What’s the Best Way to Buy Auto Insurance?

June 23, 2010

You can buy auto insurance from three different sources, all of which have their own strengths and weaknesses to consider when comparing your car insurance options.

Auto Insurance Brokers

One way to buy auto insurance is to use an insurance broker, also known as an independent agent.  These brokers or agents are licensed to sell insurance in your state and work with several different insurance companies.   Since they have contracts with different insurance companies there’s less chance they have a vested interest in selling you a policy from one particular company.

The independent agent does the research, communicates with insurance companies for you, and gives you car insurance quotes from various competing insurers.  The benefit of using an independent agent is that you get access to their expertise in selecting and buying insurance.  They get to know your specific situation, recommend coverage that would fit you best, and find you an appropriate policy at one of the insurance companies they have contracts with.

Of course getting personalized advice from an independent agent usually results in a higher insurance premium.  Some brokers will charge you a fee for their time.  Even if there’s no fee, they earn a commission from the insurance company and their referral can be priced into your premium. If you use an independent agent, ask if they’re certified by the Independent Insurance Agents of America or the Professional Insurance Agents (PIA).

Captive Insurance Agents

Captive agents work with only one insurance company so they can’t give you car insurance quotes from around the market.  On the other hand they really know the ins and outs of the policies of the company they represent.

Unlike independent brokers, captive agents usually get support from the insurance company they work with.  Typically this cost savings transfers on to you in the form of lower premiums than you’d pay with an independent agent. However, keep in mind that captive agents can’t shop around other insurance companies for the cheapest insurance.  What they can often do is offer you discounts if you decide to buy multiple types of insurance from the same company.

Basically, the benefit of a captive agent is that you get the experience of the agent’s advice and guidance at a cost that’s lower than working with an independent agent. Here are some insurance companies you’ve probably heard of that offer the ability to work with an agent:

  • State Farm
  • Travelers
  • Allstate

Direct Writers

A direct writer is an company that lets you buy insurance directly without going through an agent.  You can either call them up and talk with a customer service rep on the phone or you can research your car insurance online on their website.

Buying car insurance directly is a different experience than working with an agent.  Since insurance companies don’t have to pay agent commissions or support costs they can offer lower rates so buying direct can be a good way to get cheap car insurance.

Since it’s up to you to compare car insurance rates, many times the direct writer offers an extensive website where you can get online insurance quotes and research your options yourself.

Of course you don’t get to talk with an agent about your needs, which some people feel more comfortable with. However, if you know which type of insurance and the amount of coverage you need then direct writers can be the fastest and least expensive way to buy insurance.

Here are some companies where you can research and choose your own auto insurance:

  • Progressive
  • 21st Century

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Ben Edwards, the founder of Money Smart Life, saved up enough to buy a Nintendo back when he was 12 years old. When he used the money to buy shares of Wal-Mart stock instead, he knew he wasn't like the other kids... His addiction to personal finance has paid off for his family and now he's helping you to afford the life that you want. Check him out on the web at Google Plus, Twitter and Facebook.

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2 Responses to What’s the Best Way to Buy Auto Insurance?

  • Elda

    I guess your choice of going through an agent or buying car insurance directly from the company depends on how well you have researched your facts and know what is the right type for you. I try and find all facts before taking a decision, so don’t need an agent to buy my Arizona car insurance.

  • Steve

    I have used them all over the last 30+ years. I do not use an independent broker any longer because you will pay too much. They are the middle man and can be compared to a Stock Broker trying to give you great commission on stock trades. You can always to better with Etrade or a direct broker just like you will do better going direct with Geico or Progressive. I use Progressive and have had nothing but great things to say about them and their products and prices.