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Shopping for Auto Insurance

Shopping for auto insurance isn't much different from shopping for anything else. Your goal is to find a quality product that suits your needs--and at a good price. Here are some guidelines to help get you started.

Get your ducks in a row

Before you start shopping around, lay some groundwork. Your first step is to figure out what you need for coverage. To a certain extent, you don't have a choice--most states require you to carry minimum levels of liability coverage. Many states also require you to have certain amounts of medical payments and/or uninsured motorist coverages. Other types of coverage (e.g., collision coverage for your vehicle and extra endorsements) are generally optional. Find out what your state's requirements are, but realize that these minimums probably won't provide adequate protection, especially in the area of liability coverage. The types and amounts of coverage you should have really depend on your circumstances. Some factors to consider are the assets you wish to protect, the value of your car, your family status, and whether you live in a state with no-fault insurance laws.

Size up the coverage you have now

If you're buying a new car, you may be starting from scratch with your insurance shopping. But what if you currently own a car and already have insurance on it? Then you should first look at the coverage you have in place now and decide if it still meets your auto insurance needs. Maybe it did at one time, but things have changed since you bought the policy. Or maybe you simply chose the wrong types and amounts of coverage to begin with. Even if your coverage still seems appropriate, are you pleased with the insurance company? Does the premium seem reasonable, or do you suspect that you could get a better deal elsewhere?

A thorough review of your coverage and related issues will help you answer these types of questions. You may decide that it's best to keep your existing policy and just change your coverage limits or make other adjustments--or maybe nothing needs to be changed. If so, it may be unnecessary to explore other options. But don't stick with what you have just to avoid a tough choice--it's often wise to shop the market and check out what other companies can offer you. It may be in your best interest to make a change if you can find a lower price, better service, or both.

To seek help or not to seek help?

How do you want to shop for auto insurance? One option is to shop on your own by using on-line quote services or by dealing with insurance companies that sell directly to consumers. You may save money by cutting out the middleman, but this approach has its drawbacks. An on-line service or a company's customer service representative will give you a price quote, but you may not get much advice about your coverage needs, appropriate deductibles, and other issues. Plus, with so many companies and policies to choose from, it's hard to be sure that you're really getting the best deal.

Your other option is to work with an insurance agent or broker. Among other things, a good agent or broker can help you (1) figure out the types and amounts of coverage you need, (2) shop the market for companies and policies, (3) identify the policy that's best for you, and (4) tailor your policy by adding extra features (known as endorsements). All of this can save you a lot of legwork and maximize your chances of finding the right policy at a good price. Plus, if you choose the right person, the relationship will pay long-term dividends. The service duties of an agent or broker include filing claims, resolving complaints, and updating your coverage if needed.

Shop for value, not price

Whether you're shopping alone or with professional help, your goal is the same--to get the best overall value for your money. Sounds easy enough, but many unsophisticated consumers make the mistake of shopping for price alone. They assume that if they can find the lowest-priced policy that meets their needs, they've gotten the best deal. The problem with this approach is that it ignores other important issues. If you're not careful, a so-called great deal on auto insurance could come back to haunt you.

To find the best value, you have to balance cost against coverage and service. Once you know what you need for coverage, obtain price quotes from at least three different insurance companies. Don't be surprised if some of the quotes vary by quite a bit. You can eliminate any that are out of your price range, but it will take some work to narrow down the rest. Try to find out about each company's reputation and claims-paying practices. For example, does the company frequently deny or delay customer claims? You should also see if the company offers the discounts and endorsements you want. Finally, read each policy over to make sure that the exclusions, limitations, and other features are similar.

Don't be afraid to pay a little more for coverage if you find a company you really like. Over the long haul, quality service and other intangibles may be more important than saving a few bucks. If you're lucky, you may even find that a good company's rates are competitive with those of cut-rate insurers.