Auto insurance isn’t cheap. According to a recent AAA study, you can expect to pay around $1,251 annually for full-coverage insurance on a medium-sized sedan, depending on your state of residence and personal details. And of course bigger and more expensive vehicles will cost even more to insure. While we all want to save money, cheaper isn’t always better when it comes to auto insurance. Skimping on coverage — especially if you commute to work or regularly drive long distances — can be much more costly than paying for robust auto insurance if you are involved in a collision.
Luckily, there are ways to lower your auto insurance premium without compromising coverage. Besides auto insurance discounts for safe driving, bundling policies, personal status and affiliations, and vehicle safety features, there are further savings opportunities for those who enroll in usage-based insurance (UBI), which charges you based on how well and how much they drive.
Knowing the factors that affect your insurance premium can also help you better understand why you pay what you do and how to lower your insurance costs. We’ll explore some of those factors and go over different ways to help you reduce your premium payments so you can get the best auto insurance policy for your unique needs.
Important Things To Know About Auto Insurance
- Minimum auto insurance requirements vary by state, so make sure you know what’s required by law and what you can do without.
- Consider whether you need higher coverage limits beyond the minimum state requirements, such as extra liability coverage, personal injury protection (PIP), and additional un- and underinsured motorist coverage.
- Consider reducing the amount of optional coverage on your older vehicles, especially if you have comprehensive coverage and your car is worth less than 10x your premium.
- You can save money on your premium by choosing the highest deductible you can afford to pay out of pocket.
- Get quotes from at least three auto insurance companies to find the best rates and discounts.
- Reassess your auto insurance coverage needs every six months to ensure you’re fully protected and compare your rate with those offered by other companies to see if you can get cheaper auto insurance elsewhere.
- Shop around and get auto insurance quotes before you buy a new car.
How Your Auto Insurance Rate Is Determined
The best way to save on auto insurance is to be a safe driver and avoid collisions and driving violations — but even then you may be paying thousands of dollars a year. Rates depend on factors beyond your driving record, including your age, gender, marital status, credit rating, where you live, and what car you drive.
According to the Insurance Information Institute, the amount you’ll pay for car insurance will depend on the following:
- Your driving record
- How often and how far your drive
- Your location
- Your age and gender
- Your vehicle
- Your credit score
- The policy and coverage amount you choose
Some of these are things you have some control over, like your car, driving record, and credit score, while others — like your location — are, for the most part, out of your hands. Unfortunately, it’s often the factors you can’t control that have the greatest impact on your car insurance rate.
When insurers price risk, they look at things like population density in your area (since more drivers on the road increases the likelihood of accidents), the possibility of weather events that could cause costly property damage, and vehicle theft rates in your neighborhood. If you live near a river that has flooded in the recent past, a wooded area prone to forest fires, or a city center bustling with activity, odds are you’ll pay more for car insurance.
Insurers also take into account your personal details, such as your age, gender, marital status, credit, home, level of education, and profession. Consumers frequently express frustration that some of these factors seem to have nothing to do with their chances of being involved in an accident. Gender has been an especially controversial factor, so much so that at least seven states have passed legislation banning car insurers from using this piece of information to assess risk. This isn’t applicable to the majority of states, however, so readers are encouraged to read up on legislation surrounding auto insurance pricing in their state.
The Future of Auto Insurance
As consumer advocacy groups across the nation contest the use of personal details like credit scores as determining factors in the pricing of car insurance, more companies are seeking better ways to assess individual risk. The latest trend in the auto insurance industry is usage-based insurance (UBI) or telematics.
Telematics makes use of wireless technology to directly monitor drivers’ behavior on the road, including how far they drive, their driving speed, how fast they brake, and how they take speed bumps and curves. By analyzing real-time data on their policyholders’ driving habits, insurers are better able to price risk and improve the accuracy and fairness of their pricing.
So far, there are two telematics-based insurance options:
- Pay-as-You-Drive Insurance (PAYD): These plans work with a GPS device that transmits mileage data back to the insurance company. These are typically recommended for motorists who don’t drive often or far.
- Pay-How-You Drive Insurance (PHYD): More sophisticated than its PAYD counterpart, these plans also work with GPS technology and with accelerometers that track speed, location, date and time, cornering technique, lane change frequency.
