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How to Compare Auto Insurance Rates
Car insurance: You gotta have it, but you hate paying for it. If you’ve ever wondered why there are so many TV ads for car insurance – you know, the funny ones with the GEICO Gecko and Progressive’s retro sales gal, Flo – it’s because this industry is super competitive. And though you might think auto insurance is the kind of thing where you would pay the same no matter what company you’re with, it’s not the case.
Different auto insurance companies charge different rates for the same driver and coverage levels. Sometimes, when you stop to do a comparison, you’ll be surprised to find out just how much less you can pay for car insurance at a different insurer.
How does this happen?
In a nutshell, each insurance company employs actuaries who do some crazy-complicated math to figure out what the odds are a given policyholder will be in an accident. They then figure out the cost of paying those claims and what the company has to charge in order to be profitable. These number-crunchers use a lot of different data points, but a lot of it comes from the companies own claims history. So while one company may have paid a lot of claims for drivers in your county, for example, another company may have a better track record and thus charge a lower rate. Same thing for your age, driving history, or the model car you drive.
Furthermore, different insurance companies charge different rates based on how you manage your policy. Online-only ventures like Esurance can sell auto insurance for less because they don’t have physical offices – everything’s handled online or on the phone. That’s good, but you have to weigh saving money with the potential experience if you’re actually in an accident. State Farm, for example, sells insurance both online and through a network of local agents, which can come in handy if you want a real face to talk to if you have to make a claim. (That said, don’t automatically assume an insurer like State Farm is more expensive…again, it all depends on how the insurer rates you.)
As an example, when I last shopped for car insurance, there was a $550-a-year difference between the lowest quote and the highest quote – for the same level of coverage!
How to compare auto insurance rates
The best way to shop for car insurance is to simply get a few quotes and compare. We’ve listed some of our favorite insurers on this page to get you started. At each you’ll be asked to fill out basic information about you, your car, and your driving history. They’ll then ask you how much coverage you want. This is important! To get a good apples-to-apples car insurance comparison, be sure to enter the same coverage limits and deductibles at each insurance company. Minimum required auto insurance coverage levels are usually set by your state, but you can choose to purchase more insurance than required.
As a common example, one insurer may quote you a premium on a policy that has a $500 deductible and then you’ll see lower quote but it may have a $1,000 deductible – meaning you’ll shell out more if your car is damaged before the policy kicks in.
Why it’s a good idea to shop for auto insurance frequently
Some insurers provide generous incentives for loyalty, and that’s good. But insurers adjust their rates all the time, so just because your auto insurance policy was cheaper last year doesn’t mean it will be this year. It’s smart money to compare auto insurance rates every year or two.