Compare Car Insurance Companies for Lowest Insurance Rates

Posted by Lauren Moss on July 13, 2010 Leave a comment (0) Go to comments

Michigan isn’t the most expensive state in the U.S. in which to insure a car that honor goes to Louisiana but recent changes in the law has forced car insurance companies in that state to charge more to policyholders in order to cover liability for injuries and property damage. This puts Michigan in the Number 2 spot right behind the Pelican State, making life even more difficult for those living in this economically devastated region.

Part of the problem is that Michigan, like twelve other states (Colorado, Florida, Hawaii, Kansas, Kentucky, Massachusetts, Minnesota, New Jersey, New York, North Dakota, Pennsylvania, and Utah), has a “no-fault” insurance system. This means that if you are involved in a collision, your insurer must pay the claim up to the stated limits on the policy even if you caused the accident. In exchange, each party surrenders all or part of their right to recovery in civil court (i.e., filing a lawsuit).

The idea is that such a system would result in the best auto insurance rates for consumers, because it would reduce litigation and the use of the courts for the collection of judgments for “pain and suffering,” which can cost insurers even more and is very difficult to quantify in any event.

The Law of Unintended Consequences

While a no-fault system should result in lower premiums in theory, in practice, it has actually had the opposite effect. In fact, insurance premiums in no-fault states are up to 25% higher than in other states. There are several reasons for this; it tends to protect bad drivers, who cannot be sued, and because an arbitrary limit is imposed by insurers, these companies frequently find themselves being sued by their own customers.

It is still possible to get inexpensive auto insurance rates even in expensive states like Louisiana and Michigan, however. You just have to do your due diligence.

Bigger is Better?

Based on the principle of selling in volume, you might think that going with one of the large insurers Geico, Nationwide, State Farm, Progressive or Farmers would result in lowest and best auto insurance prices. This is not necessarily true, however.

Although we in the industry consider insurance to be a “product,” it is really more of a “service” and it isn’t like the tangible goods you pick up at Mega-Lo Mart or some other “big box superstore.” Simply because Geico has the most insurance customers doesn’t mean that it will or is even able to offer “volume discounts” across the board.

However, if you have life insurance or boat, home,business or other types of coverage with Geico or one of the other big players, they may very well offer you a discount to insure your automobile with them as well.

Beyond that, it’s important to compare car insurance rates among large companies, small companies and particularly with independent agents who represent several insurance companies, not just one, and can therefore get you the best possible rate.