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There are hundreds of auto insurance carriers to choose from in the U.S. Although large car insurance companies may be more well known, there are also small auto insurance companies that may be worth considering. Comparing the pros and cons of using a small insurance company may help you determine which size insurer is right for you.
Small insurance companies vs. large insurance companies
For many people, there may be advantages to choosing a small insurance provider, such as the potential for better or more personalized customer service. While smaller auto insurance companies may sometimes have higher average rates, that may not always be 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 country’s largest providers, has an average full coverage rate of $2,438 per year. Plus, there may 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 may be a good option. Working with a small insurance company may have several advantages compared to working with a large insurance company. Here are some of the most significant upsides you might see with small car insurance companies:
Personalized customer service
Small insurance companies may have more individualized customer service compared to large insurance companies. If your insurance agent is local, they may be able to help you determine coverage options tailored to your area. The insurance agents may also work with fewer customers, which could make it easier to access policy help.
More affordable rates
Some small auto insurance companies may offer cheap insurance rates because they do not spend as much money on staffing and advertising. A small insurer who only writes policies in areas with relatively low risk may also be able to extend lower rates to policyholders. 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 it allows them to support a local business. The money they pay in premiums goes back into their community, as opposed to a large corporation. Keep in mind, though, that not all small car insurance companies are local to your area, and large insurers may have agents who are local that you can support as a small business owner.
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 to choosing a smaller company to insure your car. The disadvantages of choosing a small auto insurance company may include:
Limited coverage area
Small insurance providers are often limited to specific coverage areas, whereas most large insurance providers offer coverage to customers in nearly every state. 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. Just because coverage is limited to certain areas does not mean you are not covered if you drive outside those areas, but if you move, it may mean that you need to switch your carrier.
Limited digital tools
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 file and track claims online. Smaller carriers may also not offer digitally-focused discounts like telematics programs or paperless billing.
Some small insurance companies will only offer auto coverage to certain niche drivers, customers or members. For example, a smaller carrier may not insure drivers with poor credit or high-risk drivers with accidents or moving violations on their record.
Do small car insurance companies offer lower rates?
Car insurance rates from small insurance companies may vary significantly. Some small insurance companies may offer lower-than-average rates, but some may be significantly higher. Some small insurance companies charge higher rates because they have a smaller customer base and less revenue. Larger companies may also have the advantage of spreading out financial risk over a larger number of policyholders.
The data below highlights average insurance premiums from some small carriers compared to average rates from five of the largest carriers by market share. Remember that these insurance quotes are averages based on a sample population, so your rates may vary.
Average rates from largest auto insurance companies
|Large auto insurance companies||Average annual full coverage premium|
Average rates from small auto insurance companies
|Small auto insurance companies||Average annual full coverage premium|
If you go with a small auto insurance company, there are some ways you could potentially save money on your premium. Here are a few suggestions:
- Look for discounts: It may be helpful to research potential discounts available with the small car insurance companies you’re considering. Discounts may be available for safe driving, student drivers, multi-car policies and more.
- Maintain a clean driving record: You can generally get lower car insurance rates if you practice safe driving habits and have no speeding tickets or accidents on your record. You may also be eligible for safe driving discounts and other perks, such as accident forgiveness.
- Pay in full: Paying your annual premium in full may earn you a discounted rate. Some insurance companies also offer savings if you enroll in automatic payments or sign up for paperless billing statements.
- Build your credit score: Depending on the state, drivers with poor credit-based insurance scores may pay higher auto premiums, so improving your credit might be an effective way to get a cheaper rate.
- Participate in a telematics program: Many insurance providers may lower your rate if you participate in a telematics program. Most telematics programs use an app or device to track your driving and reward you for safe driving or low mileage.
- Bundle your policies: Some insurance carriers may extend a discount to customers who carry two or more insurance policies with the same company. Small insurance companies may offer a discount for bundling your auto insurance with your home, renters or condo insurance policy.
- Review your policy annually: Your insurance needs may change year to year as your personal circumstances fluctuate. If something in your life has changed, like your commute is much shorter with a new job, it may be worth reviewing your policy to ensure you have the right coverage in place for the changes in your life. This may also allow you to explore discounts you were previously ineligible for.
Coverage options with small auto insurance companies
Whether you choose a small insurance company or a large provider, standard auto insurance coverage options will likely be very similar. Nearly all insurance companies will offer the most common coverage options including state-minimum liability coverage, collision, comprehensive and medical payments. Personal injury protection (PIP) may also be available, especially if you live in a no-fault state.
Small insurance companies may also offer popular endorsements like gap insurance, roadside assistance and rental car reimbursement. However, you may find that local insurance providers offer fewer unique endorsements compared to large companies. You might consider speaking with an insurance agent or researching coverage types online if you’re exploring small insurance companies.
Frequently asked questions
A local car insurance company may not be the same as a small car insurance company. For instance, you may be able to find a small insurer that offers coverage in your state, but is not located in your state. You also might find a local agent who represents a large insurance company. You can generally find information about a company’s locations and size by contacting a customer service representative or looking for an “about us” page on its website.
Financial strength and customer satisfaction ratings may be a good indicator of a company’s ability to pay out claims. A company’s financial strength rating indicates its historical ability to pay claims. While a strong financial strength rating does not offer a guarantee of paying future claims, it may help you weed out any providers that aren’t financially solvent. Financial strength scores are typically issued by third-party companies like AM Best, Standard and Poor’s and Moody’s.
You may also find it helpful to check each company’s independent third-party customer satisfaction scores, like the ones listed in J.D. Power’s 2022 Auto Claims Satisfaction Study or 2022 U.S. Auto Insurance Study, although smaller insurance providers aren’t always rated as part of these studies.
The best car insurance company may be different for every driver. The best company for you might depend on where you live, what type of coverage you need, your budget and what you value in an insurance company. To find the best car insurance company for you, most experts recommend shopping around and comparing quotes and coverage options based on your criteria.
Car insurance is required in almost every state, and you must carry the minimum amount of insurance required in your state to drive legally. You will typically be required to have personal liability insurance, including bodily injury and property damage liability coverage. If you live in a no-fault state, you will also need personal injury protection (PIP).
Most insurance experts recommend purchasing more car insurance than the minimum amount required, if your budget allows for it. You should consider your circumstances when determining how much car insurance coverage you need. Minimum coverage car insurance will not cover damage to your vehicle if you cause an accident, for instance. Speaking with your insurance agent may help you determine how much car insurance is right for you.
Bankrate utilizes Quadrant Information Services to analyze 2022 rates for all ZIP codes and carriers in all 50 states and Washington, D.C. Rates are weighted based on the population density in each geographic region. 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 coverage that meets each state’s requirements. Our base profile drivers own a 2020 Toyota Camry, commute five days a week and drive 12,000 miles annually.
These are sample rates and should only be used for comparative purposes.