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  • How to compare car insurance plans: a step-by-step guide

How to compare car insurance plans: a step-by-step guide

When you try to compare car insurance plans, be sure you make an honest comparison. Here are some tips.

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Purchasing the right car insurance policy for yourself and your family isn't as simple as looking for the lowest price. In fact, trying to compare just by price might be the worst way to make a comparison. While there are some basic elements to car insurance shared by every policy, each insurer offers its own unique twist to distinguish itself from competitors. In order to make an apples-to-apples analysis, follow these simple steps when you compare car insurance policies:

Step 1 – know your state’s coverage requirements

compare plans1Every state has some form of a financial responsibility requirement for its licensed drivers, which is primarily fulfilled through purchasing car insurance. In fact, New Hampshire is the only state that doesn't, strictly speaking, require licensed drivers to carry car insurance (though the state does impose some pretty onerous requirements for proving and maintaining financial solvency for the sake of paying for any potential car accidents you cause.)

The majority of state car insurance requirements revolve around liability insurance. Liability will pay for repairing property damage or for treating injuries you cause others in an accident. Those two separate elements of liability insurance are represented in the two types of liability car insurance you get when purchasing this coverage: bodily injury liability and property damage liability.

There are states that will also require you to carry a form of no fault insurance like a medical payments or personal injury protection (PIP) option in addition to the liability coverage you are required to have in force.

There are a few states that also require drivers to have uninsured/underinsured motorist coverage as an option on any car insurance policy as a sort of back-up to the liability coverage required of them.

There are even a small number of states that also require personal liability beyond the car insurance liability limits set for licensed drivers.

Whenever you go about trying to compare car insurance plans, be aware of what the minimum requirements are for your state and be sure all the plans you compare fulfill all of those requirements.

Step 2 – understand all the coverage options

Building a car insurance policy is a layering activity. You will start with your required levels of coverage and from there, consider additional add-ons as your particular circumstances may dictate. It’s important to remember that the laws of your state are there to regulate litigation and excess loss when it comes to the costs associated with any automobile accidents. State car insurance requirements aren’t really there to compel you to protect your car or property from damage in the event of a car accident.

For instance, no state requires you to carry an option like collision or comprehensive coverage, but you may be contractually obligated to have these in place. If you are financing the purchase of a newer car or leasing a vehicle, the terms and conditions of your car loan or lease may compel you to have one or both of those options in place. These coverage options are often required by a lender or lessee as a way of protecting the collateral interests these parties may have in a car you don’t (strictly speaking) actually own yet.

Make sure you understand what a coverage option actually does when you compare car insurance plans. Many companies are currently offering versions and variations of a vehicle replacement coverage option and the way they are marketing it makes it sound like a Guaranteed Asset/Auto Protection (GAP) option A close reading of most of these policy riders make it clear that they may not cover everything a full or traditional GAP plan will. One reason for this is that a surprising number of leading car insurance companies actually don’t offer GAP coverage.

Read the fine print on what every coverage option presented to you. Know ahead of time what it actually covers, when it goes into effect, and what your obligations will be prior to any claim being paid or processed. Make sure you are also aware of any exceptions to coverage that may come into play.

Step 3 – know your coverage levels

Coverage levels or limits are, simply, the maximum amount an option will pay to resolve a valid claim. Most basic car insurance plans will start with coverage levels that meet your state’s minimum requirements. Every insurance professional will advise you to look for plans that exceed those limits, as they are routinely set low. What some insurance agents fail to tell drivers is that setting higher levels for certain coverage options will actually save you money in the long run.

For example, if you live in the state of Illinois, your minimum liability car insurance requirements are $20,000/$40,000 for bodily injury liability and $15,000 for property damage liability. Buying just that level of coverage will cost you a higher rate than a policy that has $150,000/$300,000 in bodily injury liability and $50,000 in property damage liability (and this is true with every major car insurance provider selling insurance in Illinois.)

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Some states put caps on the limits of coverage you can have in place for options like uninsured/underinsured motorist, medical payments and PIP coverage. Some states also have an “if-then” policy with certain forms of coverage: if you want X amount of uninsured/underinsured coverage, then you must have an equal or greater amount of liability coverage in place. There are also some states in which insurance companies are required to offer drivers uninsured/underinsured motorist coverage at levels equal to what is offered for liability coverage, but drivers are not compelled to add it (though they have to officially notify the state, in writing, that they were offered the protection and chose to decline it.)

When it comes to options like collision or comprehensive coverage, your limits will generally be set by how valuable the car you are insuring is. The determination of value is typically geared to the current market, Blue Book or actual cash value of the car you are insuring. Those limits are set in the event your car is totaled as a result of a covered event.

Step 4 – know your deductibles

compare plans2An important factor in comparing car insurance plans is to know what all your deductibles are. The deductible is the amount of money you agree to pay out-of-pocket before claims start being handled by your insurer. Not all coverage options carry deductibles and those that do generally allow you some flexibility in selecting a deductible level.

