Car Insurance Buying Guide

Insurance isn’t the most exciting facet of car ownership, but it is one of the most important. Not only is your policy designed to protect you from financial calamity in the event of a collision or related injury, it is required by most states if you own a car. Consumer Reports recommends shopping around for the best policy, not only when you buy a car, but periodically, to make sure you’re always getting the best deal possible.

Through a member survey, CR has identified the insurance companies that offer the best service with the most competitive monthly premiums. But there are a number of factors to consider as you shop for an auto policy. For starters, it helps to understand what attributes insurers consider when they formulate your monthly premiums, including the following factors:

Driver profile: Age, driving experience, and driver history all influence the cost of your premium. Accidents, traffic violations, or the addition of a teen driver can raise the cost of your policy, because the insurer puts you in a higher risk category.

Car type: In general, the more expensive the car, the higher the premium, because expensive cars cost more to repair and replace. High-performance cars also increase the cost of insurance, due to the increased risk associated with owning a faster car.

Credit history: According to Experian, a credit reporting agency, most states allow insurers to calculate auto premium rates based on a customer’s credit score. Insurers maintain that credit history is a good predictor of risk that they’ll have to shell out for insurance claims, and they price their policies accordingly. California, Hawaii, Maryland, Massachusetts, Michigan, Oregon, and Utah restrict or prohibit credit-based insurance scores, but in other states, lowering your credit score can help you get a better rate.

External conditions: Local weather trends, traffic conditions, and other factors that increase the likelihood of claims result in higher rates. For example, if damaging storms in your area have generated lots of car-insurance claims, your company may apply to your state’s insurance regulator for an across-the-board rate increase to reflect its increased exposure to that risk. Customers in areas with higher rates of collisions are also likely to pay more.

Loyalty Doesn’t Pay

It is a common misconception that insurers reward customers for sticking around. Our recent survey of Consumer Reports members shows that you can save money by shopping around for a better rate from time to time. Twenty-three percent of the members we surveyed told us they’d switched insurers in the past five years. Among those, 63 percent said they’d found a better price, and 78 percent said they were highly satisfied with their new carrier.

“Price optimization” can be another reason to shop for a new insurer every few years. With the exception of California, Florida, Ohio, and Maryland, most states allow insurers to engage in this controversial practice, which allows them to raise rates for reasons that aren’t related to increased liability risk. The bottom line is that if an insurer figures you aren’t likely to jump ship to another carrier, they may raise rates just because they can, costing you extra money.

Factor in Life Changes

If you get married, add a teen driver to your policy, add or remove a vehicle, or the distance of your commute changes—as it did for many people during the pandemic—ask your insurer how much the changes will cost or save you, and shop other insurance policies to see which carrier can give you the best rate. Also, remember to ask for an adjustment to your coverage to reflect your car’s depreciation; insurers don’t necessarily do that without your prodding.

For a comprehensive list of insurers that may not be visible with a simple Google search, consult CR’s car insurance ratings.

Pick a Top-Rated Insurer

Securing a lower premium is important, but it’s not everything. Find a carrier that, in addition to competitively low premiums, provides fair and fast claims settlements, offers great customer service outside of claims, helps you review your policy thoroughly, and proactively offers help and advice.

CR rates insurers based on member feedback on the cost of their premiums, the ease of processing claims, the quality of non-claims-related customer service, thoroughness of policy review, clarity of policy coverage, and proactive help and advice. To create our ratings, we surveyed 56,396 CR members in the fall of 2020 about their car insurance. They provided us with 67,185 reports on their experiences with car insurance companies they did business with between 2016 and 2020. (CR members’ experiences are not necessarily representative of the U.S. population.)

Don't Skimp on Liability Coverage

Most states require drivers to have at least minimum coverage, but it’s a good idea to bolster your coverage beyond these minimums if you can afford to do so.

