How to Buy Car Insurance: How Most People Do Lately

With the rise of the Internet and the search engines, you would think that purchasing auto insurance online would be more commonly used method than it is today in the United States. There are plenty of options including going through an agent, aggregator websites and direct. So, how to arrange coverage and what would your choice be? 

Traditional Method of Purchasing Automobile Insurance

Usual tried and tested way is using intermediaries who can explain and arrange a policy on behalf of customers. They are local contacts and can be people you already know. There are two types of intermediaries and they differ in their features but in essence people would need to go to their office, sit down and have a conversation regarding his/her situation and be presented with a written offer. However, even the agents are more computerised these days that they may expect the applicant to fill forms and send them by e-mail.

Of course, this method has its benefits and shortcomings. First of all, you may be limited in choices since it would be hugely time consuming to physically visit several of them to shop around. A broker could offer quotations across multiple companies. Yet again they are doing the research on the backend, and it does not offer the transparency that most people want today.

How to Buy Car Insurance Online

Demand for transparency is one of the main reasons why the Internet comparison-shopping marketplace was developed. It offers the same choices, yet with much more convenience. Simply sit at home with a coffee and a tablet and explore the options. Today you can easily and conveniently get a dozen estimates delivered directly to an email within minutes of filling out a proposal form.

Fill out the same information in the application and it gets sent to multiple sources and they provide quotes. It provides the best apples to apples comparison in the industry today. If you call agents you may give different information and there may be different prices based on these changes made along the way.

You could also approach the major names for direct auto quotes. However according to Neil Rekhi, founder of a property and casualty market intelligence firm, going direct does not give the insurer any incentive to win the business with a competitive quote. It would be better if it comes from a third-party aggregator, as the carriers know it is then competing for the business directly.

Buying Vehicle Insurance Online vs Traditional Approach

It is interesting to note that in the United Kingdom, 75% of car policies are now bought over the Internet with only 25% being sold in person by a broker. Part of this is due to the decreased regulations and lack of agency networks in the UK in contrast with the US. However, online marketplace have been growing substantially in countries with similar regulations, like Spain and France. Even though the U.S. lags behind these countries, it is expected that electronic car insurance transactions will continue to grow.

According to J.D. Power, nearly 75% of American policy shoppers use insurers or aggregators’ websites for obtaining quotes and researching purposes. Only 25% of customers end up buying direct on a carrier website even though nearly half obtain a quote using this medium. 50% of the policies are sold through intermediaries. And 22% are sold through call centers.

So, it is clear that people are not fully confident with doing it all themselves because nearly half still use intermediaries. At least one positive is that majority of motorists do the homework before agreeing to the terms offered by their brokers.

How to Choose Coverage

Generally, people look at two aspects, which are paying for the premium and getting paid for the damages they suffer or make others suffer. It is understandable that you would only want to buy cheap liability only when you don’t have enough money to even pay for the cheapest. That is why it may not be realistic to look for a type of policy that would be over budget because you may struggle to pay the premium in the future that may lead to cancellations.

However, it is important to determine the protection you need and try the hardest to get it at affordable prices. This post can help you find all the discounts you qualify and reduce the premium. 72% of US policyholders choose full coverage, which combines decent Liability limits with Collision and Comprehensive. You also get Uninsured Motorist Coverage where a state requires it as part of liability or where companies offer it as a package.

Generally these packages are reasonably priced and most motorists can afford them. If you have good driving records, no claim and good credit history you may be able to get it cheap. If you are thinking of getting liability only coverage you shouldn’t just go for the state minimum but have decent protection against third party claims.

How Are Premiums Determined?

We looked at this topic in several angles already and we keep coming back to premium costs. So, we should look at how the rates are determined. There are key areas they look at before they set their rates. These are details of the drivers and the vehicle and coverage required. There are 20 – 30 factors considered in between like, credit score, experience and claim history of all the drivers listed, where you live and work and so on. Knowing all these factors will help you plan ahead and reduce the premium gradually.

Another important point to note is that every company calculates premiums differently and offer different discounts and rates. What you need to look at is the final quote. And you should always compare it with others you got based on same information.

This should never be a rush job because motorists need to go through a few considerations to make the right decision. They need to spare enough time to educate themselves on which coverage to get, discounts to ask for, and companies to go with.

We are striving to make the decision easy by providing a continuing stream of helpful blog posts with the latest facts and statistics. Here you can read about the cheapest carriers or the most expensive ‘oops’ you might forget to include in a policy. So would you want to buy cheap auto insurance online or leave it to a broker next time?

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