In my last blog post, I explained auto insurance is not priced like a commodity, with low profit margins for auto insurance companies, as each company competes to offer the lowest price and under-cut the competition. In reality, the thorough auto insurance shopper can save a lot of money by shopping with all the major companies, and find a reputable company charging a lot less than other companies for the same coverage.

Not only is auto insurance not priced like a commodity, it is not a commodity, where the product is essentially the same, like wheat or sugar, no matter which company is selling it.

Although there is an industry-standard auto insurance contract used by some companies, many car insurance companies have their own proprietary contracts varying from the standard form, making their auto insurance different from other companies.

Certainly, the quality of service can vary from company to company. However, the fact auto insurance is not a commodity, should not stop the wise auto insurance shopper from finding the coverage they need, from a reputable company at the best price. When people shop, each person will find some auto insurance companies have much higher rates than others for his or her situation. You do not get better service or better coverage simply by paying more for the same coverage. This blog post will explain how the smart auto insurance shopper should consider value & price, and avoid some of the mistakes the average auto insurance consumer makes.

Here are the steps to making wiser choices about choosing an auto insurance company, and really saving 100s of dollars:

1. Decide on the coverage you need first, and do not choose a company with a lower price for less coverage than is adequate for you.

The first step is to decide on the level of auto insurance coverage you need. When it comes to the standard auto insurance coverage types & limits the majority of people need, most auto insurance companies offer the same types and limits. If you are not a high risk driver, almost all companies can quote you bodily injury & property damage liability limits up to $500,000. Almost all companies offer comprehensive or collision with the same range of deductibles, though some companies may not offer it for older vehicles, and most companies won’t offer it for salvage or damaged vehicles.

What you need to know, as a wise auto insurance buyer, is choosing your coverage goes beyond asking for “the state minimum coverage” or “full coverage.” Even if you have no interest in shopping your auto insurance with other companies, contact your insurance company or agent once a year, to have them explain each auto insurance coverage on your policy, and your coverage options, even if you think you know your coverage. Many people are unpleasantly surprised about costly coverage gaps they could have avoided, when they have a claim. A lot of people could get double or triple the liability coverage they have now, for only a few dollars more a month. Before you contact an insurance company or agent, read my blog posts about auto insurance coverage, to see my opinions about them. Although I discuss auto insurance coverage, only YOUR auto insurance company or agent can confirm how YOUR auto insurance works, and that will depend on the coverage you have, as explained in YOUR auto insurance policy.

When you get auto insurance price quotes from other companies, make sure every agent discusses with you each coverage, and all the coverage options available to you. Get all quotes in writing, to confirm the coverage quoted, before selecting a company.

Auto Insurance Policy Differences Among Companies

Fortunately, in spite of most companies having their own auto insurance policy contracts, with wording sometimes differing from other companies, broadening or restricting coverage, the differences may not leave most customers with large, unknown coverage gaps, and much of the policy wording is identical.

However, sometimes a company’s auto insurance policy wording can restrict coverage, resulting in costly uncovered claims, which may have been covered by another company’s auto insurance policy. For example, some companies limit unrelated or unlisted drivers to the minimum amount of state liability coverage, when they are driving your car, even if you have purchased much higher liability limits.

The most potentially expensive limitations often apply to how coverage for some drivers, or use of the vehicle, might be limited or restricted. The personal auto insurance policies offered by competing companies can differ as to the limitations and exclusion of coverage for any business use of your vehicles. These differences among company auto insurance policies may be very important to some people, but not important to others.

When it comes to policy language, you can’t depend on the insurance agent selling it to advise you properly about it. Also, you can’t depend on competing agents to advise you correctly about coverage provided by other auto insurance companies.

Auto insurance policy language & coverage is enough alike among companies, where it makes sense to get price quotes from all the leading companies, choose a company based on price & service, then request a sample policy to read & review (or have a lawyer — the most prudent thing you can do — interpret it for you) before you buy it, for atypical limitations or exclusions making a difference to you, that may not apply with other companies.

