What Makes 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 is a lot more going on with our insurance policy than what we realize. When trying to do an insurance price comparison it helps to have some tips on finding difference. We hear about it all the time, one person who seems to have all the same qualities as you, the same type of car, same kind of home, paying much less (or much more) in insurance. It might make you wonder, if all things are the same, what makes one insurance company more expensive than another? 

5 Things That Make One Insurance Company More Expensive Than Another

01
Lowering the Price of Insurance With Discounts and By Correcting Mistakes

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You would think that when you sign up for an insurance policy all the possible discounts are taken care of and properly applied on your policy, but sometimes there are discounts that you are eligible for that just don’t get applied because your eligibility for them isn’t obvious.

Discount Rules Vary With Each Insurance Company

Each Insurance company has different discounts. Where one company might give a 10 percent discount for having no claims, another might give 30 percent. Or, for example, where one company may give a claims free discount after 3 years with a home insurance, another may wait until 5. There is no way for you to know what discounts you may be able to get (or not get) unless you ask.

Another example: one insurance company may give a discount for a water back up valve, which is a good tool to help prevent sewer backup water damage claims, whereas another one may just “include” an allowance for it in the rates. When switching from one insurance company to another, if mentioning this is forgotten, you may miss getting your additional discount for this water damage prevention.

One more note on discounts: Every year when actuaries review the insurance premiums and losses, underwriting may change. When you stay with the same company year after year, your policy may renew without the new discounts or credits that showed up since your policy was written.

Missing Information or Mistakes in Your Insurance Application Can Raise Your Costs

Not updating your information every year with your insurance representative may cost you money because there are new situations that come up that may qualify you for discounts too. When you call someone for a new quote, they usually get all the current information, whereas the company you have been with for many years may have missed something. 

Human Errors Can Cost You Money on Insurance

Very often the difference between one insurance company's price and another could be how well the representative (or you, in the case of online insurance quotes) filled in the information.

Whenever you get a quote from an insurance company be sure and review the information used to get the quote. Sometimes you might see areas where information is not complete. This may make you eligible for preferred rates.

02
Insurance With Credit Scoring Can Save Money on Your Insurance Price

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

You can learn more about what ​an insurance company will look at to lower or increase the prices due to credit scoring in our article: What is Insurance Credit Scoring or Insurability?

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.

03
Insurance Policy Price Comparison: Coverage Options and Perks

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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.

Make Sure You Ask About These Coverages and Limits:

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

Does Your Insurance Policy Have Perks Included?

Some insurance companies may include perks like:

Make sure that the coverages you are getting with your policy are explained to you so that you can decide if you are happy about the perks, or would rather take a policy without them. 

04
Comparing Your Price By Combining Insurance Policies

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Everyone has heard about how putting your home and car insurance with one company can save you money, but the advantage of combining your home and car in one place is far more than just getting a discount. 

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.  

Relationships Can Lead to Negotiating Better Prices

We often think the price of insurance is as simple as the price we get on an online quote, and it can be. However, if you have a relationship with your agent or insurance broker, they can look at the big picture, like:

  • how long you've been with the insurance company
  • how many policies you have with them
  • how many people you have referred

They just might be able to go to bat for you to get an even lower price on your insurance.

Another advantage of combining insurance policies is that if you do run into trouble or have a difficult situation like a vacant home, or end up with a couple of claims all of a sudden, then you have a stronger relationship with the insurance company to get more when the agent or broker negotiates on your behalf for less expensive insurance.

Look at the Combined Price of All Your Insurance When Comparing Premium

Finally, when you combine car insurance and home insurance policies with one company, you can look at the price you are paying as a whole. Sometimes one policy might be more expensive with one insurance company, but when you look at the combined price of your insurance, it ends up being less overall in one place.

05
Insurance Company Claim Experiences and Rate Increases

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The insurance premium is how much the insurance company charges you for your policy. If the underwriting and premium calculations one insurance company has used has not been enough to cover their claims adequately or they are starting to be unprofitable they will adjust their rates and prices become more expensive. 

When there is a general increase among all insurance companies, the rates may all go up about the same, but when one insurance company finds that they weren't charging enough premium for many years, all of a sudden they may have to increase prices more than the rest.

This would explain why they are more expensive than another company all of a sudden.

When Shopping for Insurance Gets You a Lower Premium

Some insurance companies will give discounts for​ a new policy. They do this to attract new clients and might give you a very low price when you switch to them, but their price might change after the new policy discounts disappear, or if they find out they need to adjust their rates. 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, then shopping around may be the only way to find out if you are paying a fair price on your insurance because a captive agent does not have access to other insurance products to offer you. If you deal with a broker or agent who is able to represent several insurance companies then they may be able to do some shopping for you and negotiate a lower price. You spend a lot of money on insurance, so it is worth shopping around, and checking your rates with the 5 tips above before you pay too much for your insurance.