Car Insurance Quotes: What You Need to Know

2020 was an unusual year for car insurance, so 2021 is a good time to review your current rates.

Because the pandemic kept people at home, Americans drove far fewer miles last year.

Miles driven fell by half across the country in late March and April compared to the same period last year. According to company data, pending insurance claims fell by 50 percent to 60 percent at the same time, according to Kyle Schmitt, vice president and managing director of insurance intelligence at J.D. Power.

And, because drivers were suddenly spending less time behind the wheel in order to adhere to stay-at-home guidelines, many auto insurers provided customers with premium credits or refunds.

State Farm, for example, returned 25% of refunds to customers between March and May, and reduced rates by an average of 11%. Customers who renewed or purchased policies between April 8 and October 7 received a 15% discount from Geico. In June and July, USAA offered a 20% credit on three months' worth of premiums and a 10% credit on six months' worth of premiums.

Many people have reconsidered how much they pay for car insurance as a result of seeing those low prices.

“During Covid, people made a connection between the use of their vehicle and the cost to insure it that they may not have fully made in the past,” Schmitt says.

In other words, you may still be overpaying for car insurance, or paying for coverage that you no longer require.

Even if there isn't a pandemic, comparing quotes at least once a year is one of the best ways to save money on car insurance.

“It's a good idea to do this once a year to ensure you're getting the best rate. You won't know if you have the opportunity to save money if you don't shop,” says Laura Adams, an insurance expert and host of the "Money Girl" podcast.

Rates differ between insurance companies and are affected by a variety of factors, so taking the time to compare and shop around can be extremely beneficial if you want to pay the lowest premium possible at all times.

“People don't shop around for insurance nearly enough, and premiums are extremely variable,” says Douglas Heller, a Consumer Federation of America insurance consultant and expert. “If you don't shop around, you might end up paying an exorbitant premium because they don't like something about you that has nothing to do with your driving.”

While it's easy to focus solely on price, Heller points out that there's a lot more to an insurance quote than just how much it'll cost you. You should also consider what the policy will and will not cover, your coverage limits, and your out-of-pocket costs if something happens to you or your vehicle.

“Buying the cheapest insurance isn't always the best option if it means getting less coverage,” Heller says.

What Is a Car Insurance Quote?

A car insurance quote is an estimate of the cost of a policy based on information you've provided about yourself, your vehicle, where you live, and other factors. The accuracy of car insurance quotes is only as good as the information you provide. The more accurate information you are willing to share about yourself, the more accurate your insurance quote will be.

Insurance companies use the information you provide in a complex proprietary algorithm to determine how risky you are. In other words, they want to know how likely you are to file a claim. According to Schmitt, the most expensive expense for an auto insurance company is repairing damaged vehicles.

Even if you provide the same exact information, auto insurance quotes vary between insurance companies. Why? Because each insurance company evaluates risk differently, and certain factors may be very important to one insurance company but not to another.

Furthermore, quotes are constantly changing. You can get an auto quote today and another in a couple of months from the same insurance company, and the quotes may differ slightly depending on what happens with that auto insurer's data, according to Adams.

For example, if an insurance company notices that people in a particular zip code are filing more claims because their cars are being stolen, they may raise the rate in that area.

“They're always changing the quotes,” Adams says. “There are probably 100 or more variables that influence how you get a quote and what the quote is. And it will differ from one company to the next, which is why it is always a good idea to get more than one quote.

What Factors Influence Car Insurance Quotes?

“The insurance company is going to do some research on you,” Adams says. “They'll look at things like your driving history, whether you've been in a lot of accidents, your age, and a slew of other demographic factors.”

According to insurance experts and the Insurance Information Institute, while rating factors vary by insurance company, there are some that are widely known and influence the price you pay for car insurance (III).

Driving Record: A clean driving record can help you get a lower auto insurance rate. If you've had any accidents or serious traffic violations, you'll almost certainly have to pay more. New drivers may have to pay more as well because they pose a greater risk on the road.
Type and Amount of Auto Insurance Coverage: The types of coverage you select, as well as the limits and deductibles you choose for each type of coverage, will influence the cost of an insurance policy.
Location: Your auto insurance rate is affected by where you live. Drivers who live in urban areas, which are thought to be more vulnerable to vandalism, theft, and accidents, are more likely to pay higher rates than those who live in suburban or rural areas. Furthermore, where you park your car, such as on the street versus in a secure garage, may affect your rate.
Age: Younger drivers are more likely to be involved in an accident than older drivers. Insurers usually charge more if there are teenagers or people under the age of 25 on a policy.
Gender: Almost every state allows auto insurers to set rates in part based on gender, and women frequently pay less for coverage than men. According to III data, men are more likely than women to be involved in accidents, have more driver-under-the-influence (DUI) accidents, and have more serious accidents.
Car Value: The value of your car plays a significant role in the cost of insuring it. If you purchase a more expensive vehicle, your insurance premiums will most likely be higher because it will cost more to replace or repair. Insurance companies may offer discounts if your vehicle has a high safety rating or high-tech safety equipment.
How Much You Use Your Car: When calculating a quote, insurance companies will take into account how much driving you do on a regular basis. The more time you spend on the road, the more likely you are to be involved in an accident. As a result, if you drive your car frequently or commute long distances, you will most likely pay more. If you only drive on occasion, you will most likely pay less.
Insurance-based Credit Score: In many states, insurance companies are permitted to use a credit-based insurance score, which is similar to your credit score. It is a statistical tool that predicts how likely a person is to file a claim based on specific elements of their credit history. Some states, such as California and Massachusetts, do not permit this to be used as a rating factor.

What Information Do You Need to Get a Car Insurance Quote?

