Car Insurance Quotes: What You Need to Know

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2020 was a strange year for car insurance — which makes 2021 a good time to check in on the rates you’re paying. 

As the pandemic kept people home, Americans drove a lot less last year.  

Miles driven dropped 50% across the country in late March and April compared to a year earlier. Pending insurance claims fell 50% to 60% at the same time, says Kyle Schmitt, vice president and managing director of insurance intelligence at J.D. Power, referring to company data. 

And because drivers were suddenly spending less time behind the wheel to follow stay-at-home guidelines, many auto insurers gave customers credits, or refunds on their premiums. 

State Farm, for example, gave back 25% in refunds to customers between March and May, and reduced rates an average of 11%. Geico gave a 15% discount to customers who renewed or purchased policies between from April 8 and to October 7. USAA gave a 20% credit on three months’ worth of premiums and a 10% credit in June and July. 

Seeing those low prices has led many to reconsider how much they pay for car insurance.

“People made a connection during Covid between the use of their vehicle and the cost to insure it that perhaps they hadn’t fully made in the past,” Schmitt says.  

In other words, you could still be overpaying for car insurance, or at least paying for coverage you no longer need. 

And, even when there isn’t a pandemic, one of the best ways to make your car insurance cheaper is to compare quotes at least once a year.

“It’s a good thing to do annually to make sure you’re getting the best rate. If you’re not shopping, you’re not really going to know if you have the opportunity to save money,” says Laura Adams, an insurance expert and host of the “Money Girl” podcast.

Rates vary across insurance companies and are dependent on several changing factors, so taking time to compare and shop around can really work to your benefit if you want the cheapest premium at all times. 

“People don’t shop around for insurance nearly enough, and premiums are extremely variable,” says Douglas Heller, an insurance consultant and expert with the Consumer Federation of America. “If you don’t shop around, you may find yourself paying a premium that’s too high because they don’t like something about you that has nothing to do with your driving.”

But while it’s easy to focus on price alone, it’s important to note that there’s a lot more to an insurance quote than how much it’ll cost you, says Heller. You’ll also want to pay attention to what the policy will and won’t cover, your coverage limits, and what your out-of-pocket cost will be if something happens to you or your car.

“Buying the cheapest insurance is not always the best if that means you’re getting less coverage,” says Heller. 

What Is a Car Insurance Quote?

A car insurance quote is a price estimate for a policy, based on information you’ve provided about yourself, your car, where you live, and so on. Car insurance quotes are as accurate as the information you provide. The more accurate information you’re willing to share about yourself, the closer your insurance quote will be to the actual price of a policy. 

Insurance companies use the information you provide in a complex algorithm that’s propriety to them to try to understand how risky you are. In other words, they are trying to see how likely you are to make a claim. The number one of expense that an auto insurance company has is repairing damaged vehicles, says Schmitt.

Auto insurance quotes vary across insurance companies even if you provide the same exact information. Why? Because every insurance company assesses risk differently, and certain factors may weigh a lot for one insurance company, but not the other.

Plus, quotes are always changing. You can get an auto quote today then get one in a couple of months from the same insurance company, and it might be a little different based on what’s happening with that auto insurer’s data, says Adams.

For example, if an insurance company sees people who live in a specific zip code are making more claims because cars are getting stolen, they may increase the rate in that area.

“They’re always tweaking the quotes,” says Adams. “There are probably 100 or more different variables that go into how you get a quote and what the quote is. And it’s going to vary from company to company, which is why it’s always smart to get more than one quote.

What Factors Influence Car Insurance Quotes?

“The insurance company is going to do a little digging about you,” says Adams. “They’re going to look at things like what is your driving history, whether you’ve been in a lot of accidents, your age, and a bunch of other demographic factors.”

While rating factors vary by insurance company, there are commonly known ones that influence the price you pay for car insurance, according to insurance experts and the Insurance Information Institute (III).

  • Driving Record: Having a good driving record can help you get a lower auto insurance rate. If you’ve had accidents or serious traffic violations, it’s likely you’ll pay more. New drivers may also have to pay more because they’re more of a risk on the road.
  • Type and Amount of Auto Insurance Coverage: The types of coverage you choose and the limits and deductibles you select for each type of coverage will play a role in the cost of an insurance policy.
  • Location: Where you live plays a role in your auto insurance rate. Drivers who live in urban areas, seen as more susceptible to vandalism, theft, and accidents, are likely to pay higher rates than those living in suburban or rural areas. Additionally, where you park your car, such on the street versus in a secure garage, could affect your rate as well. 
  • Age: Younger drivers tend to have more accidents than drivers with more experience. If there are teenagers or people under 25 on a policy, insurers will usually charge more. 
  • Gender: Nearly all states allow auto insurers to set rates partially based on gender, and women often pay less for coverage than men. According to III data, men tend to get into more accidents, have more driver-under-the-influence accidents (DUIs) and have more serious accidents than women. 
  • Car Value: The value of your car is a big factor in the cost to insure it. If you buy a more expensive car,the insurance on it will likely be higher because it’ll cost more to replace or repair. Sometimes, insurance companies offer discounts if your car has high safety ratings or high-tech safety equipment.
  • How Much You Use Your Car: Insurance companies will consider how much driving you do on a regular basis when calculating a quote. The more you’re on the road, the more likely you are to get into an accident. So you’ll likely pay more if you drive your car often or use it to commute long distances. If you drive only occasionally, you’ll likely pay less.
  • Insurance-based Credit Score: In many states, insurance companies are allowed to use a factor that’s similar to your credit score called a credit-based insurance score. It’s a statistical tool that uses specific elements of a person’s credit history to predict how likely they are to file a claim. Some states, like California and Massachusetts, don’t allow this to be a rating factor.

