Thinking about shopping your auto insurance? A huge percent of people never shop their insurance needs — and that’s a bad idea considering that modern American business punishes loyalty, rather than rewarding it.
Car insurance ads on TV promise accident forgiveness, vanishing deductibles, and other selling points. But those features are just a side show to the main act, which is a company’s reputation with satisfying customers after a claim is made.
Best and worst auto insurers
According to Consumer Reports, the top 2 insurers are USAA Property & Casualty and Amica Insurance, two of Clark’s longtime favorites. Just a hair behind them is New Jersey Manufacturers Insurance Company, a company that’s never much been on Clark’s radar.
Firmly in the middle of the pack you have insurers like State Farm, Mercury, Geico, American Family and others.
On the flipside, among the lowest rated auto insurers in the country are Farmers Insurance and Hanover Insurance. Just a hair above them you’ll find Allstate, Metlife Auto & Home, Liberty Mutual and Travelers, among others.
When it comes to car insurance, be sure the deductible you have isn’t too low. Having a low deductible pushes premiums higher. It could also tempt you to make a claim for a small incident that will leave you in trouble with insurers going forward.
Auto insurance rates are on the rise
It’s no secret that auto insurance premiums are going up around the country. The U.S. Bureau of Labor Statistics found that car insurance rates rose more than 5% from March 2015 to March 2016 at a time when was inflation was negligible at less than 1%.
But the picture is darker than that for your wallet. According to the Insurance Information Institute (I.I.I.), a deeper and longer dive into the last two years of data found that premiums actually rose an average of 10% during that longer period.
The simple answer to why rates are going up so much has to do with Americans driving more in part due to lower gas prices. But there are actually more moving pieces to the explanation…
3 reasons why you’re paying so much
The I.I.I. list the following as deeper factors behind the insurance hike:
- The improving job market not only means more Americans driving, it also means more accidents. In fact, the National Safety Council noted the largest year-over-year percent increase of accidents in 50 years when crash fatalities rose 8% from 2014 to 2015.
- Increased speed limits are a big culprit in the rise of insurance costs. Twelve states have raised their speed limits to 70 or 80 miles per hour over the past four years. Texas even has limits as high as 85 mph! Ohio, meanwhile, noted the instance of crashes skyrocketed by nearly 20% in the two years after they upped their speed limit.
- The average price an American pays for a new vehicle hovers somewhere in the low $30,000 range. More expensive rides require more coverage, and when there are accidents, medical costs, litigation costs and the cost of auto repair work continue to rise faster than prices overall.
What can you do about it?
Just because premiums are higher, it doesn’t mean you’re fated to pay more for car insurance. Shopping around for coverage is the single best thing you can do to lower your premium. Here’s how to start the process…
Begin by identifying solid companies
Clark has long talked about the merits of Amica Mutual and USAA. But those aren’t the only two companies you should look at. Consider buying a one-time subscription to Consumer Reports and checking their latest list of the best auto insurance companies to find others that should make it onto your shortlist.
Get your quotes
Once you have a list of candidates, you’ll want to start getting quotes. This typically takes around 15 minutes on the phone per insurer. Have your most recent policy in front of you in case any questions come up about the make and model of your vehicle(s).
Working with an insurance broker is another option. He or she will get multiple quotes for you and you’ll have access to all the insurers they do business with. It’s an easy one-stop shop that lets you still have the flexibility of comparison pricing.
Once you get the quotes back, it’s time to compare them. Each quote should be based on the same amount of coverage so you can do an apples-to-apples comparison. What if a poorly ranked company offers you a great quote? Clark says to avoid them! While the premium might be tempting, you want to be sure your insurer is there for you when the chips are down.
Know when to drop comprehensive and collision
The general rule is when the cost of comp and collision exceeds 10% of your old vehicle’s value, that’s the time to dump it and just have liability coverage. You can determine your vehicle’s value at Edmunds.com, KBB.com or NADA.com.
So let’s take a simple example. Say your vehicle is worth $4,000. If you’re paying anything more than $400 annually (that’s 10% of $4,000) for comp and collision, it no longer makes any financial sense. One notable exception to this rule: If there’s no way you could financially cover the loss of your vehicle, forget the math and keep paying for comp and collision.
Be prepared to take a higher deductible
You should always opt for a $1,000 deductible for the best savings on your policy. At that level, you’ll pay a lower premium and won’t be tempted to file any small piddling claims.
Don’t forget about discounts!
The I.I.I. reminds you that there are a ton of different discounts out there. Here are some you can ask about:
- Antitheft devices
- Multiple policies with the same company
- College students living away from home
- Defensive driving courses
- Drivers ed courses
- Low annual mileage
- Long-time customer
- More than one car
- No accidents in three years
- No moving violations in three years
- Student drivers with good grades