You've gathered several insurance quotes from different providers, and you have an array of companies and policy options from which to choose. Your instincts tell you to pick the insurance policy with the lowest price, but the lowest-cost option may not contain the coverage you need. On the other hand, the highest-priced option may have extra coverage that you'll never use.
In order to find the best policy for you, compare policies based on inclusion of the coverages you need, the experience of current customers and the insurance company's financial stability. While these rules apply to comparing all insurance policies, automobile insurance will be used as the primary example in this article.
Request Detailed Quotes in Writing
Don't just rely on a phone conversation with an insurance agent. Gather quotes you are given by phone and over the internet in writing, via mail or through email. The written quote will list all coverages and terms, which will allow you to compare one policy quote with others.
Determine What Coverage You Need
"Coverage" is a term that insurance companies use to identify items covered on insurance claims. No matter what type of insurance you are looking to purchase, there are going to be coverages you need and don't need.
For example, with automobile insurance, if you have coverage for towing through your cell phone service, you won't need it on your auto insurance too. However, you may still need coverage for a rental car while your vehicle is in the repair shop. Look through the quotes you were given and compile a list of what coverages you need and don't need based on what is offered. Add a third column with what you think the coverage is worth to you, in case you'd rather cover those costs out of pocket. (For additional reading about types of coverage, see Shopping For Car Insurance.)
Next, look at the liability coverage level in your policy for you and other parties injured in an accident or natural disaster. For instance, if you are legally at fault in an automobile collision, your insurance provider is responsible for damages to your's and the other driver's cars, in addition to lost wages and medical bills associated with all parties injured in the accident. You may have chosen a policy with $25,000 in coverage for personal injury for others, but you may only have $2,500 in coverage for your own injuries. Thus, if your medical bills are higher than $2,500, you will have to pay the difference. If the bills for other parties involved are higher than your coverage limit, you could also be liable for their additional medical bills.
If your insurance covers everything that could realistically happen, it could be your deductible that is cost-prohibitive, preventing you from ever using your insurance. For instance, if you typically have $500 in your checking account and the deductible in the cheapest policy available is $2,500, you should probably rule out this particular policy as one of your options. (For more on how this works, see Why is my insurance premium so high/low?)
When it comes to customer service, what you are looking for in an insurance company is how well the agents from the insurance company explain to you the terms of your coverage and how expediently claims are resolved.
You can evaluate how well the terms of the contract are explained to you when you are in the comparison stage before you buy the policy. However, evaluating how well claims are handled takes some detective work.
Talk to your friends and family about which company they use for their insurance policies and if they've ever had to make a property or injury claim. If so, ask them if they were happy with how the claim was handled.
You can also peruse your state's department of insurance website for complaint ratios on the insurance companies available in your area. Be careful of giving too much credence to one company's complaint ratio being slightly higher than another's, because if the company with the higher ratio has written fewer policies in your city or state, just a few extra complaints can look like a significantly large number.
While all insurance companies have their own insurance in case a large number of claims are filed at once, a company that is financially secure will be able to pay you faster. Look for companies with an "A" rating or above. You can find this rating on your state's department of insurance website as well. (For further reading, check out What To Do If Your Insurance Won't Pay.)
Once you've gathered all the information regarding coverages, customer service and financial stability, you can make an apples-to-apples comparison of insurance policies. The best policy will provide at least enough coverage that whatever accident or natural disaster happens, you will be able to recover financially and medically. The policy also should be provided by an insurance company with the customer service and financial stability to make you feel confident that it can expediently handle any future claims you might have.