Liability insurance: This covers bodily injury and property damage caused to another party in a crash. Experts recommend buying more than the legal minimum even if you don’t have much in assets to protect. Depending on your state, a portion of your wages could be garnished in a judgment against you. A more protective level of coverage is $100,000 per person, $300,000 per incident, and $100,000 for property damage. Robert Hunter, the insurance director at the Consumer Federation of America (CFA), says that an umbrella liability policy extends coverage for both your car and home, and it offers additional protections as well. Those policies usually up the per-person coverage to $300,000.

Low-limit coverage: Douglas Heller, an insurance expert with CFA, says that although they offer better protection, umbrella policies and policies with higher liability limits can be difficult for lower income drivers to afford. Currently, only three states—California, Hawaii, and New Jersey—offer subsidized insurance coverage for lower income drivers. Heller says that having low-limit liability coverage is better than going without insurance, or simply not driving, which can cut people off from economic opportunity.

Uninsured motorist coverage: In many states, this coverage is optional, but according to the Insurance Information Institute, 1 in 8 drivers don’t carry car insurance. That’s a statistic that has remained fairly constant for more than two decades, making uninsured motorist coverage a worthwhile buy, even if it’s not required. This coverage pays medical bills for you and your passengers after a crash caused by an uninsured, at-fault driver. Why get it in a no-fault state, where your company pays regardless of who’s at fault? Because it reimburses for lost wages after a crash. Uninsured insurance also covers you and your household as pedestrians, and in hit-and-run crashes. Heller says you want to get at least as much coverage for yourself as you would get for others involved in a crash.

Underinsured coverage: More motorists are opting to carry only minimum liability coverages in order to save money. Underinsured coverage protects you if you get into an accident with someone who doesn’t have enough insurance to cover the cost of injuries and property damage.

Seek Savings on Other Coverages

Collision insurance, which pays for crash damage, and comprehensive insurance, which protects against vehicle theft and damage caused by storms and such, are two coverages you may be able to whittle down in order to reduce your premium. You also may be able to forgo other coverages to save even more money.

Adjust your deductible: Raising your comprehensive and collision deductibles from $500 to $1,000 can shave 11 percent off your premium on average, says CFA’s Hunter. Just make sure you can afford to pay the extra out-of-pocket cost if you’re unfortunate enough to get into a crash.

Older cars don’t need extra coverage: Consider dropping collision and comprehensive coverage when your annual premiums equal or exceed 10 percent of your car’s book value. Otherwise, you could end up paying more over time than you would recoup for repair or replacement of your damaged, stolen, or totaled vehicle. (If you have a car that is appreciating and is old enough to be considered a classic, and you don’t drive it to and from work and most errands, there are classic car policies that insure your car for an agreed-upon value based upon its collectability and other factors.)

Drop rental reimbursement coverage: If you have another car you can use while your vehicle is being repaired, you don’t need to buy this coverage. You can also skip roadside assistance coverage if you have an auto-club membership that’s a better deal, or if roadside assistance comes as part of your car’s warranty.

Review personal injury protection and medical payments coverage: If you already have good health coverage you don’t need it through your auto policy. Keep the coverage if you don’t have health insurance, or if your usual passengers might not be well-insured.

Actively pursue discounts: They can include breaks for bundling home, auto, and umbrella policies with the same carrier; taking a safe-driving course; letting your carrier know about your lower annual mileage; and reporting your teen driver’s good academic average, typically a B or better.

Take These Steps to Save More

Keep your credit and driving record clean: Both have an impact on the price of your insurance premium. For the best rates, you’ll need to have at least three years of clean driving. In most states, the better your credit score, the lower your rates will be.

Choose your car wisely: Premiums vary by model. When comparing models, ask your insurer for premium quotes on the different vehicle models that you’re considering. Luxury and high-performance cars tend to cost more to insure than more run-of-the-mill models.

Assign the right driver to the right car: Ask your insurance agent who the principal driver should be for each car in your household. Basing those matchups on individuals’ driving records and car values might save you money. Pairing a lower-value car with the driver who commutes the longest distances, for instance, may cost you less than giving that driver the higher-value car.

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