With so many companies to choose from, you might have a tough time selecting a car insurance policy that aligns with your coverage needs. The decision-making process can be further complicated by outside influences from friends, family and even clever insurance ads. Fortunately, with the right strategies, you can empower yourself to make the best choice for yourself.
Why Purchasing Car Insurance Is Important
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All 50 states mandate that drivers assume financial responsibility to cover the cost of an at-fault accident, whether it comes in the form of liability insurance or proof of assets.
There is a good reason for states to ask drivers to maintain proof of financial responsibility. The National Safety Council found that the calculable costs of motor-vehicle crashes in 2019 ranged from $4,600 for property damage to more than $1.7 million for an accident resulting in death.
According to the National Highway Traffic Safety Administration (NHTSA), while private insurers paid more than 50% of all vehicle crash costs in 2015, third parties, including charities, health care providers and even uninvolved motorists, paid 16% of the costs. In other words, some of the burdens of an accident can fall on us all.
You can save yourself and others the financial burden of an at-fault accident by acquiring auto insurance. The National Association of Insurance Commissioners (NAIC) revealed that the average amount spent on car insurance in 2017 was $1,005. Paying for car insurance is a better financial choice than covering the cost of an accident out of pocket.
How to Get Car Insurance That Best Suits Your Needs
Whether your state requires you to purchase auto insurance or you believe it is the most financially-wise option, it’s good to keep the following car insurance buying advice in mind when searching for a policy:
- Identify your insurance needs. Before buying car insurance, consider factors that can influence how much car insurance you need, including the make, model and year of your car, how often and far you drive and your state’s insurance coverage minimum requirements.
- Check prices, deductibles and discounts. Car insurance deductibles can play an essential role in the coverage you choose since they can directly impact your premium. It’s good to look for a company that offers the features you want with a deductible and premium that suits your wallet. Discounts that can reduce your costs are also great to find.
- Shop with multiple insurers. Comparison shopping with several auto insurance companies is an excellent way to acquire a well-rounded overview of the many offerings out there. You can easily compare car insurance quotes online to narrow your options quickly.
4 Car Insurance Buying Tips That Can Help You Avoid Decision-Making Roadblocks
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You might think the car insurance buying experience is a simple one. But some experts have found that when you make any type of purchase, you actually take part in a consumer decision-making process that involves recognizing your needs, conducting an information search, comparison shopping and finally making your purchase. During this process, you might hit psychological roadblocks that are common in the shopping experience. Understanding how to avoid or overcome these roadblocks could help significantly improve your auto insurance search.
1. Identify What Psychological Biases Are Pulling You In
A psychological bias, also known as a cognitive bias, is the tendency to subconsciously oversimplify information and make an illogical decision as a result. Consumers can sometimes unintentionally rely on psychological biases when making purchasing decisions.
“Biases tend to make us make quick, irrational decisions in the short-term and rationalize them later,” says Alex Brown, Professor in the Department of Economics at Texas A&M University.
For instance, a consumer might lean on a psychological bias known as the bandwagon effect during their shopping process, which is the inclination to follow the crowd when making decisions. In this case, you might choose the same insurer as your family members without conducting research first — only to regret your decision afterward.
Overcoming psychological biases can be challenging but not impossible. Brown explains that “forcing oneself to explicitly define the reasons behind any major buying choice, keeping a record of that reasoning and revisiting it in the future” can be a great way to reduce the impact of these biases. These steps could also improve the likelihood of making better buying decisions.
2. Be Aware of Nudges from Insurance Companies
Over the years, businesses have learned that consumers are not always perfect decision makers. In fact, consumers have gained a reputation in marketing circles for being systematically irrational, which means they have predictably irrational behaviors.
As a result, nudge marketing became a popular tactic for influencing consumer choices. By nudging consumers, businesses hope to convince them to make purchasing decisions without putting a lot of thought into their choice.
Comparative advertising is an example of subtle guidance companies might use in which “a producer highlights some attributes of their product where they are superior to their competitors,” Brown says.
He notes that this form of advertising is “very effective at inducing incorrect decision making” since most consumers would not assume a company would advertise a product that is worse than its competitors.
