Money Essentials

Auto insurance: Picking an insurer

Find broad auto coverage without burning a hole in your pocket.


  • Towing and labor only pays if you can't drive your car away from an accident. Members of auto clubs with such privileges don't need this coverage.
  • Rental insurance costs only a few dollars per year, certainly a worthwhile expense if you travel and rent cars frequently. But spare the expense if you don't rent cars often and can depend on another car in a pinch.
  • Glass breakage coverage can add up to 20 percent to your comprehensive premium. When it's not built into the premium, avoid it.
  • Cast a wide net.

    First, check what's out there. Get quotes from at least four carriers. Try a free database such as InsWeb.

    Try these options.

    Companies like State Farm and USAA that deal directly with consumers without using independent agents are called "direct writers." In theory, they can pass on their savings by eliminating the middleman.

    Read your junk mail. Direct marketers like Geico and Progressive Insurance save on overhead - and pass on the savings - by marketing by phone, mail or the Internet.

    Let your state be your guide.

    Insurance departments in 33 states and the District of Columbia offer online shopping guides for auto insurance. Your state's guide may identify little-known companies with competitive rates.

    Look at service.

    No discount in the world will make up for slow claims processing or shoddy repairs, so find out as much as you can about a company's service before you sign on.

    Consumer Reports periodically publishes service ratings for large insurers. You can also ask a representative about a company's claims' turnaround time; a shorter turnaround is an indication of better service.

    Focus on financials.

    It's wise to look at the financial ratings of your auto insurer. Ask the company for that information, or check out one of the financial ratings services on the Web.

    An A rating or higher from Standard & Poor's or an AA ranking or better from Moody's Investor Service is a good indicator of financial strength. Weiss Ratings, the most independent of the ratings services, and arguably the most stringent, posts a list of the currently weakest companies.

    As a last resort, there's your state.

    If your driving record is bad, you may initially have only one option other than taking public transportation: your state-sponsored high-risk pool and it's expensive.

    If you must join the high-risk pool for now, try shopping again a year from now. Private insurers are always looking for new ways to serve more customers, and one company's black mark is another's business opportunity. Progressive Insurance, for instance, has thrived by insuring people and property that other carriers won't touch.

    glossary
    Glossary
    take the test
    Take
    the test
    more lessons
    More Money Essentials
    lessons
    Features
    They're hiring!These Fortune 100 employers have at least 350 openings each. What are they looking for in a new hire? More
    If the Fortune 500 were a country...It would be the world's second-biggest economy. See how big companies' sales stack up against GDP over the past decade. More
    Sponsored By:
    More Galleries
    The 13 most WTF gadgets From the weird to the gross, these 13 gadgets will make you wonder why they even exist. More
    Best-loved cars in America These cars and trucks topped J.D. Power's APEAL survey, which measures how much owners like their new vehicles. More
    America's most powerful cars A new 'horsepower war' has erupted among U.S. automakers and these are the most potent weapons in their arsenals. More

    Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.