Your Guide to Insurance Quotes & How to Best Use Them

·5 min read
what is an insurance quote
what is an insurance quote

Insurance can be a complicated topic, but the concept of an insurance quote is a fairly simple one to grasp: it’s basically an offer from an insurance company detailing how much you’ll pay and what you’ll get in return. If you need more help with insurance questions, consider working with a financial advisor.

What Are Insurance Quotes?

The idea of an insurance quote applies to just about every field of insurance, from car insurance to renter’s, homeowners and even health.

When you want to get a certain type of insurance, you start by shopping around to different vendors. Basically you’re looking to find out what they can offer you and how much they’ll charge in monthly premiums. Insurance companies generate this information in the form of a quote. This quote will typically list some basic information:

  • Coverage – How much they’ll cover you for in the event of a claim;

  • Deductible/Shared Costs – How much they will expect you to pay before they cover the rest of any given claim;

  • Covered Assets – What this insurance policy will cover;

  • Covered Claims – What kind of claims you can make under this policy;

  • Premium – How much this policy will cost per month.

The best way to think of an insurance quote is like a summary. This is not your full policy, those are generally long documents that discuss your insurance in great detail. Instead the quote gives you a snapshot of the most important elements.

An insurance quote is also not a binding contract. This is an offer, but it is not what lawyers call a “firm offer.” In an insurance quote the company is saying, “based on the information you’ve given, here’s the policy we can probably write.” However, they are not committing to anything until they actually send the full policy over for you to approve. The good news is that, by generating the quote, you aren’t committing to anything either.

How Can You Use Insurance Quotes?

what is an insurance quote
what is an insurance quote

Companies generate insurance quotes based on general information, although what information depends on the type of insurance you’re looking for.

To get a quote you can contact any given insurance company. Most, if not all, will offer you quotes directly from their websites. They will ask for a few pieces of information based on what kind of policy you would like. For example, if you’re looking for renter’s insurance they will usually ask for your address and/or zip code, the size or style of apartment you live in and how much damage you’d like them to cover. If you want auto insurance, they’ll typically ask for information like the make, model and year of your car, and the zip code in which you park it.

In all cases, the insurance company will ask for the basic information it needs to assess risk. For example, if you’re looking for property coverage of some sort, your zip code is usually important for estimating the risk of theft and vandalism.

As a consumer, you want to use an insurance quote for two purposes:

  • First, review this quote to see if the offer meets your needs. Will those premiums work for you? Are they offering enough coverage, and do the deductibles look reasonable?

  • Second, use quotes to comparison shop. Especially with insurance companies offering instant quotes through their websites, you can pull quotes from several different insurers to see who’s willing to offer you the best prices. (After all, remember, a quote isn’t binding on anyone, them or you.)

When you read a quote, make sure to particularly look at the policy’s coverage. Most insurers will write their quotes so that the premiums jump out at you. That’s not necessarily a bad thing. You do need to know how much this will cost, after all.  Just make sure to also read through enough to see if they’ll cover the kind of costs or damage you’re looking for. It won’t do you any good to get a renter’s policy, for example, that doesn’t cover flooding… then defines “flood damage” as any kind of water damage regardless of source.

And keep your quote. It’s common for terms to change between an insurance quote and when your insurer writes the actual policy. This is frustrating, but also often inevitable. When an insurance company writes policies they request a lot more information than when they generate quotes, and that can change things.

But make sure to compare your quote with the final policy. You don’t want to abandon good coverage over a small price change here and there, but you also do want to check for anything important. If your quote promised certain coverage that was important to you, double check to make sure that the policy contains those protections.

The Bottom Line

what is an insurance quote
what is an insurance quote

An insurance quote is an offer from an insurance company to give you a certain policy for a certain price. Getting quotes is an essential part of shopping for insurance, since it lets you see how much you would pay and what you would get from any given insurer.

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Insurance Tips

  • Getting a quote depends entirely on what kind of insurance you’re getting, because the insurance company will need different information for different policies. Read on to see the eight types of policies that they can write, and that you can buy.

  • A financial advisor can help you figure out your insurance needs. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.

Photo credit: ©iStock.com/Mohamad Faizal Bin Ramli, ©iStock.com/VioletaStoimenova, ©iStock.com/insta_photos

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