The use of telematics can be a double edged sword, however. On one hand, using driving data to determine auto insurance pricing can be beneficial for both responsible drivers and insurance companies, creating greater transparency when it comes to rates and piecing together more factual, unbiased evidence when it comes to processing claims.
On the other hand, the large quantities of data produced by telematics devices creates serious privacy concerns for consumers. Researchers have questioned the quality of the driver data collected and how it is analyzed and interpreted by insurance companies.
Still, the bottom line for policyholders looking to save on premiums is that enrolling in a UBI program can save them about 3% on auto insurance. This discount, coupled with others that may be available, could decrease their overall car insurance rate, especially if they’re infrequent drivers who take safe routes on even terrain.
Brokers vs. Online Insurers
Most of us don’t consider insurance brokers when looking to buy car insurance, but why is that? According to Gilberto Sánchez, a licensed insurance broker with over 20 years of experience, people look to brokers for most other types of insurance, but not auto.
“Typically, customers go to a broker for life and homeowners insurance, but less often for auto,” he said. “Many prefer to shop online and do the legwork themselves, but consulting an independent insurance agent can be especially beneficial for those who have little experience comparing rates, don’t know or understand their state’s minimum auto insurance requirements, or simply want the convenience and added security of running their needs by an expert.”
Whether you choose to get a free consultation with an expert or get quotes directly from the companies that interest you is a matter of preference. If you like face-to-face interaction, personalized service, and a handful of options tailored to your needs, you might want to consider a broker. If, on the other hand, you already know how much insurance you need and are comfortable buying insurance from lesser-known and emerging companies, comparison shopping on your own could be your best bet.
Auto Insurance Company Reviews
The following reviews are only a starting point to get you going on your search for the best auto insurer for your needs, and are based on over 200 hours of research carried out by the editors of our sister company, ConsumersAdvocate.org. They’re only meant as a frame of reference, however, and we encourage readers to do their own research and pick the company (or broker) they feel most comfortable working with. Lastly — and we can’t stress this enough — aim to get at least three quotes from different insurers before making up your mind. You won’t know which ones offer the best savings opportunities for you until you compare rates.
When comparing quotes, it’s also important to keep in mind other aspects like customer service and reputation. These details seem less important while everything is going smoothly, but they take on a different meaning come time to file a claim. We suggest you look for companies that have a good range of discounts as well as a streamlined claims process and responsive customer support.
Progressive – Best for Coverage Options and Discounts
Progressive is one of the largest auto insurance companies in the United States, claiming nearly 10% of the market. The company offers many optional add-ons such as coverage for custom car parts, rideshare coverage (if you drive Uber or Lyft), and even a deductible “savings bank” that reduces your deductible by $50 for every six months you go without making a claim. This wide range of coverage options makes it easy for you to choose exactly what you need without paying for unnecessary extras.
Progressive has several unique ways to help you save money, like its Name Your Own Price tool, which provides you with customized insurance options based on your budget. Additionally, if you’re a good driver you can save money with Progressive’s Snapshot program, which records your driving habits through a small device that plugs into your car or through an app. Progressive claims that the average driver saves $145 per year with this feature.
Progressive also scores well on measures of financial stability and customer satisfaction. It has a financial strength rating of A from A.M. Best, A2 from Moody’s, and an A rating from Standard & Poor’s. J.D. Power has also awarded Progressive with three out of five stars for claims satisfaction and the company has a complaint ratio of 1.11 with the National Association of Insurance Commissioners (NAIC), a score which is only slightly higher than average. None of these scores are stellar, but they’re relatively good for a company as large as Progressive.
Allstate – Best for Local Agents and Customer Service
Allstate is one of the largest insurance companies in the nation, offering many types of insurance including home, life, auto, boat, motorcycle, renters, and roadside assistance, among others. Allstate agents operate in all 50 states.
One feature that sets Allstate apart from other auto insurance companies is their Drivewise program. Through this app, the policyholder can obtain discounts for practicing safe driving habits and receive feedback on things such as braking and speed. The company offers a 10% premium discount for customers using Drivewise, and the driver has a chance of obtaining an additional 25% discount for every six months of safe driving. Allstate points to this program as one way that teen or inexperienced drivers, who are normally charged higher rates, can lower their insurance premiums.
