In terms of enjoyability and anticipation, “shopping for car insurance” ranks down near “doing your taxes”, “shoveling your driveway,” and “waiting in line at the DMV.”
But if you haven’t compared the relative price of your auto insurance policy in the past several years, you may be missing out on a meaningful amount of money.
It pays to shop around
According to a study conducted by the website NerdWallet, auto insurance policyholders could save an average of 32% on their premiums by comparing their current coverage to other options. That works out to $362 per year for the sample policy they used in the study.
Some reasons you may be paying too much include that you aren’t aware of specials offered by your current insurer, or your insurer isn’t familiar with recent changes in your situation that could lower your premiums. Last but not least, your situation may be priced higher or lower by one insurance company than it would be by another.
But your current insurer may also be betting that since you’re not shopping around, they can afford to charge you more than you would otherwise need to pay.
The Consumer Federation of America recently accused Allstate (and several other companies) of calculating premiums based in part on how likely it was that the policyholders would comparison shop (i.e., how long they have owned their current policy).
Defenders of the practice pointed out that it wasn’t illegal, and is just one component of how premiums are calculated.
However, in light of this revelation, it appears that it may pay to periodically switch your auto insurance from one provider to another.
Where to start
Even if you you’re ready to weigh one insurer’s coverage against another’s, the best place to begin is with your current insurer.
Call them up and let them know that you would like to see if you can reduce your premium cost, or increase your coverage for what you’re currently paying.
Some suggested steps might include raising your deductible, combining your auto insurance with other types of policies (such as your homeowner’s insurance) at the same company, and eliminating collision coverage on an older vehicle (more on that next week).
Once you know what your current provider will charge for your situation and needs, it’s time to check out their competition.
Where to look
Go to any other insurance company with which you currently have a relationship and see what they would charge to provide your auto insurance.
You can also have an independent insurance agent shop for policy offerings from several companies. You can search for one in your area or by specialty by visiting trustedchoice.com
The aforementioned website NerdWallet has a comparison tool that allows you to compare rates anonymously among several selected companies. Go to tinyurl.com/shopautoins.
And the website Bankrate has put together a listing of the various discounts offered by auto insurers, available at tinyurl.com/carinsdisc.
Which one to choose?
Keep in mind that the price of the insurance is only one factor to consider, albeit it’s a big one. Before signing up with a new provider, you may want to ask who is going to help you when you need to make a claim, and how they go about it.
You should also evaluate how others rate the insurer. Consumer Reports magazine recently surveyed nearly 65,000 readers, asking what the readers thought about their respective auto insurance provider.
Most of the insurers fared fairly well, but USAA came out on top. Farmers, Allstate, MetLife, and Travelers were near the bottom. Of course, your experience may differ, for better or worse.
We’ll tell you how to figure out how much and what types of insurance coverage you should have, and what you you need to know how to keep those premiums as low as possible.