insurance shopping

Unless you have managed to somehow disconnect yourself from all forms of communication with the outside world (and yes, I realize the irony in the fact that if you’re reading this, you haven’t) you’re probably familiar with the phrase “15 minutes can save you 15% or more on your auto insurance.” That little green fellow (or caveman or dead president or, you get the idea) has uttered that phrase often enough that it’s part of the national zeitgeist. However, can any of these outrageously clever spokesmen (Spokespeople? Spokescritters?) be trusted?

While 15 minutes on the line with that particular company may not result in any savings for you, there’s probably a better than zero chance that a little comparison-shopping will provide you with some savings on your monthly premiums. After just a little looking around, you’ll be surprised the wide range of prices you can be charged by different companies for what is essentially the same thing: a thing you have to buy that you never want to use.

Buying Insurance Is Not like Buying a T-Shirt

I always find it amusing when a product is labeled “one-size-fits-all” when, in reality, it won’t even fit most. What a driver pays for car insurance is very much tailored to them. These variations include not only the types of coverage is desired but extend to the personal skills, training and demographics of the driver.

An insurance policy has lots of moving parts. These components include things like liability, collision, comprehensive, PIP, uninsured motorist and the list goes on. Some of these coverages are optional while others are required by law or lender. As you begin shopping, be very sure you are clear as to which types of coverages are mandatory for you and which are optional. This will help you decide if the added expense of non-essential coverages are worth it.

How the Insurance Company Figures out How Much to Charge You

Each component of an insurance policy comes with a different price and a different method of calculating that price, and these methods vary from company to company. This, in part, explains some of the widely varying prices you’ll find between companies.

While the particular pricing algorithm varies from company to company, they all are based on the same types of data. Information from the driver that goes into the calculation includes things like:

  • Make and model of car
  • Is the car owned or financed?
  • How the car will be used
  • Home ZIP code of the driver
  • Driver’s credit score
  • State of the driver’s driving record

How to Shop for the Best Insurance Price

Whether online, by phone or in person, be sure to get at least three quotes for comparison. If you just get two and choose A just because it beats B in price, you may miss out on savings, never knowing that C beat them both hands down. That being said, price should not be your only consideration. While you never want to have to use your insurance, if that day should, you want to be with the company that will make good on its promises. You can find out the reputation and track record of a potential insurance company using sites like JD Powers and Associates, an independent firm that rates and ranks insurance companies, among other things.

Once you have shopped around and found the best company and price for your current situation, there are ways to put even more money back into your pocket. Some of the items on this list can be performed easily while others, well, not so much. These possibilities include:

  • Getting married
  • Getting older
  • Installing a car alarm
  • Paying for the policy in advance to save finance charges
  • Moving to a “more desirable” ZIP code
  • Completing a defensive driving course

A word about that last one. Many people think that defensive driving is just for ticket dismissal. While dismissing a ticket will prevent insurance costs going up completing a defensive driving course will very often make those costs go down. I talked to a woman recently who had received a ticket and once she discovered the insurance savings taking defensive driving offered her, she invited her husband and teenaged son to join her in taking the course. The net savings on their family insurance was roughly equivalent to all of them earning about $150 each to take the course.

You Shopped for the Car, You Should Shop to Keep It Covered

Chances are good that you spent more than little time thinking about the kind of car you wanted before you bought one. You spent hours more to determine which cars met your specifications. Then, you spent time figuring out who had the best price on the car that you decided on and we won’t even mention the hours you spent actually getting the car purchased. Why wouldn’t you use the same due diligence when it comes to protecting the investment you invested so much of your life into to get?

A study done by Progressive Insurance revealed that only 20% of drivers make it a practice to comparison shop for auto insurance. A companion study indicated that the cost of coverage for the same car and driver can vary as much as $600 from company to company. Lots of people will spend time and energy (and dollars) to find a car that will save them a few pennies on their gas expense. May I respectfully submit that 600,000 pennies will buy a lot of gas?