How to shop for auto insurance

Auto insurers spend millions of dollars on national advertising. Most of them try to convince you that they’re the cheapest. Does “save $500 in 15 minutes” sound familiar? But how can they save you money when they’re spending so much on advertising? There must be one company that’s the cheapest, right?

Wrong.

Each company uses its own proprietary formulas to determine pricing, and they can vary widely. The end result is that one company might be the cheapest for a particular driver in Arizona, but the most expensive for a different driver in New Hampshire. Unfortunately, if you want to be assured of the lowest cost auto insurance, you’re going to need to invest the time in comparison shopping.

Here are a few tips to consider in your quest for cut-rate, quality coverage.

Choose Your Carrier Wisely

Comparing costs doesn’t mean just checking with Allstate, Geico, Progressive and State Farm. There are plenty of local and regional insurers in your area. Like most locally owned businesses, these smaller insurers are often rated higher than the biggies when it comes to customer serve. And since they don’t spend millions on advertising, their rates are often lower. In short, don’t be afraid to check out a few companies you’ve never heard of.

Ask for a Discount

Every company uses a different list of qualifications for various discounts. One company may offer a discount the others don’t, so make sure you research this thoroughly. Some common discounts include:

• Auto bundled with homeowners
• Multi-vehicle
• Good driver
• Good student (for dependents on your policy)
• Professional group affiliation
• Installation of anti-theft devices

Raise Your Deductible

The higher your deductible, the lower your rate. That seems simple, but of course there’s risk involved. The rate savings from having a super-high deductible may be tempting, but it’s important to consider what will happen if you’re in an accident and actually need to use your insurance. When considering your deductible, choose a dollar amount that you can actually put your hands on if necessary. If for example you choose a $1,000 deductible, but only have access to $500 on short notice, a car accident will cause an extra layer of hassle that a reasonable deductible would’ve avoided.

Financing Requirements vs. Legal requirements

The law requires you to have auto insurance. Specifically, the law wants to make sure that if you cause a wreck, you can pay for damage to anyone else’s property. The credit union that financed your car also requires insurance. The difference is that the credit union only requires insurance that covers your car (which is technically their car).

Confusion can arise when you let your own insurance lapse and the credit union “force-places” insurance on your vehicle. This means that since you didn’t provide insurance coverage as agreed in your financing contract, they’re going to add insurance and then tack it onto your bill. However – and this is very important – the credit union will only place enough insurance to meet their original requirements. In other words, even after the credit union places its own insurance, you may still be breaking the law. Bottom line: Force-placed insurance is about the most expensive insurance available.

In the end, the amount of money you save on your auto insurance is directly proportional to the amount of time you’re willing to invest in research.