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Car insurance comparison: How it works

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You may be leaving hundreds, even thousands, of dollars on the table if you don’t regularly compare car insurance rates. Many factors affect your car insurance rates, and if any of them changed, it’s possible that the cheapest policy will come from a different insurer.

You should compare car insurance rates at these times, when your rates are likely to change significantly:

  • You bought a car
  • You added a teen driver to your policy
  • You got married or divorced
  • Your credit score changed
  • You bought a house or moved
  • You got cited for a DUI or major violation or caused an accident

Even if your status remains the same, you should do some car insurance shopping every six or 12 months. Insurance companies use different formulas to set your rates, so the price for the same policy can vary significantly even if you don’t have a life-changing event. That means you can wind up overpaying if you don’t compare insurance rates from several companies at least once a year.

Save by comparing car insurance rates

The chart below shows the highest and lowest rates from six insurers for each location. You’ll see that savings of over 50 percent can be had from doing an auto insurance quotes comparison:

ZIP codeHighest rateLowest rateSavings for lowest rate
Los Angeles 90029 $3,194 $1,464 $1,730
Chicago 60636 $2,989 $1,167 $1,822
Houston 77091 $2,934 $1,241 $1,693
Miami 33142 $3,277 $1,136 $2,141
NYC (Manhattan) 11031 $6,426 $1,407 $5,019

* Averages are based on insurance for a single 40-year-old male who commutes 12 miles to work each day, with policy limits of 100/300/50 ($100,000 for injury liability for one person, $300,000 for all injuries and $50,000 for property damage in an accident) and a $500 deductible on collision and comprehensive coverage. Data for CarInsurance.com provided by Quadrant Information Services.

Now that you’re ready to save, we’ll walk you through the process of reviewing your coverage, gathering the personal information you’ll need, comparing rates and vetting potential insurers.

Five steps to take when car insurance shopping:

1. Get an idea of what you can expect to pay.

If you’ve moved or if you just want to get a feel for what car insurance costs in your neighborhood or are a new driver, you can get an idea of what people in your area are paying by using our car insurance comparison tool, showing the average car insurance rate in each ZIP code.

2. Review your existing policy and assess coverage.

While you shop around for the price and insurance company that is right for you, you should know what coverages are right for you too. If this is a new policy you need to meet at least your state's minimum liability car insurance requirements. If you simply want to find the cheapest car insurance possible when comparison shopping, you would look for liability coverage only, and in the smallest amount your state will accept. (Legally required minimum liability coverage amounts vary by state.) Bear in mind that some states require so little coverage that an accident might leave any other assets you have, such as a home or savings, vulnerable to lawsuits.

If you’re replacing a policy, review the information on your policy to see if your existing coverage is still the best for you.

The four main types of car insurance you should understand are: 

  • Liability car insurance – Covers others’ property damage and medical expenses. If you have few assets, you don’t need high limits. If you own a home or have savings, you do --  100/300/30 is recommended. That means $100,000 per person, up to $300,000 an accident and $30,000 for property damage costs.
  • Uninsured motorist coverage – Comes in two forms: uninsured motorist bodily injury pays for medical bills if you’re injured in an accident that an uninsured driver causes. Uninsured property damage pays to fix your car. Some states require these coverages, but if yours doesn’t, ask yourself if you would have the money to pay for damages yourself should you be hit or injured by a driver without car insurance.
  • Collision coverage – Covers damage to your car. This pays out only up to the actual cash value of your car. If your vehicle is old, you may not need this optional protection.
  • Comprehensive insurance – Covers theft and damage to your car from hail, floods, fire, vandalism and animal strikes. Like collision coverage, this will pay you up to the amount your car is valued by the insurance company. If you drive a beater, you may not need the extra coverage.

Comprehensive and collision coverage are typically not budget-busters. A comprehensive car insurance comparison analysis by the Insurance Information Institute shows the national average cost per year is $139. For collision, it’s $297.

Also, decide now what deductible makes sense for your situation. One of the best ways to save on car insurance is to raise your deductible for collision and comprehensive insurance, but remember that if you have a claim, that deductible will be your out-of-pocket expense to repair or replace your car. If you have more than one claim, you'll have to pay the deductible each time. We recommend you choose an amount that you can pay from savings. Your car won’t be repaired until you pay your share.

3. Gather your personal information.

If you compare car insurance rates online, it’s easier to compare quotes side-by-side, which saves you from having to repeatedly give out the same information and write down quotes on your own. Once you know what coverage you need, gather the following information to request a car insurance quote.

  • Name, birth date and driver's license number of all drivers to be covered.
  • Make and model of each car to be covered.
  • Driving history, including accidents and driving violations, of all drivers to be covered by the policy.

4. Start comparing multiple auto insurance quotes.

Now you can begin collecting online car insurance quotes. Request rates from at least three different insurers. Be careful to compare the same coverage by using the same liability limits, identical deductibles and optional coverages.

Also be sure to follow up with potential insurers about any car insurance discounts you may qualify for. There may be additional discounts offered that are not part of the online quote process. For instance, you may be asked how many miles you drive a year to see if you’re eligible for a low-mileage discount, but you may not be asked what your teen driver’s grades are, which could snag you a good-student discount.

Now that you know what coverages and limits you need, start now by finding car insurance companies in your area.

5. Research potential car insurance companies before you buy.

When you’re ready to buy, research the insurers that offered you the lowest rate. The National Association of Insurance Commissioners (NAIC) recommends that when you compare insurance companies you take the following steps:

  • Check with an insurance rating service, such as A.M. Best or Standard & Poor's, to find a grade or rating for the company and an analysis of its finances so you can feel confident that a potential insurance claim will be paid.
  • Check for complaints against the company with NAIC's Consumer Information Source.
  • You can also research complaint rates online at the Better Business Bureau and your state insurance department's websites.
  • Read the customer comments at the insurer’s Facebook and Twitter accounts to see if people are generally happy with the service.

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