Allstate also stands out with its Good Hands Repair Network. Over 3,500 repair shops across the nation are affiliated with this program. All repairs stemming from covered claims that are made at these facilities are guaranteed for the life of the policy.
Allstate is financially solid, obtaining an A+ Financial Rating from AM Best, an AA- rating from Standard and Poor’s, and an Aa3 Financial Rating from Moody’s.
State Farm – Best for Discounts
State Farm is the largest auto insurance company in the U.S., with 17.05% of the market. It offers over 100 financial and insurance products and operates in all 50 states.
The company has a number of discounts for safe drivers, returning customers, and those who bundle multiple insurance policies. The company also has a Steer Clear Driver Program, which allows drivers under the age of 25 to qualify for a discount by completing course training, driving practice, and mentoring programs designed to create safe driving habits.
For drivers over the age of 25, the company extends the Drive Safe and Save Program, which allows drivers to obtain discounts ranging from 5% to 30% based on their driving habits as monitored through a mobile app and a Bluetooth device provided by State Farm.
Although other companies offer rideshare coverage, what makes State Farm unique is that it will extend this coverage even before you’ve picked up a rider, as long as you are logged into the app. This coverage is offered in 46 states and the D.C. area.
State Farm has a 7.5 score on Trustpilot for its customer service and is rock solid financially, holding an A++ Financial Rating from AM Best, an A2 rating from Moodys, and an AA rating from Standard and Poor’s.
Esurance – Great Online Presence
Esurance launched in 1999 and is considered a pioneer in the online auto insurance space. Now, it’s a part of insurance giant Allstate.
This means its policyholders get the cutting-edge experience of a newer, tech-inclined insurance company, but also the financial security of a larger, longer-established insurance company to back it up. Allstate carries an A- rating from both A.M. Best and Standard & Poor’s.
Like Progressive, Esurance offers its own version of a drive-recording program called DriveSense. This app scores your driving habits and provides you with customized insurance discounts. Customers also have access to the Fuelcaster fuel price forecasting tool and to E-star auto repair facilities that guarantee insured repairs for the life of your car.
Esurance’s only downsides are that it has a slightly higher NAIC customer complaint ratio of 1.79 (for reference, 1.00 is average) and that it doesn’t offer auto insurance policies in seven states: Alaska, Delaware, Hawaii, Montana, New Hampshire, Vermont, and Wyoming.
GEICO – Offers Some of the Cheapest Auto Policies on the Market
GEICO has made a name for itself by offering some of the least-expensive auto insurance policies on the market. It’s the second-largest auto insurer in the nation, with a 13% share of the auto insurance market.
GEICO also offers a stellar customer service experience and enjoys a solid financial profile. The NAIC has recorded a customer complaint score of a mere 0.56, much lower than the industry-average 1.00. Additionally, the company carries a strong A.M. Best financial rating of A++, and a strong Standard & Poor’s rating of AA.
The Insurance Center – Best for Customers in the Upper Midwest
For residents of Wisconsin and Iowa who want to work with a local agent, The Insurance Center is a good place to start. Founded in 1966 as a service to help dairy farm families connect with good health insurance plans, over the years it has expanded into other areas such as life insurance, homeowners insurance and, of course, auto insurance.
One of the primary benefits of purchasing a policy through an insurance agent is that if you have a unique situation, such as a poor driving record or an unusual vehicle, they are generally able to zero in on the best companies for these cases. So if you live in the Upper Midwest and prefer discussing your options with an expert prior to purchasing a policy, The Insurance Center is well worth exploring.
How MONEY Looks at the Best Auto Insurance Companies
There are a lot of insurance companies in the market today, which is good because competition between companies tends to drive down prices. However, it also means that shopping for insurance can become overwhelming. To simplify things, we have highlighted the best auto insurance companies according to the criteria discussed below.
Coverage Options & Discounts
Even a policy issued by the very best of insurance companies won’t be useful to you if it doesn’t provide the coverage you need. It’s important to scrutinize your policy to make sure you are not paying for costly premium options that are irrelevant to your situation. Conversely, if you’ve put in a lot of work and money into your car by adding customized parts, it’s a good idea to get extra or specialized coverage to ensure your full investment is protected in case of an accident. For that reason, we gave extra weight to insurers that provide numerous and easily-configurable coverage options.
