Understanding car insurance quotes

Two men exchanging insurance after a car accidentImage: Two men exchanging insurance after a car accident

In a Nutshell

Car insurance quotes provide a price estimate and information about the types of coverage the policy provides, the maximum amount the insurance company will pay for a covered event and how much you have to pay if you file a claim. You can get quotes online or directly from an agent.

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Car insurance quotes are an estimate of how much you’ll pay for an insurance policy based on the coverage types, limits and deductibles you choose.

When you get a quote, it’s easy to focus on price alone. But there’s a lot more to an insurance quote than just how much you’ll pay.

Insurance quotes include valuable information about what the policy will and won’t cover, how much the company will pay for a covered incident (your coverage limit), and what your out-of-pocket cost will be if you need to file a claim.

To get the car insurance policy that’s right for you, it’s important to know what factors affect price, the types of coverage you can choose from and what to look for when you’re comparing quotes from multiple insurance companies.



What are car insurance quotes?

A car insurance quote is an estimate of how much you’ll pay for coverage. Nearly every state requires drivers to maintain liability insurance, which helps cover costs for damage or injuries you cause someone else in an accident.  

Quotes vary across insurance companies, which is why it’s important to shop around, gather quotes from multiple insurers and compare them.

What factors influence car insurance quotes?

Insurance companies determine rates based on a range of factors. While rating factors vary by insurance company, here are eight common ones that may influence the price you pay for car insurance.

  • Your driving history — People who have a clean driving record with no tickets or moving violations represent a lower risk to insurers and typically receive lower auto insurance rates.
  • Your location — Car insurance companies set rates based in part on where your car is located. It typically costs more to insure vehicles in areas where rates of theft, vandalism and accidents are high, or in places where repairs and medical care cost more. In general, urban drivers pay more for insurance than drivers who live in the suburbs or rural areas.
  • Your age — Younger drivers are more likely to get in an accident than older drivers, so rates for teen and young adults tend to be higher. Car insurance premiums typically decrease after age 25 if you have a good driving record.
  • Your credit history — Some states allow car insurance companies to use credit-based insurance scores to calculate insurance premiums. Typically, higher scores result in the lower rates.
  • Your vehicle — Some cars cost more to insure than others. Coverage for vehicles with high safety ratings and lower replacement or repair costs will typically be lower.
  • How much you drive — In general, the more you drive, the more likely you are to get into an accident. If you put a lot of miles on your car each month, your premium will probably be higher.
  • Your coverage limits — A coverage limit is the maximum amount the insurance company will pay for a single claim if you’re in an accident or your car is stolen or damaged. The higher the limits, the more your policy will cost.
  • Your deductible — The deductible on your policy is the amount you must pay before the insurance company will start paying for the damage. You can usually lower your insurance premium by increasing your deductible.

What’s the best way to get auto insurance quotes?

If you’re in the market for an auto insurance policy, there are three main ways to get a quote.

  1. Online — Many car insurance companies offer the ability to get a free car insurance quote online. And third-party websites can help you shop around quickly by allowing you to compare multiple quotes from different companies.
  2. Captive agent — If you prefer to speak with someone about your insurance needs, an agent can help. Captive agents represent one insurance company and can provide you with a quote from that company.
  3. Independent agent — An independent agent can make shopping around for car insurance coverage easier. Independent agents represent multiple companies and can give you quotes from different insurers to help you find the coverage that best meets your needs.

What information do you need to get a car insurance quote?

Whether you choose to get a quote online or directly from an agent, you’ll need to provide some personal information, such as your name, date of birth, gender, address, marital status and vehicle information. The insurance company may also pull a copy of your driving record, previous insurance claims and credit history.

What types of coverage appear on a car insurance quote?

Every state has its own auto insurance laws and minimum insurance requirements. But there are six major types of coverage that may appear on your quote, depending on where you live.

Liability insurance

There are two types of liability coverage — bodily injury and property damage.

Bodily injury liability helps protect you if you cause an accident and someone sues you for damages — meaning compensation — because of their injuries. The liability limit in your policy is the maximum amount your insurance company will pay.

Property damage liability helps pay for damage you cause to other people’s property while driving your car. It includes damage to vehicles as well as other structures such as fences and lamp posts.