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

To get a car insurance quote — whether it’s online with an insurance company or directly from an agent — you’ll need to provide some personal information. For instance, you’ll be asked for your name, date of birth, gender, address, marital status, Social Security number, and vehicle information. 

You’ll also need to provide information on any family members you want covered on the policy. 

The insurance company or agent may ask about your driving record, any previous insurance claims, and credit-based insurance score (depending on the state) before giving you a quote. 

Car Insurance Terms to Know

If you’re speaking to an agent, you may hear them throw out words like “no-fault” and “diminished value,” and have no idea what they’re talking about. 

Insurance jargon can be really confusing, but it’s not as complicated as it sounds. 

Below are definitions of some of the most common terms used in auto insurance. Think of it like a cheat sheet that you can always refer to if you ever hear an auto insurance term you don’t know. 

Additional insured: A person or group that is insured by another party. For example, if you get a car as a teenager, you’re mostly likely additional insured under your parents’ coverage. 

At-fault: You’re considered “at-fault” if you get into an accident that was caused by your wrongdoing. It could be with another vehicle or an object. 

Actual Cash Value (ACV): The cost to replace your car minus depreciation.

Claim: An official request you file with your insurance company for financial compensation if your vehicle is damaged, or you are hurt, after an accident. 

Collision Insurance: Optional insurance that covers your car when it collides with another car or object. 

Comprehensive Insurance: Optional insurance that covers damage to your car that’s not the result of a collision, such as theft, vandalism, natural disaster, and animal-related damage. 

Deductible: The amount you’re required to pay until your insurance kicks in. Here’s an example: Your deductible is $1,000 and you need $3,000 worth of repairs after a car accident, so you’ll only be required to pay the first $1,000 and your insurance will cover the rest. 

Declarations page: An important document given to you by your insurance company that breaks down how much your premium costs and specifics about your auto insurance policy, such as the term length, the vehicles and driver covered, and a lienholder if you’re financing. 

Diminished value: The difference in a car’s market value before and after the accident. 

Exclusions: Anything that an insurance policy will not cover, which is usually listed explicitly on a 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 gap between what you owe on a car loan if the vehicle is totaled or stolen and the car’s depreciated value.

Liability Insurance: The minimum type of auto insurance required at the state level. It protects you and your assets if you’re held personally liable for an accident that led to another’s injury or a loss. It does not protect your vehicle from damage. 

Lienholder: The person or entity that has a legal claim on your vehicle. If you’re financing your vehicle, then the lienholder is your lender until the auto loan is completely paid off.

Limit: The maximum amount a car insurance policy will pay after a covered accident.

Loss: The amount paid by an insurance company because of a claim.

Personal Injury Protection (PIP): This type of coverage, also known as “no-fault insurance,” pays up to a certain amount on medical bills and lost earnings for you and your passengers in the event of an accident —regardless of who caused it. It is required to carry in certain states, like Michigan and Kentucky, and optional in other states.

Premium: The amount you pay for your auto insurance policy. Depending on your coverage and payment plan, it can be paid either monthly, semi-annually, or annually.

Replacement Cost Value (RCV): The cost to replace your car without subtracting depreciation.

Totaled: The cost to repair the vehicle exceeds its value.

What Is The Average Car Insurance Rate?

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

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

How to Compare Car Insurance Quotes

There are many ways to get a free auto insurance quote.

“You should never pay a fee to get a quote,” says Heller. “If somebody would suggest that you have to pay anything beyond the insurance premium once you sign up, then you should walk away.” 

You can go online to an aggregator pulling a variety of quotes from different insurance companies. You can go directly to an insurance company, like State Farm or Allstate. If you want to talk through your options, getting an auto insurance quote from an independent agent or broker can also be a good choice. 

“It’s important to get a fair rate, but it’s also important to think about what you need. Do you need help figuring out how much coverage is right for you? Shopping insurance with an agent is often more expensive than one online, but you pay for the service,” says Heller. 

But before you start making phone calls, there are ways to be smarter when shopping for car insurance, says Heller. First, you’ll want to take a look at car insurance companies’ reviews; keep an eye out for complaints and customer satisfaction. It’s also important to get a good understanding of how much coverage you want, and discuss the same amount of coverage with each company to accurately compare rates. 

Schmitt recommends starting at insurance comparison sites then moving onto specific insurers to get more detailed quotes. The majority of companies offer free online auto insurance quotes, which let you start the process online but then pair you up with an agent to finalize your quote on the phone. 

Buying insurance without the help of an agent gives you more autonomy, but there are some drawbacks.

When you go online to get quotes, Heller says that insurance quote websites aren’t always showing you all of your options. “Those websites typically have financial ties to a certain number of companies, and will only give you quotes for a certain number of companies based on their own financial relationships. And that’s the same if you go to an insurance agent or broker’s office,” he says. 

The more car insurance quotes you can get for comparison purposes, the better. Experts we spoke to say you should get at least three, so you can figure out whether you’re getting a good deal for the coverage you want.

“Going to one website or asking one insurance agent is usually not going to give you the full landscape of what’s available,” says Heller.

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