a wide range of options for you to choose but is of course more expensive than liability-only. Low-income drivers may not be able to afford full coverage insurance or even lower-cost liability insurance.
New cars and loans or leases are the ideal candidates for full coverage insurance. In many cases, loans or leases will require this. Risky driving behavior is on the rise and an accident may be out of your control. Adding full coverage protects your expensive car property and the lives of you and others in your car. Further, in the case of an accident, auto insurance will be the means to receive compensation for any related doctor or hospitalization costs.
Premiums will be higher in states that are more urbanized. Our most populated cities have the highest traffic congestion and hours spent commuting, which increases the likelihood of claims. Some of these patterns have changed because of the COVID-19 pandemic with an acceleration of work from home. What has changed for the worse, and which makes premiums go up, is that despite less hours driving (13% less in 2020), risky behavior has increased, as shown with an 8% increase in national traffic fatalities (National Safety Council).
What tips would you offer for someone looking to lower their car insurance rate?
In addition to Learn, Shop, and Confirm, understand how premiums are set. Factors that impact premiums reflect the insurance company's estimates of the likelihood of your filing a claim in the future. Institutional racial and gender bias are factors, although they are under review, as they may not reflect risk of driving accidents or damage to property. Currently the important factors used to determine premiums are:
- Age: New and senior drivers have a higher likelihood of having an accident, and so premiums are higher.
- Driving history: Many companies increase premiums if you have an accident or have driving violations (e.g., a DUI conviction, speeding tickets).
- Where you live: Your ZIP code can increase your premiums, as lower income neighborhoods have higher insurance premiums even with similar claims.
- Gender: Studies show women pay more than men even though more accidents are caused by male drivers.
- Education: You pay less if you have more years of schooling.
- Vehicle type: Vehicle age and safety features affect premiums.
- Occupation: Professional jobs have lower premium costs.
- Credit history: A higher credit rating may result in lower premiums.
If you find you have one of these risk factors, shop around, as several companies have committed to non-bias pricing.
To address concerns of racial inequity in premiums, the National Association of Insurance Commissioners, which sets guidelines for its members for state insurance regulators, is conducting a review of industry rate-setting practices. States can also encourage safe driving to reduce premiums -- enforcing speed limits and other moving violations. Other factors to reduce the premiums are to limit the practice of "price options," encourage competition, and support disruption with technology. Price options practices, when used, raise premium rates for customers who don't comparison shop. Instead, encourage premium policies that are related to safe driving. Finally, states' government regulators need to conduct reviews and hearings regarding policy premiums related to gender, income, and race to ensure no institutional biases. This would eliminate premium excess that may be charged for low-income, credit score, occupation, and gender.
Leo Chan, Ph.D.
Associate Professor of Finance at Utah Valley University
How can shoppers feel more confident when selecting an auto insurance provider?
Do more online research and read more reviews about a few well-known companies, along with a few lesser-known ones, and compare them on your own. There are some benefits of getting suggestions from people you know. But they often overhype their own experience. So, their opinion can be quite biased. Look for reviews on claim processes. If insurance companies are making it difficult for the insured to submit claims, it is not a good sign. Avoid those companies.
What additional coverage(s) would you recommend that shoppers pay for?
It depends on the cost of coverage and your location, as well as driving habits. I think most states have sufficient legal limits on coverage that will meet most people's needs. Some states, however, do not require personal injury protection (PIP). I highly recommend adding this coverage if it is not required.
What tips would you offer for someone looking to lower their car insurance rate?
Always shop around for multiple quotes and even try to get quotes online and over the phone with the same company. You will be surprised by how much variability there is in insurance premiums. It can be as much as a 50% difference according to empirical studies! Attending defensive driving class helps too. Getting a newer car with a lot of safety features can also lower the premium. Lastly, insuring with companies that have very little physical presence (i.e., selecting a company that has no, or very few, insurance sales agents) could save you a lot as well.
Jie Ying, Ph.D.
Assistant Professor in the Department of Economics and Finance at Southern Illinois University Edwardsville
How can shoppers feel more confident when selecting an auto insurance provider?
Confidence for shopping auto insurance primarily comes from shoppers' knowledge about the insurance providers, insurance products, and their specific needs and risks to cover. For insurance providers, it is easiest for the shoppers to learn from their families, friends, and colleagues regarding the quality of the services such as the difficulties of filing claims, speed of processing indemnities, etc. While being more accessible, reviews on the internet should be taken with caution by the shoppers as the accuracy is not always guaranteed. Once pinning down several trustable insurance providers, either the local ones or the nation-wide ones, it is important for the shoppers to further investigate the differences among the available insurance products such as pricing, coverage, procedures, etc. Shoppers may call local insurance agents or customer support to inquire necessary information, especially when some terminologies are confusing to the shoppers. The shoppers then need to combine their specific needs and risk profiles to choose the insurance products. For instance, use of vehicles, traffic conditions, likelihood of natural disaster or vandalism, etc. I would encourage the shoppers to make scenarios that they may face in the future and discuss the corresponding procedures with the agents.
What additional coverage(s) would you recommend that shoppers pay for
Besides the basic liability and medical coverage, shoppers may consider opting in comprehensive insurance to cover the possible damages to the car from non-collision cases such as vandalism, weather factors, or deer accidents. Depending on the traffic conditions, risk characteristics of the neighborhood, as well as the cost of car repairs, shoppers may also consider collision insurance to reduce the repair costs if needed.
What tips would you offer for someone looking to lower their car insurance rate?
Having a clear driving history is important to receiving a lower auto insurance rate as the rate is floating based on the insurance providers' assessment of the likelihood of accidents. For shoppers with limited driving history, it may help to join the monitoring program of some insurance providers by installing a tracking device in the car. The tracking device can reduce the information asymmetry between the drivers and insurers, thus reducing the insurance premium.
About the Author
Christy Bieber is a full-time personal finance and legal writer with more than a decade of experience. She has a JD from UCLA as well as a degree in English, Media and Communications with a Certificate in Business Management from the University of Rochester. In addition to writing for The Ascent and The Motley Fool, her work has also been featured regularly on MSN Money, CNBC, and USA Today. She also ghost writes textbooks, serves as a subject matter expert for online course design, and is a former college instructor.
Share This Page
We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team. The Motley Fool has a Disclosure Policy. The Author and/or The Motley Fool may have an interest in companies mentioned.
