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How to decide when to shop for auto insurance

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With auto insurance rates expected to increase in 2022, you may be feeling nervous about what a rate hike could mean for your budget. After all, car insurance is a required expense for drivers in nearly all states, which means you probably can’t eliminate the bill. However, one powerful tool in your corner as a policyholder is shopping. While you may be required to carry a car insurance policy, you aren’t required to carry it with a particular company.

“Consumers are certainly feeling like inflation is impossible to hide from right now, considering that prices have skyrocketed at the fastest rate in 40 years,” said Sarah Foster, Bankrate’s U.S. Economy Reporter. “High inflation makes best practices for personal finance all the more crucial. That includes shopping around, forming a budget and tracking your spending.” While the process of shopping for your insurance policy might be intimidating at first, don’t worry. Bankrate can walk you through the entire process, from knowing when and why to shop your policy to how often you should shop.

Do I need to shop my car insurance policy?

Before you start gathering auto insurance quotes, you may want to consider if you even need to shop. Rate increases are likely to be fairly widespread, but that doesn’t mean every driver will see the same percentage of increase or even higher insurance costs at all. If your company’s rates were relatively low before, you might still feel like your policy is within your budget even after an increase.

To decide if you should shop around, devote some time — 15 to 30 minutes should be plenty — evaluating your insurance. Consider answering questions, such as:

  • Does your policy still fit your needs?
  • Does your premium still fit into your overall financial budget?
  • Do you still find the interactions with your company to be efficient and helpful?
  • Have your policy coverage needs changed?

If you still like your company and are comfortable with your auto insurance premium and type of coverage, there may not be a need to shop. Your situation is unique to you; only you can weigh the pros and cons of staying with your current company versus shopping around and switching carriers.

When is the right time to shop for auto insurance?

There’s no official guideline for when to shop your auto policy. While it may be convenient to shop at your renewal date, you don’t have to wait until then. You can shop and change carriers at any time within your policy term. Some situations lend themselves to shopping around, and understanding these situations sooner than later can help you decide if you need to shop before a rate hike affects your budget.

Increasing rates

Due to inflation, supply chain disruptions, increasing claims and labor shortages, car insurance rates are expected to increase in 2022. You may receive your policy renewal only to find that your new insurance premium no longer fits in your budget. Maybe your policy isn’t renewing yet, but you’ve seen a rate increase sooner due to a change you’ve made to the policy, like adding a driver or vehicle. Or you might not be facing any rate increase, and you’re simply curious if you can find cheaper car insurance coverage.

Because rates are going up, this could be a great time to shop around for more affordable coverage. Just be sure to choose the same coverage limits that you currently have when doing comparison quotes, or as close as possible, so you get a true price comparison. If you choose lower limits than you have now, you’ll likely get a cheaper quote, but you won’t truly know which company is offering the lower price for the coverage you want.

Moving to a new area

If you move to a new state, you’ll likely have to get a new insurance policy. Car insurance policies don’t transfer across state lines if you make a permanent move because each state has its own insurance laws. You’ll likely be asked to update your vehicle’s registration and insurance policy to your new state within 30 to 60 days. Insurance laws —especially surrounding necessary coverage types and levels — claims risks and the cost of living vary by state and can influence car insurance rates.

Even if you move to a new city or just a new ZIP code within your state, you’ll likely experience a rate change. Each geographic area comes with its own unique set of rating factors. Insurance companies interpret these rating factors differently, which leads to rates varying by carrier. This means that any move, even just across town, could mean it’s a good time to shop.

Insuring a teenager

If you have a teen driver in your household, you may want to gear up to shop your policy when they get their license. Young adults are one of the most expensive age groups to insure, but you can find cheap car insurance for teen drivers with a bit of time and research. Make sure you get a quote for the teen on your current policy first, though, before you start shopping. That way, you’ll have a benchmark to use as a price comparison; you may find that your current company is the cheapest.

Purchasing a different vehicle

The make and model of your vehicle is one of the biggest factors when it comes to how much you pay. The price and availability of parts and labor, the statistical likelihood of accidents, the safety features in your vehicle and overall value of your vehicle can all impact premiums. If you get a different type of vehicle and your current insurer increases your premium beyond your comfortable range, you can shop around to see if another carrier offers a lower price.

How often should I shop for auto insurance?

Generally, it’s a good idea to shop for auto insurance when a life event happens — like the ones mentioned above — or when your premium is too expensive for your budget. Shopping more often could be helpful to know if your rate is still competitive, but most insurance professionals recommend against changing companies too often. Doing so can prevent you from earning valuable loyalty discounts.

Additionally, although relatively rare, some carriers charge cancellation fees if you cancel your policy before your renewal. Some companies also have “earned premium,” which means that, regardless of how quickly you cancel, you forfeit a certain amount of premium to the company. Shopping too often could subject you to those cancellation fees without realizing it.

How to shop for auto insurance

If the only thing preventing you from shopping for auto insurance coverage is your concern about how much time it takes, it does not need to be daunting. You may have heard in the past that you need to research your state’s minimum requirements before shopping to avoid purchasing less than you need to drive legally in your state. You can save time and avoid the research because this isn’t true. Insurance companies cannot legally offer you a policy below your state’s requirements. Because of this, you don’t need to know your state’s insurance requirements or research anything beyond a basic knowledge of car insurance. You can do this, and it’s easier than you might think! Here are a few suggestions to help you get started:

  • Know how to get quotes: Many insurance companies offer an online quoting tool, although you can also get a quote by phone or visit a local agency, if one is available, if you’d like a little more guidance. One of the biggest things to watch out for, especially if you do the quote yourself online, is your coverage limits. Make sure you get as close to your current coverage types and limits as possible to get an accurate comparison. According to Steve Ellis, an Assistant Vice President and Claims Field Manager, shoppers should “be wary of extremely low quoted premiums. If one quote comes in extremely low, ask clarifying questions to ensure you are comparing apples-to-apples.” Also, keep in mind that online quoting tools may have limited functionality compared to an insurance agent’s tools. Some coverage types and discounts may not be available for you to quote yourself.
  • Double check that your coverage meets your needs: According to Ellis, “There are a few things shoppers should keep in mind during the quoting process. The most important thing is to ensure you are matching your driving needs to the coverage being offered.” This could mean adding ridesharing coverage, emergency roadside assistance or other endorsements, for example, if you need them. Ellis also points out that properly insuring your vehicle for any modifications, like lift kits or custom sound equipment, can help ensure you are properly protected from damages.
  • Consider working with an independent insurance agency: Working with an agency could be a good idea if you feel especially nervous about shopping. These agencies contract with several auto insurers and shop your policy for you. Licensed agents will also be able to listen to your specific scenario and help you craft a policy that fits your needs, including your budget.

The bottom line

While you might not avoid the inflation that could increase your car insurance rates, you can take control of your rates in another way. Every car insurance company uses its own rating system to calculate premiums, so the same coverage will likely cost different amounts with different companies. You can use this to your advantage by comparison shopping and choosing the best option for your budget.

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Written by
Cate Deventer
Insurance Writer & Editor
Cate Deventer is a writer, editor and insurance professional with over a decade of experience in the insurance industry as a licensed insurance agent.
Edited by
Managing Editor