How to Choose the Right Auto Insurance Company

With the myriad of auto insurance companies available on the market today, how do you choose one that's right for you?

With this handy guide, we will show you how to choose the right provider with step-by-step instructions to make the process in choosing a cheap auto insurance policy a whole lot faster and a lot less difficult.


1. Find the right coverage
First, it's important to gather information about, and obtain auto insurance quotes from, a variety of insurers as part of your overall selection process. In order to do that, begin by determining the type of coverage you need in order to make an apples-to-apples comparison across multiple carriers.

The major types of auto insurance coverage include liability, personal injury, comprehensive and collision, medical payments and uninsured/underinsured. In our article How Much, and What Kind, of Car Insurance You Need, we outline in detail the types of insurance coverage available, so be sure to review this list before you begin aggregating information from multiple providers.

Most importantly, you need to know the minimum amount of insurance coverage required by the state in which you live. You can obtain this information from your state's department of insurance, on the Internet or by phone.

Once you know what your state requires and the type of car coverage that meets your needs, it's time to research the types of insurers from which to obtain that coverage.

2. Find the right provider

There are three major types of insurers today -- captive agents, brokers and direct providers. A captive agent acts as an exclusive representative for one insurance company, a broker acts as a representative for multiple insurance companies and a direct provider sells auto insurance straight to consumers online or by phone via customer service representatives. Each type has its own advantages:

Captive Agents

Some people prefer to develop a relationship with a Captive Agent; one who knows the intricacies of your personal situation, one who can recommend specific policies to you, and one who has a keen interest in keeping you satisfied, not only on behalf of the company they represent but also on behalf of the personal service they provide.

Brokers

Some people prefer to work with brokers since brokers typically don't have a biased interest in any one particular organization. Rather, they can pinpoint the most advantageous insurer and policy depending on your specific needs, from several different providers. What's more, they can act as a consultant, helping you through the process of evaluating carriers and making a switch should problems arise.

Direct Providers

There are a variety of direct insurance companies today, ones that work with you via the Internet, the phone or the good old postal service. One of the biggest advantages is the savings involved with eliminating the fees of a middleman, such as an agent or broker. You can find direct providers that offer convenient price quotes, 24/7 customer service, affordable rates, versatile payment options and well-rounded policies. It's important to learn as much as you can about direct providers since not all are created equal. Following are additional tips to help you research the best and most qualified insurers, either directly or through an agent.

3. Check licenses

Providers must be licensed by the state in which they sell insurance. For added peace of mind, be sure you're buying coverage from a licensed provider in your area by checking with your state's department of insurance, either online or by phone.

4. Check financial stability

Finding out the financial stability of an insurance company is an important step in determining whether or not it will have the ability to make good on any claims you submit. That's why it makes sense, as an additional layer of information, to research a provider's financial strength ratings at the websites of companies such as A.M. Best, Standard & Poors, Moody's or Fitch. While most of the major insurance companies are safe bets, this is especially helpful when considering smaller, lesser-known providers.

5. Check consumer complaint ratios

Again, your state's department of insurance is a helpful resource when it comes to researching insurance providers. Many department of insurance websites publish consumer complaint ratios for the insurance providers in their state. A consumer complaint ratio tells you how many complaints an insurance company received for every 1,000 claims its policyholders filed. It's also a good idea to check a company's complaint ratios in several other states, since a company might have great ratings in one but not-so-great ratings in another. For added protection, look for companies with low consumer complaint ratios in a variety of states.
6. Compare auto insurance rates

Finally, it's time to compare rates. Before you begin, you may want to read 10 Ways to Save Money on Auto Insurance to determine the insurance savings programs for which you might qualify.

Once you have this information, start by obtaining insurance quotes online. You can choose to submit your information at websites that publish quotes from a variety of providers, or you can identify your top five prospects and submit your information online at each of their respective websites. Keep in mind that some insurers will provide instant quotes, others will contact you at a later time, and still others will put you in touch with a local agent who will calculate a rate for you.

Next, pick up the phone and reach out to the companies that didn't provide online auto insurance quotes. Be sure to ask for written documentation of the verbal quotes they offer for your auto.

Once again, your state's department of insurance is an excellent information resource. Many publish pricing information across all of the major licensed insurance carriers in their state. Remember that what you drive can affect your insurance; our article on the most and least expensive cars to insure will provide you with some in-depth information on this topic.

Finally, keep in mind that even though an insurance company might offer the biggest discounts, it might also charge the highest rates. When shopping for insurance, focus on the final price after all discounts have been calculated. To ensure that you've explored every possible aspect, be sure to also peruse Five Things You Might Not Know about Car Insurance before deciding on a policy.