Deductibles can add up and you need to consider them in any cost calculations you make in comparing car insurance plans. For example, if you are considering a policy with a collision option that carries a $500 deductible and a comprehensive option that carries a $500 and you add a specialized equipment coverage option with a $500 deductible, that’s an extra $1,500 in costs you will need to figure into the overall price of your plan (assuming a worst-case scenario of events that total your car.) Beware also of car insurance companies that require you to package related coverage options and carry separate deductibles. Many leading car insurance companies will not sell you comprehensive coverage without also selling you collision coverage and requiring you to select separate deductibles for each option.

There are also some options for coverage that carry prerequisites and those prerequisites have separate deductibles attached to them. For example, most car insurance companies that offer GAP coverage require you to have collision and comprehensive in place first. All three of these options will typically carry separate deductibles.

Some companies are beginning to promote combined or single-deductible plans that allow you to collect all your options under a single deductible. There are also some sub-tier deductibles that can work to your advantage. For example, some insurance companies offer comprehensive coverage with a deductible exemption for glass and windshield repair and replacement.

Step 5 – know the length of your terms

Term of coverage is something you will see in most car insurance plans you compare and while it may seem pretty straightforward, here’s an area where confusion can occur. Most car insurance policies run for six-month terms, though many insurers will originally quote you an annual rate for premium. A growing number of car insurance companies are starting to offer full-year policies for preferred customers.

Be clear you know just how long the term of coverage for any plan you look at is and what the terms of renewal are. Care should also be used if you are looking at comparing bundled plans – where you combine one or more lines of insurance with the same insurer. It is very common practice to combine car insurance with homeowner’s insurance. Most homeowner's insurance policies run a full year and if you are bundling home and car insurance, be sure the rate you are quoted for your car insurance is valid for the full term of the combined policy.

Step 6 – understand payment options, exceptions and special conditions

Some insurance companies will discount your premium if you pay in full at the beginning of the policy term. Some companies will allow you to have a monthly payment electronically deducted at no cost. Others will allow you to mail or phone in a monthly payment but will charge you a slightly higher rate to do so.

Many car insurance plans include exceptions to coverage, reasons why the insurer won’t pay a claim you file. Some of these exceptions are geared to how you use the vehicle you intend to insure.

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When you go to compare car insurance plans, have any and all exceptions, payment options and any special conditions clearly spelled out for you to review and understand.

Step 7 – be familiar with the claims process

Claims is where car insurance actually works for you and knowing what the standard process for any given insurer is for handling claims can help you compare your options. Does the insurer pay claims directly, or do you have to pay them upfront and await a reimbursement? Can you file claims online? Are you restricted in where you can have your car repaired should you need to? When you select a coverage option like rental car reimbursement, are you required to use select rental car agencies in order to get the full benefit of the coverage option?

If you have coverage options in place to address treatment of potential injuries sustained by your passengers or family members named on your policy, are there any restrictions on where you can go for that treatment. Are there certain treatments that have to be pre-approved by a claims representative beforehand?

Ask what the average turnaround time on claims is.

All of these factors should be included in your calculations of which car insurance plan is best for you.

Step 8 – see all the discounts

compare plans3Even under the best circumstances, car insurance can be expensive. It‘s one reason why every insurance company will tout the discounts it can offer you. When you undertake a comparison of car insurance plans, get a list of all the discounts you may be eligible for. That last phrase (eligible for) is key. Some states restrict insurers on what discounts they can offer drivers. Some insurers are reluctant to advertise all of the discounts they offer.

Get a list of all the discounts and all the eligibility requirements so that you can make an honest assessment. If you’re unclear or doubtful an agent is showing you all the discounts available with a specific company, visit the company’s website and see all the discounts they tout there. One discount that most insurance companies and agents are reluctant to promote is one given if you switch insurance companies before the term of your existing coverage with a different carrier expires. There are also a growing number of insurance companies that have crafted affinity programs that give discounts to drivers working in select professions or for select companies.

Step 9 – check reviews and ratings

Online ratings sources can quickly give you a sense of how any prospective car insurance company is going to perform. You can also take any car insurance quote and run it through comparative sites to get a sense of how yours stacks up. Some sites need to be taken with a grain of salt, as they can become rant sites from a handful of disgruntled current and former customers.

Also be cautious of comparison tools offered by a specific brand or a specific car insurance company. These are routinely skewed to the company’s advantage and often leave out specifics regarding coverage to assure a more favorable rating for the company providing the comparison. The number of objective and subjective rating sites continues to grow, daily, so be diligent in your efforts to get up-to-date reports on how any given company is doing.

A more objective source might be your state’s insurance commissioner’s office. They license, regulate and monitor insurance services in your state and will have reports of any complaints filed against any prospective insurer as well as any disciplinary actions taken against them.


While it may seem like a hassle, taking the time to actually compare car insurance plans could save you, literally, thousands of dollars over your driving life. Comparing plans can also assure you that you will always be getting the coverage you need. Beyond online resources, you may want to spend some actual face-time with a local, licensed car insurance agent. Reply! can help by connecting you to car insurance professionals in your area ready to help you put just the right policy in place. 

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