2. Get auto insurance quotes from all the leading auto insurance companies in your state, and develop the habit of shopping your auto insurance each year.

Once you decide on the coverage you need, contact all the major auto insurance companies in your state for price quotes. You can find my blog posts about the major auto insurance companies in each US state here.

The more companies or agents you contact, the better your chance is to save a lot of money on your auto insurance. Have each company quote you the same amount of coverage, or as close as possible to the same coverage.

It’s best to shop your auto insurance each year. Even if your driving record has not changed (or has become worse, by a recent ticket or accident), it pays to shop, because simply being a year older, or having a year longer auto insurance history, might get you better rates. Also, insurance companies are always changing their rates, adding new discounts, refining their rating plans, and launching new auto insurance products. Shopping each year keeps you from missing out when a company makes a big change resulting in lower rates.

Getting into the habit of shopping each year keeps you from forgetting when you might qualify for much lower car insurance rates. For example, you may forget to check for better rates 2 1/2 years from now, when a moving violation falls off your 3 or 5 year driving record. Shopping each year avoids this mistake. Sometimes you may find little change in price from one year to the following year, but it’s still important to shop, to have your coverage reviewed each year. Receiving additional opinions about your coverage from other companies can help you avoid missing coverage you may have not needed, but need now. People have lifestyle changes every year: moving, changing jobs, buying and selling cars, etc.

You may have had no lifestyle changes in the last year, but this year might be the first time an agent advised you could double your liability coverage for what you are paying now. The average auto insurance buyer makes the mistake it’s not worth it to shop & review their coverage with other companies each year.

3. Consider the quality of customer service of each company in relation to its price.

Although I spend a lot of time blogging about the JD Power ratings and complaint data to help people find better auto and home insurance companies, there are no “good” insurance companies, where you can depend on great, honest service, or completely avoid poor service. There are customers having great experiences and horrible experiences with every insurance company. Many claims with all the larger insurance companies are settled to the customer’s satisfaction, even those with less than good reputations. You may be insured with a company you love, and you have had great claims service in the past, but that is no guarantee you won’t change your mind about them, if you are treated unfairly with your next claim, particularly if its a large claim. Companies with great reputations for customer service and high customer satisfaction, like Amica and USAA, still have customers and former customers feeling cheated by them, when their claim is not paid as expected.

I think it’s important to follow my reviews about JD Power ratings and complaint data for insurance companies, because choosing companies with higher customer satisfaction, and a consistent history of lower than average customer complaints, will increase the chance you will be happy with their service. But I have no confidence any auto insurance company is providing so much better service, it’s worth paying a lot more for the same coverage.

There are only a select few auto insurance companies (some not available to everyone, or available in only some states) truly performing much better than the average company. If they are available to you, have the coverage you need, and you value customer service no matter the price, read my insurance company reviews to find them. In my opinion, which I think is supported by the analysis in my insurance company reviews, there are very few companies performing so much better than the average company to warrant paying a much higher price. The good news is you may not have to pay more for these companies, because they may have competitive rates for you.

For most people, choosing an auto insurance company involves considering its customer service in relation to its price. In an industry known for customer dissatisfaction, you want to choose an auto insurance company with better than average customer satisfaction, and a lower than average number of customer complaints, if the price for the coverage you need is reasonable, compared to the lowest rates you are quoted.

I recommend getting quotes from all the major auto insurance companies willing to quote you, then read my insurance company reviews, to evaluate the customer service of the companies quoting you the lowest rates. It may surprise you, but there is no correlation to the price you pay for auto insurance and the quality of customer service. You can pay high rates with low rated companies, and low rates with highly rated companies. My insurance company reviews can help you compare companies, once you know the companies with the best prices for you, so you can choose the best combination of price and service for you.

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