The same is true of discounts. Opportunities to save money that only apply to a few people aren’t of much value to the general public. We looked for insurers that offer a wide range of discounts and additional savings opportunities through technology-based programs like PAYD or PHYD.
We considered the financial strength of individual insurance companies (but not marketplaces) as an important factor in our recommendations. After all, you don’t want to have to file a claim only to find out your insurance company doesn’t have the financial resources to pay your claim and is selling your policy to a different insurer. While this scenario isn’t the worst thing that could happen, it could delay the claims process and payout. We included only financially-stable companies on this list, as measured by their A.M. Best, Moody’s, and Standard & Poor’s ratings.
It’s almost a given that comments and consumer reviews about insurance companies will be generally negative. What’s more, consumer reviews and comments don’t present a representative slice of an insurance company’s customers. So while we don’t ignore the remarks that people post online about particular insurance companies, we understand they don’t give us a picture of a typical customer experience. For this reason, we paid more attention to customer service metrics as measured by J.D. Power and the NAIC.
How To Choose the Best Auto Insurance Coverage For Your Needs
At the very least, you’ll need to purchase your state-mandated minimum coverage if you plan on taking your car out on the road. Generally, most states require you to purchase liability coverage which will pay out if you cause property damage or personal injury to others. A few states also require you to purchase personal injury protection (PIP) for yourself and/or coverage in case you’re involved in an accident with an uninsured or underinsured motorist.
Next, consider whether the minimum insurance coverage is enough to protect you considering how frequently people file car insurance claims, and for how much, in your area. You may be able to get this information by speaking to an insurance agent.
For example, according to the Insurance Information Institute, the state of Florida only requires you to purchase $20,000 worth of liability insurance for bodily injuries. Yet, in 2018, the average claim for bodily injury in the United States was $15,785, meaning that you run a high risk of not having enough coverage by opting for a policy that only covers the minimum liability requirements if you get into even a moderately serious accident.
Finally, consider whether you need any other types of common insurance products. If you can’t pay for the following expenses out of pocket, it’s a good idea to get a policy that covers these things as well:
- Uninsured Motorist and Underinsured Motorist insurance: This covers you if you’re hit by an at-fault uninsured or underinsured motorist. This can be especially good to have in certain states, such as Mississippi, where an estimated 24% of all motorists are uninsured. What’s more, underinsured motorist coverage will protect you in the event that an at-fault driver who injures you doesn’t have enough liability coverage to compensate you for your medical bills, lost wages, and disability.
- Personal Injury Protection: This helps to pay your own medical bills and lost wages if you’re involved in a car crash. Even if you have good health insurance, it’s likely that a moderately serious accident will still result in many thousands of dollars in co-pays, deductibles, and other uninsured medical expenses. Personal Injury Protection insurance will cover you for those expenditures.
- Collision insurance: This covers damage to your vehicle if you are involved in an accident, regardless of who is at fault. As with uninsured and underinsured motorist coverage, collision insurance is an especially good idea to have if you live in an area with a high percentage of un- and underinsured drivers.
- Comprehensive insurance: This covers damage to your car for most other cases, such as theft or damage from wind, hail, or water.
- Roadside Assistance: This covers all or part of the costs if you break down and need assistance. Many programs also offer a dedicated emergency phone number that policyholders can call to request a tow or other assistance.
Reassess Your Auto Insurance Company On A Regular Basis
Most auto insurance policies are written for a term of six months. This means that twice a year you can easily renew or drop your coverage.
Every six months, you should ask yourself whether your current coverage is sufficient or redundant. For example, if you just got roadside assistance coverage through a recently-opened credit card, you may be able to drop this coverage from your insurance plan if you’re currently paying for it. Or if you’ve decided to take up driving for Lyft as a side hustle, it would be a good idea to add coverage for rideshare vehicles.
Similarly, it’s also smart to compare quotes from different companies each time your policy comes up for renewal. It only takes a few minutes to shop around for insurance prices (especially if you use one of the insurance marketplaces mentioned above). Doing so can save you money. This is especially true if your situation has changed recently, such as if you were recently involved in an accident or your teenager just got their own license.