Research from NerdWallet referenced in a recent USAToday article shows that consumers could save an average of 32 percent by changing auto insurers. Why don’t they? According to the NerdWallet data, it pays to comparison shop since rates on auto insurance can vary by an average of 154 percent in any particular ZIP code. You can find real, unbiased auto insurance quotes at compare.com.
Divorcing Your Auto Insurance Company
Some consumer protection groups want to know why it’s so hard to divorce your auto insurance company, and whether insurers make it that way on purpose to discourage shopping around. Consumer advocates also decry the use of sophisticated data mining techniques by the auto insurance industry, strategies that allow insurers to raise rates just enough for any particular customer that he or she is unlikely to mind enough to look elsewhere.
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Insurers can find out a lot about you through various avenues, including anything you post publicly online. Using a process called “price optimization,” computers massage your information to determine your habits, whether you’re likely to switch carriers and how much the insurer can raise prices before you’ll bolt.
Why It’s Hard to Change
The article doesn’t mention another significant factor in many customers’ auto insurance situation. For several years, insurers have increasingly been linking auto and homeowners insurance together.
Since insurers make significantly more money from auto insurance than they do with homeowners policies, they increasingly threaten to significantly increase a homeowners insurance premium or cancel it entirely for customers unless they switch their auto insurance to the homeowners insurance company.
This happened to us a couple of years ago, when our homeowners insurance company sent us a renewal letter demanding permission to raise our yearly premium a much larger amount than state regulators had approved, something that other homeowners have also experienced. Otherwise, they would cancel our policy – unless we moved our auto insurance to them.
I should mention that a little over a year prior to this occurring, we’d filed our only homeowners insurance claim in more than a decade of home ownership. A day of tornadoes wreaked havoc with the Raleigh area, and my house and almost every house in my neighborhood suffered significant damage.
The insurer treated us well, sending a claims adjuster right away and approving needed repairs quickly, then paying the claim in a timely manner. Though we ended up choosing poorly with the contractor who handled our home’s repairs, we couldn’t have been happier with how our homeowners insurance company handled our claim.
The Homeowner Trap
The letter about our rate increase, which referenced significant claim activity in our area, not our claim in particular, both irritated and frightened me. It gave us only a few short weeks to either accept a hefty jump in homeowners insurance premium or find replacement homeowners coverage. I phoned our homeowners insurance agent to get a quote on what our auto insurance would cost with our homeowners insurance company.
Then, I contacted MetLife, our auto insurer of more than 15 years, to request a homeowners insurance quote, which was lower than what we had been paying for homeowners insurance previously. We ended up moving our homeowners insurance to MetLife, saving money in the process. We’ve had a long history with MetLife, plus, they weren’t the ones forcing our hand by threatening to cancel our policy or jack up our premium.
So, despite what a major auto insurance company says repeatedly in their ads, 15 minutes wouldn’t save us money on auto insurance. Changing auto insurance would involve many hours to comparison shop among insurers, and we’d probably see our homeowners insurance rates rise as a result, for losing the multi-policy discount.
If you plan to comparison shop for auto insurance, you need to have a copy of your policy in front of you, so that you can make sure you compare apples to apples. The same goes for shopping for homeowners insurance. You want to ensure that you get a price quote on the exact coverage that you currently have – same deductible, same riders, and so forth.
What to Expect
If you own a home and go car insurance shopping, you should be prepared to move your homeowners insurance along with your car insurance. I’m not saying you shouldn’t do it. I’m just saying it’s not as easy as it’s made out to be.
You might save a lot of money doing it this way, especially if your insurer is threatening to jack up your rates quite a bit. You’ll want to make sure there isn’t a penalty on either homeowners or auto insurance for canceling outside of your renewal period before going too far.