Shuman Roy is an entrepreneur, business owner, and musician. He started RoysNoys, LLC in 2013 as a music production and education service company. He also offers small business consulting and advisory services to help businesses get from start-up mode to turn-key operations. Shuman earned his M.B.A from the Stern School of Business in 2001 and has an undergraduate degree from Manhattan College in ...

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Written by Shuman Roy
Content Writer & Entrepreneur Shuman Roy

Joel Ohman is the CEO of a private equity-backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He has an MBA from the University of South Florida. Joel...

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Reviewed by Joel Ohman
Founder, CFP® Joel Ohman

UPDATED: Jun 28, 2022

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These days, it’s cliché to see or hear a commercial about how much you can save by switching insurance companies.

You might be asking yourself how it’s possible that every insurance company in America can save you $400 by switching. Why not just keep moving from insurer to insurer until you’re paying nothing?

And heck, how can we tell which company is overcharging us if they all claim to save us money on our insurance premium?

Not Every Company Can Save You $400

If you read the fine print or listen with a cynical ear you may notice each commercial states, “of those consumers who switched.” These are the ones who saved the money.

Unfortunately, for the consumer, it means just those who switched saved money. There may have been thousands of people who got quotes hoping to save, and maybe only a few of them actually saved dime one.

This could mean they offered 500,000 insurance quotes, and 1 guy in Tuskegee, Iowa saved $500.

The other 499,999 people who received a quote might have been offered a rate that was double what they are paying with their current insurer.

Have you heard statistics that say how many switched versus how many were quoted? I bet the answer is a resounding “No.”

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Who can save money on insurance costs?

Auto insurance companies all have different targeted risks they are willing to insure.

As discussed above, insurance providers want to provide quotes to as many people as possible, then hand pick the drivers they actually want to insure.

The people who may ACTUALLY benefit from getting quotes are those who have not gotten into any accidents or received tickets in the past two or more years.

Insurers change their rates all the time. And for the past several years, many insurance providers have been reducing their car insurance rates for the drivers they want…typically those with good insurance scores and no tickets or accidents.

[Credit scores and car insurance rates.]

Bottom line; if you fit the characteristics outlined above, you could probably have serious insurance savings by getting quotes and switching insurers.

The lesson here is to take every advertisement with a huge grain of salt…especially when dealing with insurance. They spend a lot of money on advertising each year.

For example, GEICO Insurance Agency spends over a billion dollars a year to promote the message that you can save money with GEICO. In fact, GEICO commercials claim that “15 minutes could save you 15 percent or more on car insurance”. We’ve all heard this message many times, but is it really true?

We looked at the rates GEICO Insurance Agency charges for drivers with a clean driving record and similar policies to find out how their annual premium compares to the median in each state. Across all 8 states, GEICO rates are about 20% cheaper than the median while the discounts range between 12 percent and 24 percent. However, even though their rates are cheaper than the median, they’re not always the cheapest option.

In states like Arizona and Maryland, GEICO savings are over 30 percent compared to the typical insurance company in the state.

Another example are Liberty Mutual ads. They promise that if you total your car, they will reimburse for the cost of a new vehicle, however it costs $75 to $80 per year on top of your rates to have this service.

Allstate’s accident forgiveness will also cost you an extra 10 to 19 percent, depending on the number of accidents.

If you think you may save on insurance coverage, even after reading this article, the best way to truly comparison shop and ensure you’re getting great coverage at the best possible rate is to contact an independent insurance agent and have them quote you with multiple companies (as opposed to a captive agent,who can provide just one insurance quote).

This might save you money over what you pay now and will certainly save you time at the very least.