Why Is One Insurance Company More Expensive Than Another?

5 Things to Look at When Doing an Insurance Price Comparison

Behind the scenes in the insurance world, there are more factors than you realize affecting the price of your policy. When trying to make an insurance price comparison, you may wonder why insurance is so expensive.

Prices can be vastly different from one company to another, and it helps to have some tips on finding the best rate. After all, why is insurance so expensive when the person who seems to have all the same qualities as you pays much less for the same type of car or home?

It might make you wonder if all things are the same, what makes one insurance company more expensive? Here are five things that make one insurance company more expensive than another.

The Cost of Discounts and Mistakes

Couple comparing car insurance prices


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You would think all the possible discounts are taken care of and properly applied when you sign up for an insurance policy. But each insurance company is different. There is no way for you to know what discounts you may be able to get unless you ask.

For instance, an insurance company may give a discount for installing a water backup valve—a good tool that helps prevent claims from sewer water backup.

When switching from one insurance company to another, you may miss getting your additional discount for this water damage prevention if you don't mention this specifically.

Not updating your information every year with your insurance representative may also cost you money. New situations can come up, and underwriting may change each year when actuaries review the insurance premiums and losses.

Whenever you get a quote from an insurance company, be sure to review the application information used to get the quote. The difference between the quoted insurance companies' prices could be how the representative completed the application form.

Insurance With Credit Scoring

Some insurance companies may offer you the chance to use your credit score to help lower the price of insurance. Companies are using insurance credit scoring more often because statistics have shown that people with good credit scores have fewer claims. When people have fewer claims, they can pay less money for their insurance.

If you have a good credit score and good insurance history, getting a quote from a company that uses insurance credit scoring could make your insurance much less expensive.

Compare Coverage Options and Perks

Insurance companies usually have several levels of coverage to offer their clients. Asking key questions about your options may explain why one policy might be more expensive than another.

For instance, opting to have a higher deductible can lower the premium you pay for insurance. Other considerations that can affect why insurance is so expensive include whether they use actual cash value or replacement cost for claims settlement if exclusions or special limits exist, and what risks are covered.

Some insurance companies offer various perks or advantages. Their price may be higher, but the benefits you get from them may be worth it. 

Some insurance companies may include perks like:

  • Roadside assistance
  • Identity theft protection
  • Coverage for Pets
  • Legal Assistance

Make sure you understand the coverages you are getting with your policy to decide if the perks are worth the extra cost.

Combining Insurance Policies to Cut Costs

Everyone has heard that putting your home and car insurance together with one company can save you money.

When an insurance company insures multiple policies for you, or even for several of your family members, there is a greater chance that the price of your insurance may be negotiated.  

If you have a relationship with your agent or insurance broker, they can lower your price based on how long you've been with the insurance company, the number of policies you have, and if you've referred other customers to them.

When you combine car and home insurance policies with one company, you can look at the total price you are paying. Sometimes one policy might be more expensive with one insurance company, but the combined price might end up being less overall if you combine them.

Claim Experiences and Rate Increases

The insurance premium you pay is determined by the company's underwriting and premium calculations. Your cost may go up if the rates have not been enough to cover their claims adequately.

When there is a general increase among all insurance companies, the rates may increase by the same amount no matter which company you use. If one insurance company finds that they weren't charging enough premium, they may have to increase prices more than the rest.

Some insurance companies will give discounts for​ a new policy to attract new clients. While your initial cost might be very low, your price might change after the new policy discounts disappear. You might be better off letting your current insurance company know that you want a better price, and they just might lower it.

How to Get the Best Insurance Price Comparison

Finding the lowest price on your insurance can be tricky. If you are insured with an agent who only represents one insurance company, they may not have access to other insurance products to offer you. In this situation, shopping around may be the only way to determine if you are paying a fair price on your insurance.

However, if you deal with a broker or agent who represents several insurance companies, they can shop around on your behalf to negotiate a lower price. Since insurance is so expensive, comparing prices among several companies is worth the effort. Check your rates with the five tips above before you pay too much for your insurance.