What should I look for when buying car insurance?

All you need to know when buying car insurance is where to compare insurance quotes online. Comparison shopping is how you save money on car insurance. Start comparing now with our free online quote tool.

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A former insurance producer, Laura understands that education is key when it comes to buying insurance. She has happily dedicated many hours to helping her clients understand how the insurance marketplace works so they can find the best car, home, and life insurance products for their needs.

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Joel Ohman is the CEO of a private equity backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He has an MBA from the University of South Florida. Jo...

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Reviewed by Joel Ohman
Founder & CFP®

UPDATED: Jan 21, 2021

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Here's what you need to know...

  • When you are buying car insurance, it’s important to compare prices. Every carrier creates a different rating system, and some companies have more competitive rates than others
  • One of the most important things to consider that would indicate that a company is secure is financial stability. You should check the company’s financial strength rating through a third-party rating agency
  • Customers are far more likely to complain than they are to write a positive review. You can learn from others’ experiences by checking official complaint records and looking for trends

When you’re buying a product like auto insurance, you would think that the most important thing to look for would be a low price.

The price that you pay for auto insurance dictates whether or not you can afford to keep your vehicle expenses up, but the coverage that you select will dictate whether or not you can afford to pick up the pieces after a loss.

Since auto insurance is the only protective layer safeguarding your finances, it’s important to put a lot of consideration into which company you choose to do business with.

Researching carriers that sell products in your area is a must. Here’s what you should look for in a carrier and in a policy as a whole.

Make sure you find the right provider and coverage. Enter your zip code into our FREE comparison tool above!

Step 1: Check Financial Stability Rankings


You might assume that you should make a list of carriers before doing anything else. While this is an effective step, making a list of only the top providers in your state might eliminate some smaller companies that deserve your business, which is why looking up the financial stability rankings by the state is wise.

Where to Find Rankings

Financial statements and accounting are public records. But if you’re not an accounting expert, it’s hard to decipher what the meaning is behind the statements.

To make it easier on you, there are consumer rating agencies that grade companies in the insurance industry for you.

Find grades through the following agencies:

The Importance of Rankings

You may be wondering why financial stability is so important. There are a few reasons why financial security is more important than price. One of those reasons is because of how the marketplace works.

When insurance companies are licensed, they set rates that will help them stay marketable and profitable.

The companies must file these rates for approval by the insurance commissioner. Even though a rate is approved, it doesn’t mean that the rate that’s on file is sufficient to cover operation costs and reserve requirements.

A sufficient rate will also leave some room for profitability.

If a carrier doesn’t do the right projections and charge adequate premiums, they may not have the money to cover claims.

Smaller carriers attempt to deny claims or delay the settlement process when they are just barely making it by. By eliminating the companies that have average or below average ratings, you can narrow down your options.

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Step 2: Look Up the Company’s Licensing Status

Licensing status is critical. If you were to buy auto insurance from a company that’s not licensed to sell personal car insurance products in your state, the coverage that you carry, no matter how high the limit, won’t satisfy state law.

Under mandatory insurance laws, you must maintain insurance through a licensed carrier to avoid penalties.

You can find a company’s licensing status by visiting your Department of Insurance website.

Every official site has a company search tool that shows if the company is in good standing. If the company is on probation or they don’t have a license, steer clear of the carrier.

If the company is on probation or they don’t have a license, steer clear of the carrier.

Step 3: Check the Company’s Complaint Index

A company’s complaint index says a lot about how a company does business. All companies that have been selling products for more than a decade are going to have official complaints, but not all of them will have trends.

It’s your duty to look at the index and see if the number of claims in a specific category is high.

Step 4: Check the Product Offerings

Some companies sell strictly auto insurance and others are licensed to sell other lines of insurance. If you need property insurance, life, disability, or boat insurance, look for companies with more lines to offer.

When you buy coverage through a carrier with several lines of insurance, you can get multi-line discounts and keep your rates down.

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Step 5: See What Features and Discounts the Company Offers


All companies will sell the coverage that’s required. They will also offer physical damage coverage and other first-party medical benefits that they must offer all new applicants.

What sets companies apart is their policy features beyond the industry standard.

If you want access to pay-as-you-go endorsements or new car replacement additions, you should do your research to find carriers that offer these specific features.

Finding out about the unique policy discounts a provider offers can also help you keep your premiums manageable.

Some discounts can lower your rates a much as 30 percent.

Step 6: Shop Around to Find the Right Price

Price is important. When you know you have a list of quality carriers, the only thing that you have left to worry about is the price. Since rates can be different from provider to provider, comparing premiums is important.

The only way to find out if a company is priced right in your segment of the market is to do a quote comparison.

If you have four or five carriers on your list, getting quotes to compare can be a time-consuming process. You can find multiple quotes instantly from quality insurers.

For consumers who value their time, use our FREE online comparison tools to can cut the time it takes to get several quotes. Use our FREE comparison tool below to get started!

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Enter your ZIP code below to view companies that have cheap car insurance rates.

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