Your liability coverage may appear on your quote as a trio of specific coverage limits in thousands. The three coverage limits are for injury-related expenses per person involved, injury-related expenses per incident, and property damage per incident. These may be represented on an insurance quote as values like 50/100/25, for example.

If your quote says “50/100/25,” that means your insurance could pay up to $50,000 in injury-related expenses for each person involved in an accident and a total of $100,000 in injury-related expenses per incident. The insurer could also pay up to $25,000 for property damage per incident.

Uninsured motorist bodily injury

Unfortunately, not everyone has insurance. Uninsured motorist coverage helps pay for medical bills and damage to your vehicle if you’re in an accident with an uninsured (or underinsured driver), and they’re at fault.

It also provides protection if you’re the victim of a hit-and-run or you’re a pedestrian and get hit by an uninsured or underinsured driver.

Personal injury protection

Personal injury protection, or PIP, is available in no-fault states, where drivers file claims with their own insurance company, no matter who caused the accident. If you or your passengers are injured in an accident, personal injury protection helps cover medical bills and lost wages. If the accident is fatal, it may also pay for funeral expenses.

Medical payments coverage

Medical payments coverage is a type of insurance coverage that’s available in states without “no-fault” systems. Like personal injury protection, it helps pay for medical bills you or your passengers incur because of an accident, regardless of who was at fault.

Collision insurance

Collision coverage helps pay for damage to your vehicle if you hit another car or stationary object such as a fence, lamp post or telephone pole. It’s optional, but lenders often require it if you finance or lease your vehicle.

Comprehensive insurance

Comprehensive coverage helps pay for damage caused by events other than a collision, such as theft, natural disasters, falling objects and contact with an animal. Like collision coverage, it’s optional, but your lender may require it if you finance or lease your car.

What is the average car insurance rate?

The average premium for liability coverage was $611.12 in 2017, according to the National Association of Insurance Commissioners’ January 2020 Auto Insurance Database Report. The average premium for collision coverage was $363.08, and the average for comprehensive insurance was $159.72.

But because there are so many factors that influence the cost of car insurance and insurers use different rating factors to calculate price, premiums vary considerably by state, insurance company and policyholder.

How to compare car insurance quotes

Shopping around and comparing car insurance rates can help you save money and get the best coverage for your needs. When comparing quotes, it’s important to look at more than just the premium. Here are a few factors to compare.

Minimum coverage requirements

Every state has laws that mandate whether you need insurance, what types you must have and the minimum coverage requirements you need to maintain. As you review insurance quotes, check with your state insurance commissioner’s site to ensure they reflect at least the minimum required coverage.

How much car insurance do I need?

Coverage and deductible amounts

Make sure the coverage options, coverage limits and deductibles are consistent across all quotes. If they’re different, you won’t be able to do an apples-to-apples cost comparison.

Generally, insurance policies with higher deductibles have lower premiums and vice versa. If you’re considering a policy with a lower premium and a higher deductible, make sure you can cover the deductible without experiencing financial hardship if you need to file a claim.

Discounts

Many insurers offer a slew of auto insurance discounts that can help lower your premium. Depending on the company, you may be able to find discounts such as loyalty, safe driver, good student, homeowner, safety feature, multi-car and multi-policy discounts, among others.

Company reputation

Before you buy auto insurance coverage, it’s a good idea to make sure the insurance company is financially sound. You can check the financial strength of the companies you’re considering on the five major insurance rating agency websites: A.M. Best, Fitch, Kroll Bond Rating Agency, Moody’s and Standard & Poor’s.

You may also want to search for consumer complaints and financial information about the company on the National Association of Insurance Commissioners website.


What’s next?

Remember that the premium isn’t everything when shopping for car insurance. Carefully review your coverage options and policy limits to make sure you have appropriate coverage based on your personal situation and your state laws.

If you’re at fault in a serious accident or get sued after a crash, you may need more than the minimum amount your state requires to adequately protect your assets. While it may cost more, it’s worth it to get the financial protection you need before you need it.

Because your financial picture is always evolving and rates can vary between insurers, it may be worthwhile to shop around each year to ensure you’re getting the best policy and price for your needs.


About the author: Jennifer Brozic is a freelance financial services writer with a bachelor’s degree in journalism from the University of Maryland and a master’s degree in communication management from Tow… Read more.