As of 2020, there were nearly 6,000 insurance companies in the U.S., according to the National Association of Insurance Commissioners. These companies, which come in all shapes and sizes, offer auto, home, life insurance and other related insurance products to consumers who need to insure themselves against losses. Thanks to these numerous options, you get to choose between obtaining car insurance coverage from a large insurance company or a smaller provider. While larger companies may be the more popular route, it may benefit you to take a close look at what small auto insurance companies can offer.
For many people, there can be some advantages to choosing a small insurance provider, such as the potential for better or more personalized customer service. And, while smaller auto insurance companies sometimes have higher average rates, that isn’t always the case. For example, Erie, a regional provider operating in 12 states, has an average annual rate of $1,321 for full coverage insurance, according to Bankrate’s research. On the other hand, Allstate, one of the largest providers, has an average full coverage rate of $2,438 per year. Plus, there can be other perks to purchasing an auto insurance policy from a small company.
Advantages of small auto insurance companies
For certain drivers, purchasing an auto policy from a small insurer is a good option. Working with a small insurance company has several advantages compared to working with a large insurance company. Here are some of the most significant upsides to small car companies:
Personalized customer service
Small insurance companies sometimes have better customer service than large insurance companies. More importantly, the service might be more personalized, so you could have a better experience with claims adjusters.
More affordable rates
Some small auto insurance companies can offer cheap insurance rates because they do not spend as much money on staffing and advertising. However, it is important to note that this is not always the case. It is also possible that a local insurance company will offer higher rates than a national insurance company.
Supporting a local business
One of the main reasons many drivers like working with local car insurance companies is that they can support a local business. The money they pay in premiums goes back into their community, as opposed to a huge corporation.
If you choose a local auto insurance company, you might be able to get more specialized coverage. For example, if you buy car insurance from a company that exclusively serves California drivers, they might offer higher coverage limits for earthquake or wildfire damage.
Disadvantages of small auto insurance companies
While small auto insurance companies may offer unique benefits to drivers, there could be a few disadvantages of choosing a smaller company to insure your car. The disadvantages of choosing a small auto insurance company could include:
Limited coverage area
Small insurance providers are often limited to offering insurance in specific coverage areas, whereas most large insurance providers can offer coverage to customers nationwide. For example, Plymouth Rock offers car insurance policies in just six states, while Alfa Insurance is only available to drivers in Alabama, Georgia and Mississippi. When shopping for personalized insurance rate quotes from small insurers, it can be helpful to start by ensuring that the company serves your state.
Technology may be lacking
While large insurance carriers typically offer the most up-to-date technology, from intuitive mobile apps to websites with personalized quotes and online claims features, smaller companies may not. With smaller insurance companies, you may not get access to a mobile app or an online platform to report and track claims online. That may be fine for drivers who are comfortable with the more manual claims or quote process, but could be a deterrent for someone looking for the most advanced technology from their insurance provider.
More picky with eligibility
Some small insurance companies will only offer auto coverage to certain niche drivers, customers or members, which means that some people may not be eligible to buy insurance through these companies. For example, a smaller carrier may not insure drivers with poor credit or drivers who have had recent at-fault accidents. Or, if you have other blemishes on your driving record, you may find the rate quoted by smaller companies is much higher than what you’re quoted by a large carrier without limited eligibility.
Car insurance rates with a smaller company
Car insurance rates from small insurance companies differ significantly. You can find cheap rates from small insurance companies, but it is not a guarantee. Some small insurance companies charge higher rates because they have a smaller customer base and less revenue.
The two tables below highlight insurance premiums from five of the largest carriers by market share and compare rates from some smaller carriers. Remember that these insurance quotes are averages based on a sample quote, so your actual rate will vary.
Average rates from largest auto insurance companies
|Large auto insurance companies||Average full coverage premium|
Average rates from small auto insurance companies
|Small auto insurance companies||Average full coverage premium|
Ways to save with a small auto insurance company
If you go with a small auto insurance company, there are some ways you can potentially save money on your premium. Here are a few suggestions:
- Look for discounts: Research local auto insurance companies that offer discounts you can take advantage of. The more discounts you qualify for, the more money you can save.
- Pay in full: Consider paying your annual premium in total, which can usually help you get a better rate. Some insurance companies even offer savings if you enroll in automatic payments or sign up for paperless billing statements.
- Build your credit score: Work on improving your credit score as a way to save money on car insurance. Drivers with a poor credit score pay the highest rates in most states, so improving your credit is often an effective way to get a cheaper rate. Keep in mind that some states do not allow insurance companies to factor in your credit score when calculating your rate.
- Participate in a telematics program: Many insurance providers will lower your rate if you participate in its telematics program. Most telematics programs use an app or device to track your driving and reward you for being safe or driving fewer miles.
- Bundle your policies: If you have two or more insurance policies, consider bundling them with the same company to save money. Many small insurance companies offer a discount for bundling your auto and home, renters or condo insurance policy.
Coverage options with small auto insurance companies
Whether you choose a small insurance company or a large provider, the basic auto insurance coverage options will be essentially the same. Nearly all insurance companies will offer the most common coverage options, including state-minimum liability coverage, collision, comprehensive, medical payments and personal injury protection (PIP) if you live in a no-fault state.
Typically, small insurance companies offer popular endorsements, like gap insurance, roadside assistance and rental car reimbursement. However, you may find that local insurance providers offer fewer unique endorsements, like special coverage for hybrids or new car replacement coverage, compared to large companies.
Local insurance companies
We should point out that the definition of a small insurance company is not one-size-fits-all. A small insurance company could serve an entire region of states, like the ones on our list above, or apply to a provider that only serves one very small area.
For example, Edison Insurance only sells auto insurance coverage in Florida, Maine Coast Insurance Agency sells coverage throughout Maine, and Nia Insurance sells coverage in the Omaha, Nebraska area.
When shopping for your next auto insurance policy, you might consider looking into local insurance companies during your search. We recommend checking out local insurance providers if you value good customer service or prefer to work with an insurance agent.
Frequently asked questions
Bankrate utilizes Quadrant Information Services to analyze rates for all ZIP codes and carriers in all 50 states and Washington, D.C. Quoted rates are based on a 40-year-old male and female driver with a clean driving record, good credit and the following full coverage limits:
- $100,000 bodily injury liability per person
- $300,000 bodily injury liability per accident
- $50,000 property damage liability per accident
- $100,000 uninsured motorist bodily injury per person
- $300,000 uninsured motorist bodily injury per accident
- $500 collision deductible
- $500 comprehensive deductible
To determine minimum coverage limits, Bankrate used minimum coverages that meet each state’s requirements. Our sample drivers own a 2018 Honda Accord, commute five days a week and drive 12,000 miles annually.
These are sample rates and should be used for comparative purposes only. Your quotes may be different.