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 the right company. There are many factors to weigh when trying to decide, but so often people look at the price of the insurance and read online reviews and stop there. The truth is that these two measures only reveal a small piece of the picture, and may not be the best way to assess which company is best for you.

Here are some things to think about and tips to help you compare your choices when choosing any type of insurance.

Online Reviews

The thing to note about any given online insurance company review is that it comes from a single person. Any rating or number of stars it has could be based on a single factor, among so many aspects that matter. As you sort through consumer reviews, keep the source in mind, and learn how to assess them better with these tips below.

  • Know what they refer to. A poor review can be about the writer’s trouble with payments, claims, customer service (from a single agent of many), or might just be their overall view. The same can be said of praise. You should always look closely at what the writer is referring to. This will help you decide if it applies to you or not.
  • Is it about a person or the product? It’s important to get a feel for how much of the commentary is based on the writer's experience with a single person (an agent, local office, or claims adjuster, for example) versus the product, coverage, or company as a whole.
  • Discuss the review with a company rep. If a review is strong enough to push you towards a given 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 can help reveal how accurate the reviews are, just by the way they address the questions you ask.
  • Be aware of the company model. Before you start reading reviews for a company, get a sense of its size and business model. This can help you focus your research. For example, if an insurer operates across the whole nation through local offices, you might not get a good picture of the service you can expect to receive by reading reviews from people in a state on the other side of the country. You're much better off reading local Google or Yelp Reviews of the agent or firm that you'd be working with.

If you come across a scathing review about cost, keep in mind that insurance pricing is based largely on a person's insurance score or credit score. Their comment may not have much at all to do with the price you would pay for the same coverage.

Rankings, Reports, and Surveys 

If you want to get an overall sense of how well an insurance company does compared to any other, check out general industry rankings or consumer reports and surveys. These often compare many companies side by side based on the same set of 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 many areas, including auto insurance, auto claims, property claims, health insurance, homeowners insurance, and life insurance.

Financial Strength

The financial stability of an insurance company should factor into your purchase (or pass), because it shows how well it performs in the larger market, and whether you can depend on it in the future. Insurance companies need to have the assets to be able to pay out claims. AM Best is a good source for this type of research, because they often give companies a financial strength rating of superior (A+), excellent (A), good (B+), or worse.

Agent vs. Firm

Local offices, agents, and brokers each have their own methods of service and sales. Your experience will differ based on how you seek out insurance. It’s just like when you ask friends to refer a good doctor. The reason one friend may refer a certain professional to you could be because they have good bedside manner or give good advice. A second friend may refer you to a doctor based on the fact that they are the top expert in their field. Yet a third friend may refer you to a doctor who offers the best deal, or who they know from college.

The same thing can happen with insurance if your point of contact is new on the job, if they don’t have great service skills, or if they simply don't know what you value. Be sure to conduct your own research on the firm you plan to buy insurance from. It can't hurt to learn a little about the person who is selling or making a referral either. If you can build a good relationship with this agent or broker, they may be more helpful in the future when you need it, such as when it comes time to file a claim.

A Note on Alliances

One more factor to think about if you purchase from a broker is the size of the firm, or how much business they do with the insurance company of choice. This may have an effect on their “pull” with that insurer. For example, a smaller firm may have a very large contract with one insurer, and that could result in stronger ties. They have more at stake in the contract, and so they will put in the extra effort to give you a good experience. On the other hand, a large firm that does very little business with that same insurer, or whose contract won't make as much of an impact, might not put in the same effort to help you out. This could work in your favor when it comes time to negotiate prices or process a claim. Ask the broker what kind of relationship they have with the insurance underwriters, or claims people, and what the process would be if you run into problems. This factor alone could help you make the right choice.

Service Model

Insurance companies may sell direct to consumers or through a network. This is where learning about the service model of the company may help you make a better choice, if all other things are the same. For example, what kind of customer support can you expect? How are claims handled? When you have a claim, will it be an agent of the insurance company who will resolve the claim for you, or will it be an outside claims adjustment firm?

If you like to handle your insurance online, find out if they have an app or a site with self-service features. But if you want the option to go down to an office and talk to an agent in person, check that they have a brick and mortar office nearby.

Where To Buy Your Insurance

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

Direct From the Company Through a Captive Agent

"Captive agents" are salespeople that represent only one insurance company. When you work with a captive agent, you will only receive advice and product offerings for the company the agent works for. If you know that’s the company you want to deal with, then they will be a good person to discuss all the options with, Note though, that they will not be able to help you compare products from other sources.

Through an Outside Broker or Agent

Brokers or agents may represent many insurance companies. This allows them to compare services, products, and coverages across a few insurers. One of the perks of working with the broker or agent is that they will have many options to offer and can do some shopping for you.

Through an Insurance Aggregator

Working with insurance aggregators can confuse some people, because their job is not to sell you a product, rather to offer quotes. They are not agents or brokers, they are outside parties that only work with insurance companies. They provide quotes by looking at your data and giving quotes, which in turn could assist in sales. You may get great service from the aggregator, but after yo make a purchase they will hand off your new policy to an agent at the actual insurance company, so you might want to know how that works before it happens.

Online Self-Serve

There are a number of new insurance options that allow you to sign up fully on your own online, without ever speaking to an agent or broker. 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.

It may seem fast and simple to buy insurance online, but make sure you don't act in haste. It's still smart to compare quotes as if you signed up in a more standard way. Then if it's worth any extra cost to save time and hassle, at least you know what you're paying for.

Deals and Discounts

Some companies offer more flexible payment plans than others. When you're shopping, make sure to ask how they accept payments. You may be able to get a discount for setting up automatic withdrawals, or for paying many months in full up front. Some insurers reward good driving or steady payments with extra deals as well. These are not always published, but it never hurts to ask about cost cuts that may apply to you.

The Bottom Line

Many people think insurance is just a basic need that comes down to price. But shopping on price alone could end up hurting you if you end up with less coverage than you need, or if the service standards are not what you expect. The best thing you can do is to know your options. When it comes time to file a claim, chances are you're in a stressful spot as it is (like a car crash, or a house flood), and the last thing you want to deal with at this time is a surprise in your insurance policy.

Key Takeaways

  • As you research, take online reviews with a grain of salt, and consult trusted sources and customer surveys like those from J.D. Power.
  • Keep in mind that quotes may differ based on many factors. When shopping, make a list of the features that you need, and refer to these when you ask questions.
  • Look at the service model, financial strength, and company overview, for each insurer you compare.
  • There are many ways to purchase an insurance policy, whether through an agent, a broker at a firm, or on your own online.