Your current agent/company might be great, but do you like them so much you’re willing to overspend hundreds if not thousands per year? 

Many people get stuck in the mindset that they have a great insurance agent/company, great coverage and a fair price. So they just let the policy automatically renew every 6-12 months, for years and years.

This is a huge mistake financially! The issue is not with your agent (in most cases) or coverage, it is that insurance companies regularly raise rates and make changes to their algorithms which could leave you with a higher cost policy. This is out of your agents control, even if you were their own mother, there is nothing they can do about the higher rates.

It is not uncommon for an insurance company to have rate hikes as much as 3-10% in a single year. And this is not reflective of anything you did as a single insured. It is the carrier raising rates on ALL of their current clients and new quotes. Sounds unfair, doesn’t it? 

Keep reading for more information about how insurance companies figure out the pricing (rate) for your policy, why you should shop every 12 months and what you can do to get the best overall rate and coverage.

How Insurance Rates Are Determined

There are many factors in this modern age we live in. As technology advances, so does the rating system. Here is a list of known components that make up your insurance rate.

Offenses & Claims History

This is a big one, if not the biggest factor in determining your rate. If you have speeding tickets, at-fault accidents, most any violations (texting and driving, running a stop light, etc…) then your rates will be significantly impacted. Or if you have made multiple water damage or fire damage claims in your home or renters policy, this is seen as a higher risk. The trick here, is to find a carrier that goes the least amount of years back for rating these offenses or claims. For instance, State Farm or Farmers may go back 5 years while Progressive may only go back 3 years.

Gaps In Coverage

If you went even a few weeks without auto or home insurance coverage, this will  impact your rates in a negative way. Insurer’s want to see consistency in coverage and consistency in payments. If you went without any insurance due to cancellation on your behalf or your current insurer’s behalf, you should plead with them to reinstate you without a gap in coverage. Pay whatever the charge is for a reinstatement, because if you leave them and go to another company without doing this, you will most always be charged significantly more.

Geographic Location

If you live in a heavily populated city you will most likely pay more for car insurance because of the extra risk of so many other cars on the road. On the flip side, if you live in a rural location, you will most likely pay more for homeowners insurance. This is because you are not within close proximity of a fire department. Also, some states are just notably a higher risk of natural disasters and/or auto collisions due to many factors.

Vehicle Type

If you drive a safe vehicle it will help in reducing your rate.

Check NHTSA and IIHS to see how your vehicle rates. If you drive a sports car, muscle car, exotic car or just generally unsafe vehicle, expect to pay more to insure it. Another big factor is the cost to repair or replace your vehicle. If the replacement parts are extraordinarily expense or if the vehicle is, then expect to pay more to insure it.

Annual Mileage

Typically if you drive less than 5,000-7,500 miles per year you will get a discount for low mileage. Insurer’s figure the less someone is driving, the less risk of them getting into a situation where a claim will arise. Be truthful, insurance companies have ways of finding this information out.

Age of Home or Last Updated

When getting a quote for homeowners insurance, you will be asked the age of the home and the age of the roof if the home is older. This is because a new home has a new roof, new siding, new foundation, new plumbing and new electrical. The odds of something going wrong are a lot less than a 30 plus year old home. If you have done updates to these things, you may qualify for a discount. You will need to prove it with documentation from the contractor in most cases.

Insurance Score

Yes, your insurance score. Not to be confused with credit score. Everyone has an insurance score. It is comprised of your past behavior, things like how likely you are to make a claim, or a late payment. You can ask your agent or go to a site like creditkarma to check your score.

Coverage Amounts

Generally speaking, the more coverage you are asking your insurance company to provide, the more you will pa,y as it is more risk for them.

DO NOT, I repeat, DO NOT go with the least amount of coverage

just to save a few bucks. This can ruin your chances at financial freedom or retirement later in life if something really bad happens and you’re sued for more money than you have coverage. Not a good place to be in.

In fact, I recommend every person have the highest liability limits possible and an umbrella policy, because you never know. Also, for a few bucks more a month I would rather have peace of mind. Consult with your local agent(s) to determine the coverage amount needed for your situation. 

Eligible Discounts

Here is a short list of common discounts. Always make sure to ask for every discount you think you qualify for.

• Bundle – Home/Auto, Renters/Auto, Home/Auto/Life, Renters/Auto/Life
• Early Renew/Quote – Typically 2-3 weeks before renewal date
• Multi-Car
• Loyalty
• Good Student – Must provide GPA records and be within time frame
• Claim Free
• New/Updated Roof
• New/Updated Electrical
• Low Mileage – 5,000-7,500 miles or less per year, per car usually
• Safe Driver
• Driver Training Course
• Monitoring Devices – Depending on your driving habits this can lead to big savings
• Senior – 59-65+ most cases
• Military
• Continuous Coverage with Previous  Carrier – 3-5 years in most cases
• Paid in Full – Use a 0% credit card if you are light on cash, this can save you a ton by paying in full. One of the biggest discounts out there!
• Paperless
• Auto-Pay

These are just a few, there are many more discounts out there and it varies by carrier. Be sure to ask for all of these discounts if you think you qualify for them when shopping for home, auto and/or renters insurance.

