How to Choose an Insurance Company

Tips for comparing your choices and making a decision

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With so many options for buying insurance, it can be a challenge to know how to choose an insurance company. Among the factors that most people consider when they are trying to make a decision are the price of the insurance and online reviews. Unfortunately, these two measures may not be the best way to evaluate which insurance company is best for you. Here are some things to consider and tips to help you compare your choices when choosing any type of insurance company.

Using Online Reviews to Evaluate an Insurance Company

The interesting thing about an individual consumer’s insurance company review is that it can be based on so many aspects of the insurance. Sort through consumer reviews and understand how to evaluate them better with these tips below.

  • Understand what they’re referring to. A review can be about the person’s payment experience, claims experience, customer service received from one representative, or might just be their overall commentary. When reading online reviews about an insurance company it is always a good idea to understand what the reviewer is referring to. This will help you decide if the reviews are relevant to you or not. 
  • Is the review of their experience with a person or the product? It’s important to understand how much of the commentary is based on the experience with one individual (an agent, specific office, or claims adjuster, for example) versus the product, coverage, or company as a whole. 
  • Discuss the review with a company representative. If a review influences you to make a choice about an insurance company, discuss what you read online with the person who is selling you the insurance. They will often be able to give you feedback that helps you understand how accurate the reviews are just by how they address the questions you ask.
  • Consider the insurance company’s model. Most importantly when evaluating online reviews, understand the model of the insurance company you are reading about. For example, if an insurance company operates across the nation through local offices, you may get a more accurate picture of the service you can expect by reading local Google Reviews of the agent or firm that is selling you your insurance, as opposed to the information about the national insurance company itself.

If online reviews are negative, but the commentary is about the cost of the insurance, remember that insurance pricing is based largely on the individual’s personal insurance score, so this would not necessarily reflect what you would experience.

Rankings and Comparisons 

If you are looking for an overall review of how well an insurance company does compared to another that you are considering, check general consumer surveys. These often compare many insurance companies side by side based on the same criteria.

A good place to start is J.D. Power. Its surveys and rankings are independent, unbiased, and based on consumer feedback regarding customer satisfaction. They can often answer questions like:

  • Does the company pay claims well?
  • Does it give good customer service? 

Studies by J.D. Power compare insurers in several areas, including auto insurance, auto claims, property claims, health insurance, homeowners insurance, and life insurance.

Financial Stability or Strength

The financial stability of an insurance company is important when trying to figure out if it is good or not because it shows how well it performs financially. Insurance companies need to have the assets to be able to pay out claims. A.M. Best often gives insurance companies a financial strength rating that determines if it's superior (A+), excellent (A), good (B+), or worse.

Agent vs. Insurance Firm

Local offices, agents, and brokers can make a difference in what your experience is with an insurance company. It’s just like when you ask a friend to refer a good doctor or an accountant. The reason they may refer a certain professional to you could be because the person has a good bedside manner and customer service skills, is a good listener and knowledgeable, or seems to give good advice.

The same thing can happen with a great insurance company if your point of contact is not very good at their job, lacks experience, or doesn’t have great customer service skills. Research the firm you are buying insurance from, and don’t hesitate to learn a little about the person who is selling you your insurance. If you can build a good relationship with them, they may be more likely to help you when you need it, such as when processing a claim. 

Another important thing to consider is the size of the firm or the amount of business a firm does with the insurance company. This may influence their “pull” with the insurance company. A small business may have a very large contract with a company, and that could result in a stronger experience with the insurance company. On the other hand, a large firm that has very little business with that same insurer might not have the same relationship. This could benefit you when it comes to negotiating premiums or processing a claim. Ask the representative what kind of relationship they have with the insurance underwriters, or claims people, and what the procedure is if you run into problems. This could help you make a decision. 

Service Model

Insurance companies may try and sell insurance to consumers directly or through a network. This is where understanding the service model of the insurance company may help you make a better decision if all other things are equal. For example, what kind of customer support can you expect? How are claims handled? When you have a claim, will it be an employee of the insurance company who will resolve the claim for you, or will it be an external claims adjustment firm?

If you like to interact or handle your insurance digitally with self serve options, find out if they have an app or online services. But if you want the option to go down to an office and talk to someone, find out if they have a physical location nearby.

Insurance products are available in many different ways, so you’re sure to find one that suits your preferences.

Where to Buy Your Insurance

There are several ways you can buy your insurance. We list some of the most common ones below.

  • Direct from the insurance company online, by phone, or through a “captive agent.” Captive agents represent one insurance company. When you work with a captive agent, you will only receive advice and product offerings for the company that the agent represents. If you know that’s the company you want to deal with, then they will probably be the best person to review all the options with, but they will not be able to compare various insurance products.
  • Through a broker or agent. Brokers or agents may represent several insurance companies and that may allow them to compare services, products, and coverages across a few different insurance carriers or companies. The advantage of working with the broker or agent is that they will have several options to offer and can do some shopping for you.
  • Through an insurance aggregator. Insurance aggregators can be very confusing because when you are getting a quote, the aggregator might seem like the insurance company, or the agent or broker. However, aggregators only work with insurance companies, brokerage firms, or insurance providers, and collect information to provide quotes. You may get great service from the aggregator, but they will most likely hand off your new policy to someone at the actual insurance company, so you might want to know how that works before it happens.
  • Completely online. There are a lot of emerging insurance options that allow you to sign up completely on your own all online. Some are traditional insurance companies, and others are doing things in new ways. For example, Lemonade uses an artificial intelligence bot to provide you with rental insurance through its online portal or app.

Although the purchasing process may seem fast and simple when doing it online, it may be smart to investigate what your insurance quote would be if you signed up in a different way. The real value of insurance is about the coverage you get and the help the company offers in a claim, not how fast it can issue a policy.

Payment Plans

Some companies offer more flexible payment plans than others. Find out how your insurance company accepts payments. Some insurance companies give discounts for automatic withdrawals, while others may give discounts for full payment up front. 

The Bottom Line

Most people may think that insurance is just a basic necessity that comes down to price. Unfortunately, shopping on price alone could end up hurting you if your coverage isn’t enough, or if the service standards are not what you need or expect from your insurance company. The best thing you can do is to know your options. 

Key Takeaways

  • Compare prices online and by calling local insurance providers.
  • Make a list of the policy coverage features that are most important to you. Then ask each of the providers how their offerings compare to other companies.
  • Compare the service model, financial strength, and company overview for each insurance company you are considering.
  • Understand online reviews from individuals vs. customer surveys like those from J.D. Power. And ask questions about what you read before buying your insurance.
  • Consider whether the company offers payment plans and discounts.