So, how can you avoid being persuaded by companies through these forms of marketing? Brown recommends making “slower, deliberative choices rather than relying solely on intuition.”
He also suggests gathering as much information as possible about a service, setting up a rubric to evaluate your choices and then buying the best product — though he notes that making this type of effort can be challenging for some consumers. An alternate suggestion he offers is to seek insights from third-party organizations that will do this work for you.
3. Avoid Making Uninformed Purchasing Decisions
It’s easier than you might think to make an auto insurance purchase without adequate information, particularly if you’ve been convinced that the time is now to get car insurance. For example, you might see a car insurance commercial that advertises a great discount and feel compelled to secure a policy right away.
Elliott Jaffa, behavioral and marketing psychologist with Dr. Elliott B. Jaffa Associates, recommends that you avoid making quick, uninformed decisions.
“How many times have you gotten in line at a supermarket, and you’re waiting, and you see a magazine and buy it? That’s called an impulse buy,” he says.
Fortunately, you don’t have to fall victim to the impulse buy. For instance, if you’re searching for coverage online, Jaffa recommends skipping over the ads and scrolling down further to find neutral sources designed to help you comparison shop.
But it’s also essential to go into this process somewhat informed of your needs. “You’ve got to have an idea of what you want,” Jaffa explains.
Ways to bolster your knowledge can include learning more about how car insurance works and acquiring relevant data like insurer ratings from companies AM Best and insurance company customer satisfaction studies from businesses like J.D. Power.
4. Sidestep the Challenges of Choice Overload
Research has found that consumers sometimes fall victim to choice overload, which can occur when they are presented with so many options that they either make a decision they regret or have a difficult time deciding at all.
The surplus of car insurance companies offering a wide array of coverage options and policy perks can quickly leave you feeling overwhelmed, which is why it's good to get clear about what you want and need in an insurance policy.
To help narrow your options, Jaffa recommends picking five companies that have gained your interest over time then checking with a neutral and reputable source to see which companies they recommend. In addition to the five companies you like, he suggests picking two more from the unbiased source. This way, you will have a substantial but not overwhelming pool of options.
Next, you can get car insurance price quotes and examine each company's offerings and prices to see how they align with your needs. After conducting your research, you could even consider waiting a few days before reexamining them again. This can allow the information to sink in and help you feel confident in your final decision.
First-time and seasoned car insurance buyers alike can struggle with making quality decisions when searching for coverage. But after equipping yourself with the right strategies and making the extra effort to conduct a mindful search, you can feel confident in your ability to secure the best car insurance.
About the Author
Stacey Bumpus is a freelance writer with more than a decade of experience creating online content in the areas of personal finance, education, career and entertainment. Her personal finance work has covered topics ranging from budgeting and retirement to bank accounts and insurance. Stacey’s articles have been featured on MoneyGeek, MSN Money, Business Insider and Credit Karma among other online publications.
- Central Intelligence Agency. “Psychology of Intelligence Analysis: Chapter 9: What Are Cognitive Biases?” Accessed January 29, 2021.
- Harvard Business Review. “Why nudging your customers can backfire.” Accessed January 29, 2021.
- Insurance Information Institute. “Is It Legal to Drive Without Insurance?“ Accessed January 29, 2021.
- KelloggInsight. “When Are Consumers Most Likely to Feel Overwhelmed by Their Options?“ Accessed January 29, 2021.
- McKinsey & Company. “A 'Nudge' for the Better in Assistance Claims Journeys.“ Accessed January 29, 2021.
- Minnesota State Colleges and Universities. “12 Cognitive Biases That Can Impact Search Committee Decisions.“ Accessed January 29, 2021.
- National Association of Insurance Commissioners. “Auto Insurance Database Report 2016/2017.“ Accessed January 29, 2021.
- National Highway Traffic Safety Administration. “The Economic and Societal Impact of Motor Vehicle Crashes.“ Accessed January 29, 2021.
- National Safety Council. “Guide to Calculating Costs: Costs of Motor-Vehicle Injuries.“ Accessed January 29, 2021.
- Stankevich, A., 2017. “Explaining the Consumer Decision-Making Process: Critical Literature Review.“ Accessed January 29, 2021.