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With a lot of purchases, you hear sage advice like “buyer beware” and “if it’s too good to be true it probably is,” but when it comes to auto insurance, that need not be the case.
So how do you know whether those dirt cheap auto insurance rates you’ve found are worth it in the long run?
Those rates are safe if your prospective insurance company is basing them on the internal guidelines they’ve set out.
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If you’re seeing really low insurance rates, and are not expecting to, here are some things to consider:
About the Driver
Here are some things to remember when it comes to the driver:
- Driver Demographics – One of the first things the auto insurance industry looks at is the age and gender of the driver. Young drivers, owing mostly to lack of experience are responsible for more accidents.Men have more accidents than women. The insurance companies want to work with you, offer rate discounts at 21 or 25 years old.
- Driver Record – If your driving record is clean and accident-free, and has been that way for a while, chances are you’ll qualify for a discount with auto insurance companies. Many of them will be looking for accidents within the last 5 to 10 years.
- Driver Location – You may have heard stories and jokes about how bad California or New York drivers are, or how common auto theft is in Florida or Texas. Well, the insurance companies compile statistics on accidents and auto theft, and it turns out there are some states, metropolitan regions and even neighborhoods that you can be penalized or rewarded for living in.
- Driver Credit – Car insurers have, as a general practice, started considering credit records when determining rates. They do this because it can be another indicator of how responsible the driver is likely to be. If you have a bunch of debt and you’re not paying it on time, they may wonder how good of a driver you are.
About Your Car
How old your car is, as well as the type of car it is, play important roles in determining rates. If you’re driving a brand new sports car, you will pay substantially more than if you’re driving a 10-year-old coupe.
If your car is nicely appointed with safety equipment like anti-lock brakes (ABS), airbags, automatic seatbelts and a theft-deterrent system, you will likely receive a better rate quote than if your car does not have standard safety features or is considered a higher than usual risk (think of the Explorer rollovers).
About the Insurance Company
Here are some things to know about the auto insurance company:
– Profession Discounts
– A lot of insurers offer special discounts for different types of employment.
Teachers, public safety officials like police and firefighters, government workers and members of the military are some of the more common jobs that are eligible for special insurance discounts.
– Customer Loyalty Discounts
Having multiple policies (e.g.: life, auto, homeowners; or more than one auto policy) with the same insurance company is often a great way to save on rates.
Similarly, staying with an insurer for a long time demonstrates a loyalty that these companies often reward.
You may even experience the increasingly popular accident forgiveness with these companies, since they consider your comprehensive profile when determining rates.
– Special Discounts
Many auto insurance companies offer specialized discounts for different things. For instance, some companies offer rate discounts to full-time college students able to maintain a certain GPA.
Insurers also may have affiliate programs that offer special discounts to drivers who are members of a certain club or organization, like AAA or AARP.
About Your Coverage
Here are some things to know about auto insurance coverage:
- Minimums or More – If you are carrying more than the minimum auto coverage, your rate will logically be higher. This is also tied to state requirements – some states require more minimum coverage than others. The effects are noticeable in rate comparisons.
- Additional Coverage – If you have opted into roadside assistance, free towing, tire protection, windshield protection and special additional coverage for uninsured motorists, then your rates will reflect that. Accordingly, if you don’t have these sorts of additional coverages, your rates will be lower.
- Deductibles – If you have a high deductible (the amount you pay out of pocket in the event of damages), then your rates will be lower. It’s something to consider when comparing rates. Lower – or zero – deductibles mean higher rates.
- Risk Factors – How far you drive in a year, and whether or not the car is being used for pizza delivery or taxi service will also play a role in rates. If you don’t drive much, or your commuting distances are short and you alternate between driving and public transit, you could be saving quite a bit on your car insurance.
If, after reviewing these considerations you are still concerned about taking advantage of dirt cheap auto insurance rates, here are some things you to check:
- The Fine Print – Is the rate offer promotional, or does it require special qualifications? Companies are required to disclose policy conditions prior to purchase, so read carefully.
- BBB and the web – If you’re concerned about the company itself, check the Better Business Bureau‘s online portal and scour the web for information about the insurer you’re considering.
- Business reviews – Sometimes you’ll see dissatisfied customers expressing themselves on websites like Yelp. It can be a great source of reassurance if you’re questioning those cheap insurance rates.
Really low insurance rates are not unusual. Insurance companies are competitive and they are tailoring the rate quotes based on your individual profile.
So are those cheap rates safe?
Auto insurance companies stay competitive by offering competitively low rates. Because of that, the consumer wins. To determine what low rates they can offer, insurers look at:
- Your personal profile
- Your credit profile
- Your driving record
- Your car
- Your coverage
- Special discounts that may apply
Once you understand your relative appeal to different insurance companies, and you’ve done a little research, you can select low rates with confidence.
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