Ever been hit with an auto insurance premium that your gut tells you is too high? Then it’s time to shop around, experts say.
The curious thing about auto insurance is that rates vary widely. That’s because different insurers use different factors in determining your rate. For instance, some insurers may consider your credit history, while others may not.
An insurer may quote you a lower rate if the company is aggressively trying to sign up more new customers – especially customers of your type. The company may want more customers in a particular city or neighborhood, or more older or younger customers. If you fit the insurer's demographic desires, you might get a good deal, says Robert Hunter, director of insurance at the nonprofit Consumer Federation of America.
Red flags that may mean it's time to get quotes for your auto insurance include:
1. It’s been a few years.
Auto insurance premiums often creep up steadily over the years that you're with one insurer, Hunter says. To be on the safe side, you should get several quotes from other insurers if three to four years have passed since the last time you compared insurance rates.
2. Your circumstances have changed.
If you have moved, have a new job with a longer or shorter commute or you have seen changes in your credit history, your rate may change, too. As you age, you may enter a lower risk category as well. Since different insurers weigh various factors differently, another insurance company might give you a better price for your new situation, says Loretta Worters, a spokeswoman for the nonprofit Insurance Information Institute.
3. You got a ticket three to five years ago.
Different insurers drop traffic tickets from consideration at different points. In fact, they sometimes forget to delete them from your record, says Kevin Alsup, director of insurance at independent insurance brokerage Foundation Financial Group in Florida. If you’re near the time when some insurers might remove a traffic ticket from your record, shopping around could yield a much better quote from an insurer that disregards your ticket. “It’s really important to follow where your ticket trail ends,” he says. “We see people save as much as $200 a month.”
4. You see a big jump in premiums.
Anytime you see a big rate hike, you should compare rates with other insurers, the Consumer Federation’s Hunter says. Something may have changed in how your carrier calculates rates that puts you at a disadvantage.
For Brittany Jefferson and her husband, James, the addition of a new car triggered a hunt for new insurance quotes. The couple had been saving to buy a second car – maybe a 2007 or 2008 Toyota Camry, Jefferson thought. Then the Jacksonville, Fla., resident got a look at the quote from her current insurer on how much it would cost to add the car to her existing policy, which covered only a much older truck.
She was expecting a substantial discount for insuring two cars, but she was in for a shock – her longtime insurer offered only a $20 discount. Adding the new car would nearly triple her monthly insurance bill of $113, despite the couple’s clean driving record.
The Jeffersons were stunned and even thought about postponing their car purchase. They liked their insurer and had been with it for more than a dozen years.
“We thought, ‘It might be impossible for us right now to buy the car,’” says Jefferson, whose husband works in banking. “We’re trying to pinch every penny.”
The odd thing about insurance is that most consumers don’t get new quotes for years on end, even if their rates go up sharply, the Consumer Federation’s Hunter says.
“We have a strange combination of fear and boredom,” says Hunter, a former Texas insurance commissioner. “People hate having to deal with insurance. They’re afraid of making a mistake.”
Once you decide to get a few different quotes, be sure to request the exact same coverage from each company. Otherwise, you won’t get an apples-to-apples comparison to tell which policy really is the cheapest, says Alsup, the insurance broker. He recommends requesting a price for a basic policy without any bells and whistles.
For instance, you might get several quotes for $50,000/$100,000/$50,000 – that’s $50,000 of medical coverage for each person you injure in a collision, a $100,000 bodily injury limit per accident and a $50,000 property damage limit per accident.Make sure you choose the same deductible amounts for each quote, too – usually $250 or $500.
Be sure to figure in whether the insurer offers annual rebates, Hunter says. Several insurers, including USAA and Amica Mutual, give back 5 percent to 20 percent of customers' annual premium each year.
Sometimes, it’s easy to tell when you’ve got a better offer. Jefferson obtained a quote from GEICO that was nearly $800 a year less than the quote from her current insurer, State Farm. What’s more, GEICO’s policy added collision coverage for her truck as well as roadside assistance and car rental insurance. She says deciding to switch wasn’t hard.
“I can definitely use 800 more dollars elsewhere,” Jefferson says.