How to Choose a Car Insurance Company

In the vast sea of auto insurance offerings, consumers are bombarded daily by clever ad campaigns featuring everything from an affable lizard with an English accent to a guy named Mayhem who goes around spreading, well, mayhem. While some of these entertaining 30-second spots may cause you to chuckle, the fundamental question remains: How do I choose the right insurance company for me?

Every driver is different, so this is going to take some homework: If you're willing and patient, you will not only save money, but you will gain the peace of mind of knowing you are more than adequately covered.

Is the Company Licensed?

Not every insurance company is licensed to operate in every state. As a general rule, you should only buy from an insurer licensed in your state so that when a problem arises, you can rely on your state insurance commission to intervene. Sometimes, when car owners buy insurance online, they do so from an out-of-state provider not recognized in their state. This can be problematic. To find out which companies are licensed in your state, contact your state's insurance commission.  The National Association of Insurance Commissioners can direct you to the appropriate agency in your state.

Price

Once you've narrowed down the list of insurance providers operating in your state, it's time to shop for the best deal. With most consumers, price, more than any other single factor, influences their auto insurance buying decision. Since many companies offer policies and prices that vary greatly, you should get at least three quotes. Primary sources are direct-to-consumer companies (Geico, Amica), independent agents (State Farm, Allstate, Nationwide) or internet-based offerings (Progressive). Direct sellers usually offer the most competitive premiums, but these companies also demand near-perfect driving records.

Insurance can also be obtained through member organizations such as USAA, an association of active and retired members of the U.S. military and their families. Insurance rates through these organizations are often lower than the market average. These groups also offer a sense of trust and familiarity to members.

As you shop around, make sure you compare apples to apples. In other words, when you're getting competing quotes, you want them to be for the same levels of coverage, when possible. A lower quote may sound nice, but it often means less protection.  

To help you in your research, your state insurance commission may show what insurers charge for different polices in various parts of your state. These comparisons will likely not fit your individual situation exactly, but they are a good resource to help you determine which company's premiums are the most affordable.

Service

If you are ever in an accident, you want your insurance company to handle your claim fairly, quickly and efficiently. You can get a pretty good feel for this from your initial discussions when you get a quote. If the representative or agent is helpful and forthcoming with information, that's a good sign. You should feel they are trying to educate you about proper coverage, rather than angling to score the sale.

It's advisable to talk to other customers of that insurance company or agent. Furthermore, your state insurance commission and the Better Business Bureau may be able to tell you whether any consumer complaints have been filed against the company.

Bottom line, you should feel comfortable with your insurance, whether you buy it from a local agent, directly from a company over the phone or purchase a policy online. Make sure the agent or company will be easy to reach if you have a question or if you need to file a claim. Bigger insurers typically have a 24-hour hotline, and some independent agents give their clients their home and cell numbers.

Reliability

In the end, an insurance company is only as good as its ability to pay on a claim. There are independent agencies that rate the financial strength of insurance companies. Bear in mind, there is no exact science to rating an insurer's soundness. For that reason, each of these agencies has its own rating scale, set of standards and population of rated companies. Typically, a combination of letters, numbers and pluses and minuses are used to indicate the differences in ratings among insurers.  

Also, these agencies may disagree about a particular insurer, so it is prudent to consider an insurance company's ratings from at least two agencies before choosing. Moreover, agencies can announce new ratings at any time. Be aware of that, and check in a couple of times a year on the ratings of your company.

It's not a good idea to rely heavily on what the insurance providers say about their ratings from these independent agencies, as insurers often highlight a higher rating from one agency and ignore a lower one from a second agency. Insurance companies are known to publish the most favorable comments from a rating agency's evaluation while omitting any negative feedback from a less-flattering report.

Decision Time

Buying auto insurance is an important decision, and perhaps a bit more complicated than you might have thought. If you take your time and properly research your options, you can feel confident that you've selected the right insurer to cover you and your family while on the road.

© Cars.com 06/11/2013