How do I Choose a Good Car Insurance Company?

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woman on the computer learning what to look for in an insurance company

Whether you’re searching for an insurance company car insurance for the first time or you’re already familiar with the process, knowing what to look for in an insurance company takes knowledge, patience, and research. Understanding your needs is the first step in selecting the best insurance options at the most affordable price. With so many insurance companies on the market, it’s best to focus on what matters to your most. 

Let’s explore some areas you should consider when assessing and choosing the right car insurance company.

What Auto Insurance Coverage Do You Need?

Before you can begin the process of choosing a good car insurance company, you have to determine what you’re looking for. Consider a myriad of factors in deciding which options make the best sense for your situation. Let’s look at some questions you should ask to find the best car insurance company.

What Insurance Does Your State Require You to Carry?

In almost every state, you must carry minimum liability insurance coverage on your car. This liability-only coverage protects you if you’re found liable in an accident that causes damage or injury to someone else. 

Keep in mind that liability-only coverage does not pay for damages or injuries that may occur. In addition, if the minimum coverage on your vehicle is not enough to cover damages or injury to the other driver, you will most likely be held financially responsible for the remaining costs, not your insurance company. So having adequate insurance is vital.

How Much do You Drive Your Vehicle?

Are you a commuter who drives hundreds of miles per day, or are you only behind the wheel a few hundred miles per month? Selecting coverage based on your driving habits can save you money in the long run.

Where do You Live?

Your insurance could be more expensive if you live in a congested or metropolitan area prone to more accidents, vandalism, and theft. When choosing an insurance company, try to find one that provides additional discounts you may qualify for to offset the costs of higher premiums. 


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Consider the Insurance Company’s Financial Strength Rating

A financial strength rating (FSR) is the primary indicator of an insurance company’s stability. The financial strength of the car insurance company you’re considering should be factored into your decision-making process. 

An insurance company with a healthy financial standing is more likely to have the money available to quickly pay insurance claims and debts. Independent rating agencies ascertain the viability of insurance companies’ financial strength, especially during natural disasters like hurricanes, tornadoes, and floods. 

Some of the most respected independent agencies are Fitch, Kroll Bond Rating Agency, Moody’s, Standard & Poor’s, and A. M. Best, probably the best-known and most prominent.

Each agency rates the insurance company based on unique algorithms and criteria. Most of them assign a letter grade to signify good, better, and best. However, the exact rating can mean something different from agency to agency. 

Why do Car Insurance Company Financial Ratings Matter?

Before you purchase a car insurance policy, it’s a good idea to research the company’s financial stability. Knowing that a company has a history of responsible money management indicates sound business practices and sufficient assets to cover their customers’ claims. 

If you select a company that does not have a solid financial rating or that’s known for sketchy business practices, there’s a chance you may be left out in the cold if you are involved in an accident and file a claim.

For this reason, it’s crucial to consider a company with a significant and long-standing track record of financial health and stability.  

What Are Car Insurance Financial Ratings Based On?

The financial ratings for car insurance companies are based on many factors to ensure your claims are paid on time. Keep in mind that the rating criteria for each independent agency is different. However, the overall commonalities are as follows:

  • Business Profile
  • Balance Sheet
  • Operating Performance
  • Comparison to Peers
  • Cash on Hand
  • Debt Ratio
  • Quality of Insurance Policies

Thankfully, you don’t have to understand any of the items listed above – the rating agency does it for you! Just taking a look at the grades they give to insurance companies will tell you all you need to know. 

Look at Customer Ratings and Reviews

To get an overall sense of how a car insurance company meets the needs of its customers, take a look at their online reviews. It’s now easier than ever to access the web and read about what other customers have experienced. 

Here are 3 trusted sites where you can find real customer reviews of the insurance company you’re considering. 

J. D. Power

JD Power is a leading global consumer research firm collecting current and previous customer feedback. They then analyze the data and rate the results based on the customer’s satisfaction. These results carry a significant amount of weight amongst those in the auto industry as well as consumers alike. 

They survey consumers on overall satisfaction, customer service, and cost. Researching the car insurance companies you are interested in purchasing a policy from can give you a better idea of how they stack up against other auto insurers. Doing so allows you to make a more informed decision. 

Better Business Bureau (BBB)

The BBB has a long history of assisting people in finding companies they can trust. They carry out this mission by collecting consumer complaints and helping solve outstanding problems. 

Companies that consistently demonstrate sound business practices and maintain a minimum B rating can qualify for BBB accreditation. This signifies that the company follows the core principles set by the BBB and treats their customers fairly.  It would help to search the BBB database for each insurance company you consider purchasing a policy with. 

National Association of Insurance Commissioners (NAIC)

This organization provides oversight for insurance companies in all 50 states, including Washington, DC, and its territories, such as Puerto Rico. Before selecting an insurance company, you can visit the NAIC website and check the number of complaints each insurance company has. You can also compare the complaint average against other companies you may be interested in. 

Review Their Business Practices

Whether you choose a nationally known car insurer or a less-known local company, a company’s daily business practices to address its customers’ needs can separate the good from the great. Ask about the following three things to help you select the best car insurance company. 

  1. Does the insurance company hire licensed car insurance agents to process claims?
  2. Once a claim is filed, how long does it take until the insurance company approves it?
  3. Do they offer discounts based on your driving history or if you bundle policies?

Frequently Asked Questions About What to Look for in an Insurance Company

Are large car insurance companies better than smaller ones?

Not necessarily. Please don’t assume that larger means better when selecting a good car insurance company. A smaller company may provide a competitive or cheaper rate for similar insurance coverage. 

Is an insurance company bad if it only operates online?

Many car insurance companies offer 100% of their services online, meaning there isn’t an office for customers to walk into. This is quite common and doesn’t mean the company is not legitimate.

Is it reasonable to get multiple car insurance quotes online when searching for an insurance policy?

Absolutely. Taking time to research and get quotes from multiple car insurance companies is one of the most effective and efficient ways to find the best car insurance company for your unique needs. To help you save time and money, contact Compare.com for your auto insurance search.

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