To obtain a car insurance quote, whether online with an insurance company or in person with an agent, you must provide some personal information. You will be asked for your name, date of birth, gender, address, marital status, Social Security number, and vehicle information, for example.

You must also provide information on any family members you want to be covered under the policy.

Before providing you with a quote, the insurance company or agent may inquire about your driving record, previous insurance claims, and credit-based insurance score (depending on the state).

Car Insurance Terms to Know

If you're speaking with an agent, you might hear phrases like "no-fault" and "diminished value" and have no idea what they're talking about.

Insurance jargon can be perplexing, but it's not as difficult as it appears.

The definitions of some of the most commonly used terms in auto insurance are provided below. Consider it a cheat sheet that you can always refer to if you come across an auto insurance term that you are unfamiliar with.

Additional insured: A person or group that is insured by another party. For example, if you get a car as a teenager, you're almost certainly covered as an additional insured under your parents' policy.

At-fault: You are considered "at-fault" if you are involved in an accident that was caused by your negligence. It could be with a different vehicle or with an object.

Actual Cash Value (ACV): The cost of replacing your vehicle less depreciation.

Claim: An official request for financial compensation filed with your insurance company if your vehicle is damaged or you are injured in an accident.

Collision Insurance: Optional insurance that protects your vehicle in the event of a collision with another vehicle or an object.

Comprehensive Insurance: Optional coverage for damage to your car that is not the result of a collision, such as theft, vandalism, natural disaster, and animal-related damage.

Deductible: The amount you must pay before your insurance kicks in. As an example, consider the following: Your deductible is $1,000, and you require $3,000 in repairs following a car accident, so you will only be required to pay the first $1,000, with the rest covered by your insurance.

Declarations page: An important document provided by your insurance company that outlines the cost of your premiums as well as details about your auto insurance policy, such as the term length, vehicles and drivers covered, and a lienholder if you're financing.

Diminished value: The difference between the market value of a car before and after the accident.

Exclusions: Anything that an insurance policy does not cover, which is usually specified on the declarations page.

Full coverage: A combination of liability, comprehensive, and collision coverage is typically referred to as this.

Gap Insurance: Optional coverage that helps pay the difference between what you owe on a car loan and the car's depreciated value if the vehicle is totaled or stolen.

Liability Insurance: The bare minimum of auto insurance required by the state. It safeguards you and your assets in the event that you are held personally liable for an accident that causes another person's injury or loss. It does not provide any protection for your vehicle.

Lienholder: The person or entity that has a legal claim on your vehicle is referred to as the lienholder. If you finance your vehicle, the lienholder serves as your lender until the loan is completely paid off.

Limit: The maximum amount that a car insurance policy will pay out in the event of a covered accident.

Loss: The sum paid by an insurance company as a result of a claim.

Personal Injury Protection (PIP): Also known as "no-fault insurance," this type of coverage pays up to a certain amount for medical bills and lost earnings for you and your passengers in the event of an accident, regardless of who caused it. It is mandatory in some states, such as Michigan and Kentucky, and optional in others.

Premium: The amount you pay for your auto insurance policy's premium. It can be paid monthly, semi-annually, or annually, depending on your coverage and payment plan.

Replacement Cost Value (RCV): The cost of replacing your car after depreciation has been deducted.

Totaled: The cost of repairing the vehicle exceeds the value of the vehicle.

What Is The Average Car Insurance Rate?

According to the most recent data from the National Association of Insurance Commissioners, the average premium for liability coverage in 2017 was $611.12. The average collision insurance premium was $363.08, and the average comprehensive insurance premium was $159.72.

That means that the average person's total cost of full coverage exceeds $1,000. But keep in mind that, depending on the state, insurance company, and policyholder, there are dozens of rating factors at work that ultimately determine your personal auto insurance rate.

How to Compare Car Insurance Quotes

There are numerous methods for obtaining a free auto insurance quote. You can go online and use an aggregator to get a variety of quotes from various insurance companies. You can contact an insurance company directly, such as State Farm or Allstate. Getting an auto insurance quote from an independent agent or broker can also be a good option if you want to talk through your options.

“You should never pay a fee for a quote,” Heller says. “If anyone suggests that you have to pay anything other than the insurance premium once you sign up, you should walk away.”

Car Insurance Quotes Over the Phone

There are ways to be smarter when shopping for car insurance, according to Heller, before you start making phone calls. First, look at car insurance company reviews; keep an eye out for complaints and customer satisfaction. To accurately compare rates, you should also have a good understanding of how much coverage you want and discuss the same amount of coverage with each company.

Schmitt suggests beginning with insurance comparison sites and then moving on to specific insurers for more detailed quotes. The majority of companies provide free online auto insurance quotes, allowing you to begin the process online but then connect with an agent to finalize your quote over the phone.

“It is important to get a fair rate, but it is also important to consider what you require. Do you need assistance determining how much coverage is appropriate for you? Insurance is often more expensive when purchased through an agent than when purchased online, but you pay for the service,” says Heller.

Car Insurance Quotes Online

Purchasing insurance without the assistance of an agent gives you more independence, but there are some drawbacks.

According to Heller, when you go online to get quotes, insurance quote websites don't always show you all of your options. “Those websites typically have financial ties to a limited number of companies and will only provide quotes for a limited number of companies based on their financial relationships. “And the same is true if you go to an insurance agent or broker's office,” he explains.

The more car insurance quotes you can obtain for comparison, the better. According to the experts we spoke with, you should get at least three quotes so you can determine whether you're getting a good deal for the coverage you need.

“Going to one website or asking one insurance agent usually won't give you the full landscape of what's available,” Heller says.