You can, in less than an hour, have more than a dozen auto insurance companies competing for your business. This is great, but now comes the hard part, comparing each of these policies.
While price is always going to be a large factor, it shouldn't be the only one. As you'll discover in this article, all auto insurance companies are different.
When you have multiple quotes, from multiple companies in front of you, it's important you're looking at these objectively. One oversight may save you $50 today when you purchase your policy, but cost you thousands, or even in some cases, hundreds of of thousands of dollars in the near future.
Here are the important factors you need to look for when comparing auto insurance:
How to compare car insurance | Eight ways you need to know
1. Coverage’s and limits: The most important factor, compare the limits on each policy. This includes bodily injury, medical payments, collision, comprehensive, uninsured motorists, underinsured motorists (Note: since insurance is different in each state, your policy may have different terms).
2. Deductibles: Compare the deductibles on both policies. The deductible is the amount that comes out of your pocket when you’re at fault for an accident.
3. Agreed value v. standard value: If you’re in an accident that totals your car, on a standard insurance policy, you’re reimbursed the depreciated value of the vehicle, minus the deductible. For example, if six months ago you purchased a Ford Fusion for $20,000, and you totaled your car today, the payment you receive from the insurance company would subtract the deductible plus the wear and tear on the car. Therefore, even though the car is six months old, you would only receive around $15,000. In contrast, some policies (typically from higher end insurers) offer agreed value, which is set at the beginning of the policy and lasts through the policy period. Therefore, you would get back $19,000 if your agreed value was $20,000. Agreed value is more expensive but pays more favorably during a loss.
4. Fees: Different insurance companies have different types of payment fees, which can add up over time. For example, if you want to pay monthly but get charged $5 for doing so, that’s $60 over the year. In contrast, some insurance companies offer a 5% discount for paying in full, which can save you $50 a year on a $1,000 policy. The difference between the two payment types adds up to over $110.
5. Length: Know if your policy is insured for 6 months or 12 months. 12 months is more favorable because your rate is locked in for that entire time period.
6. The “extras”: Insurance company may include extras at no cost for towing and labor, roadside assistance, and rental reimbursement. Know what is and what’s not included in your policy.
7. Insurer rating: Lookup the A.M. Best Rating of your insurer, as it lets you know how financially stable the company is. Lower rated companies, are generally more stringent on their ability to pay out a claim.
8. Fully underwritten: Many insurance companies will advertise and show you a really low price, without stating that the price is subject to change once MVR reports and auto insurance scores are known. Before making any commitment to an insurance company, make sure the price you see, is the price you pay.
There you go, eight different ways you can compare auto insurance, before looking at price. It’s not that price isn’t important. More so, it’s that price shouldn’t be the only factor.
About the author: R.J. Weiss is a CFP® who specializes in individual insurance planning at his family's 108 year independent insurance agency, Weiss Insurance Agencies.
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