Why You Need to Shop Around for Car Insurance

Here's a very good argument for shopping around regularly for car insurance. It was left on my post titled Is This a Valid Saving Tip?:

I was loyal to an insurance company which had my auto and home for 9 years. When I shopped for a new company last year all competition prices were significantly less. After changing I saved about $1,100 a year.

It was amazing. Looking back it seemed clear what happened. Each year the company raised my rates a little bit. After 9 years those increases ended up being huge compared to the competition.

Looking back I will always shop around every few years.

This is exactly what I found to be the case in my early years as a driver (before I learned to shop around for car insurance.) The companies slowly turn up the prices, just a bit each year, so that after several years you're paying a ton more than you'd pay if you went elsewhere. But many (most?) people simply let it ride, sticking with their insurer because either the increases aren't that big (per year) or simply "that's who we've always used for insurance." It's fine if you want to do that, but it's likely that you're paying a big price to do so.

For another example of how this works, see my post titled A Real-Life Example of How to Save $1,300 in Less than Two Hours by Shopping Around for Car Insurance.

Comments

[rdub98]

I shopped not too long ago and found that my insurance company was cheaper than any I had contacted. So I stuck with them. I've been with them for about 18 years now.

[jeffinwesternwa]

Never had a co come close to USAA in San Antonio, TX ,except one: Armed Froces in Leavenworth, KS when I shopped for auto, home and $2M umbrella alltogether....

[Andie]

Every year when my AAA auto insurance comes due for renewal I expect the price to go up and am ready to shop around and every year it seems to get cheaper. This year it was about $600 total to cover both our 13 year old cars down from about $700 last year. So I don't shop around. Maybe I should? But I gotta say I'm pretty happy with the price right now.

[Meoip]

I had to replace 2 vehicles in 12 months so I decided while I'm re-figuring my insurance I might as well re-shop it. In about an hour of work I saved 600 a year. My old insurance was getting cheaper each year, some loyalty discount, but it wasn't getting discounted enough. I learned companies give you the discount each year to make you think your getting a great deal, remember your car losses value each year so your policy should go down.

[rwh]

I checked around this year for the first time in a very long time. My company, American Family Ins. raised rates on cars and homeowner policies about 16%. I was pretty annoyed when I got an $80 bill for my homeowner's policy (that runs from October to October) to cover the price increase retroactive to January of this year. I think if I paid my premium last October for 12 months it's pretty crappy to raise the bill before the term is up.

But after checking around I couldn't find anyone any cheaper, and AMFAM has been very good about claims.

I think, however, I will look at AAA. Anybody have any claims experience with them? I realize there is a market for people who want the lowest premiums, but I also place a value on service and paying claims fairly.

[Keith]

My (now) fiancee wasn't on her parents policy anymore but was using the same company because that's who they always used. When we moved in together, we combined finances and she saw how low my car insurance was. She ended up saving over $1800/year by switching to the same insurer I have and is now paying less than I am. It's definitely worth it.

[FMF]

rwh --

I do. They treated me wonderfully. Details:

http://www.freemoneyfinance.com/2007/09/props-to-aaa-ca.html

[rwh]

FMF:

Thanks for the link. I'll give them a call. Since I just paid for 6 more months of car insurance and my home policy isn't due until October I'll have some time. But I'll let you know what I find out.

[David R.]

USAA is one of the best insurance providers out there, bar none. The trick is you have to be affiliated with the military or some other form of federal public service to qualify as a customer.

[Andy]

Do you shop for insurance directly with the insurance companies or go through agents that represent multiple companies? I have always used local agents. I tried shopping directly, but never found the rates to be any better.

Still, I find their service to be disappointing. I need to call every time my rates go up and ask the local agent to shop around for lower rates. They always find a better deal, but it kind of bugs me that they seem surprised I don't just go along with the price increases every year. I'll admit to not knowing much about the insurance business, but it seems like they could keep my rates low automatically by doing a little work each year, or at least they could alert me when my rates are up. I'm not convinced that they serve a useful purpose, even though I do have good rates. Am I just wasting money on a middle man?

[FMF]

Andy --

We do both.

[Colin]

I'm a little late to the party, but I recently switched insurance to AAA. Formerly, my wife & I were on different plans... now we're saving $1,800 annually with AAA! They were at least $1K cheaper than any of the other options. I don't know how they do it!

[David hogard]

I find their service to be disappointing. I need to call every time my rates go up and ask the local agent to shop around for lower rates. They always find a better deal, but it kind of bugs me that they seem surprised I don't just go along with the price increases every year. I'll admit to not knowing much about the insurance business, but it seems like they could keep my rates low automatically by doing a little work each year, or at least they could alert me when my rates are up. I'm not convinced that they serve a useful purpose, even though I do have good rates. Am I just wasting money on a middle man.