How to shop for insurance quotes

If you’ve ever done comparison shopping for an insurance policy, you’ve likely been offered competing insurance quotes – estimates of what each insurer would charge for a premium. While such information can help you zero in on the least expensive policy, consumers could end up paying more in the long run if they select their coverage based on insurance quotes alone.

When it comes to selecting an insurer, “prices for the same coverage can vary by hundreds of dollars from company to company, so it pays to shop around,” says Loretta Worters, vice president of the Insurance Information Institute.

what is an insurance quote

An insurance quote is an insurer’s method of bidding for your business. You tell the insurer what you want, and the insurer will tell you how much it will cost you. But when you start asking insurers for quotes so you can determine who has the lowest price, it’s important to make sure that each insurer is giving you an estimate for the exact same amount of coverage.

“There is so much competition that agents often compete by lowering coverages,” says Thomas Simeone, a personal injury attorney in Washington, D.C. “I routinely see people with inadequate insurance solely because the agent slashed their coverage to offer them a competitive quote.”

Extracting the most helpful quotes

To come up with a quote, insurance companies require consumers to provide information about what type of coverage they’re looking for. For example, an auto insurance provider might require that a consumer reveal the make and model of the car, the average number of miles that are driven per year and the age of any drivers listed on the policy before issuing a quote. Likewise, to get a quote for home insurance, you may need to provide such information as when the home was built, whether it has a basement and whether you have a security system.

The best way to make sure you’re comparing apples to apples is to make a list of the coverage you’re seeking and give each insurer the same information. That way, you can determine whether a company offers a lower quote because the prices are lower rather than because the company offers less coverage.

Of course, all quotes are contingent upon you telling the truth. For example, if an auto insurer asks whether you have received recent tickets and you say "no," your actual premium may be higher than the quote given when the insurer discovers via your driving report that you caused two fender-benders in the past six months.

One thing you don’t want to do when asking for quotes is tell insurers or brokers what you’re currently paying, says Adam Lederman, principal of Strategic Insurance Agency in Livingston, N.J. If you do, “a broker is going to beat it by $50 and expect you to go with him,” Lederman says. Instead, send in the declaration pages of your existing policy after whiting out the cost and ask the agent or broker to give you quotes on that same exact coverage. This way, you’ll know if you’re truly getting a deal, Lederman says.

Look beyond price

Once you’ve gotten all of your quotes, you can easily see the best bargain. But choosing the least expensive quote is not necessarily your best option. “Service is more important than price,” Worters says. You want a company that will be responsive to your needs if you need to file a claim, so it’s good to ask friends for referrals or check the National Association of Insurance Commissioners’ Consumer Information Source database to find complaints about insurers across the country.

Also, before accepting any company’s quote, check on its financial stability with rating companies such as A.M. Best (www.ambest.com) and Standard & Poor’s (www.standardandpoors.com), Worters suggests.

Finally, don’t neglect to talk to an agent about what types of coverage you might not have considered when requesting the quote. Once you determine that a company can save you money on basic coverage, consider spending a few extra dollars to make your policy more robust. “There may be room to discuss adding some other coverage to make the policy broader and still save money,” Lederman says.

Without the proper amount of insurance, you can end up paying thousands of dollars out of your pocket if a disaster strikes and your policy is insufficient. “You get what you pay for,” Lederman says. “You want the best price for the broadest coverages. You don’t always want the cheapest policy out there.”

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