Captive Agent Vs Independent Agent Vs Online Insurers

Captive Agent

“A captive agent is an insurance agent who only works for one insurance company. A captive agent is paid by that one company, either with a combination of salary and commissions or with just commissions. The parent company may push its captive agents to sell certain policies or meet certain sales quotas.”  Source: Investopedia.comm,

Known Captive Companies: State Farm, Farmers, Allstate, Farm Bureau

Independent Agent

“An independent agent is an insurance agent that sells insurance policies provided by several different insurance companies, rather than a single insurance company. An independent agent receives commissions for the policies that he or she sells, and is not considered an employee of a specific insurance company.”  Source: Investopedia.com

Known Independent Carriers: Nationwide, Travelers, SafeCo, Kemper, MetLife, EMC, Encompass, Stillwater, State Auto and many more…

Online Insurance Companies

The big names here are Progressive, Esurance, Geico, The General, and Lemonade. They have huge call centers with licensed employees ready to serve you. Or you can simply use their online quoting system to get the  policy setup yourself. Sometimes these companies can be found in the independent agents pool of carriers offered.

In my experience, the independent agent will find more coverage at a better rate, almost every time. Captive agents have only policy to quote and are stuck if the rates are high for you. This can be a huge conflict of interest as they are trying to make one policy fit all.

Independent agent’s however can quote your insurance through many companies and have no bias to which company you choose. Independent agents provide many options, not to say you should completely factor out captive agents, but you should get quotes from both.

Another advantage to an independent agent is before renewal you can ask them to shop for you, automatically finding you the best deal at the current time. A good agent will do this for you without asking.

To find your local independent insurance agents, just google “independent insurance agents near me” or check out TrustedChoice.com.

Be Careful Who You Give Your Information To When Seeking Quotes

When searching on google, you will most likely come across insurance quoting sites. These websites look official and most are, but the catch is, they are not actual insurance companies. They sell your information to insurance agents at a steep price. This is a billion dollar per year market in selling insurance leads.

You enter your name, address, phone number, e-mail, vehicle types, miles driven per year and so fourth, expecting a couple of quotes immediately at the end of your entree. Only now, you find out that someone will be in contact with you soon.

Wait…this isn’t what you signed up for is it? You just wanted some numbers to compare and now you have 10+ insurance agents calling and e-mailing you for weeks, if not months later. Well, that quoting service sold your information to the highest bidders. Some quoting services will continue to sell your information for years and keep passing it around as long as there are agents willing to buy the “lead”.

The best practice here is, know who you’re giving out your personal information to and make sure they are not reselling it. Go with a trusted local agent, independent or captive, or both!

Getting Quotes

I recommend getting quotes at least a month before your next renewal. Find at least 3-4 trusted sources, a combination of independent agents, captive agents and online companies is ideal. Check local Google and Yelp reviews to vet them on quality of service.

Be honest and open about everything. If you aren’t, it will come out anyways when they pull your reports. Get a copy of your current policy declaration pages. Declaration pages will have most of the information needed for the new agents to quote you.

Make sure the quotes are as close to the same coverage’s as each other and to your current policy and are not missing anything. Check over things like deductible amounts, policy length (6 or 12 months), replacement coverage vs actual cash value, bodily injury limits, property damage limits. Also, sewage back-up coverage, flood coverage, business or personal use coverage, gun endorsements, jewelry riders for that wedding ring and many more.

Be sure the agent or company is not giving you a “soft quote”. A soft quote is simply putting your information into their quoting system. And then getting a rate without pulling your record, such as insurance score, driving history and claims history. This deceptive practice can lead to big surprises after you have given the OK to bind coverage and suddenly the rate sky rockets due to them finally pulling your information after the fact. Again, a good reason to vet and choose a trusted source.

Once you have your quotes in hand, have verified the coverage’s,are all quoted correctly and the all eligible discounts are applied, you can now make your decision.

Try to make this a habit going forward, every 12 months

Get quotes before your current policy renews ensuring you are getting the best possible deal. While most home or renter policies are 12 month policies, some auto policies are 6 month. It is not recommended to switch after only being with a company for 6 months, wait at least 12 months to get the best rate on your next quote. 

Some people are afraid of confronting their current agent. Maybe that agent is a friend or family member or neighbor and it can be awkward. I understand this can be tough to leave them, but you have to do what makes logical and financial sense in your best interest. One way around this is to have the new agent or company handle this for you. Yes, that’s right, they will gladly fire your old agent for you and have all the proper forms to do so, all that is needed is your signature and permission.

But I have to be loyal to my agent, they have been good to me!

– Every Loyal Client EVER

Maybe so, and that is a decision you will have to make on your own. I would tell you though that the old saying goes, “It’s not personal, it’s just business”. And trust me, your current agent gains and loses clients on a weekly, if not daily basis. It’s just the nature of the business they choose to be in.

I hope this article was helpful, if you have a story about your personal experience with switching insurance companies, getting quotes or rate hikes, please leave a comment below.