Why online insurance comparison tools aren’t always the best option, even though they’re quick and easy
Summary List Placement
Online insurance marketplaces allow you to compare quotes from multiple companies.
If you’re just looking for the cheapest auto or renters insurance, marketplace providers are fine.
But for coverage like life and homeowners insurance, you’re better off speaking with an agent.
Policygenius can help you compare life insurance policies to find the right coverage for you, at the right price »
Table of Contents: Masthead StickySites like Insurify, PolicyGenius, and The Zebra have become popular destinations for finding insurance policies online. You can think of these insurance marketplace providers as the Expedia of the insurance industry — they compare quotes from various insurance providers, and you can click through to purchase the one you want.
But while these sites make it easy to purchase an insurance policy without having to speak to an agent, in some cases it’s in your best interest to take more time and consult a professional. Beyond that, there are some limitations and drawbacks you should be aware of when using an insurance quote provider.
What is an online insurance marketplace provider?
Online insurance marketplace providers give you quotes from various insurance companies. Marketplace providers offer quote comparisons for auto, renters, homeowners, and term life insurance.
Not all online marketplace providers offer quotes for all insurance types. For instance, The Zebra only offers quote comparisons for auto and home insurance.
Life insurance (term)
*Requires drivers license and optional SSN
**Only for single family homes, must speak to an agent for renters, condo, and mobile home insurance
Quotes can be real-time or estimated. Real-time quotes are when the online marketplace provider submits your information to various insurance companies and then returns quotes from those providers. Estimated quotes are when online marketplace providers use historical data from insurance companies and artificial intelligence to estimate your payments. You will know it’s an estimated quote when you contact the insurance company and the quote is not the same as offered on the online marketplace.
Marketplace providers will ask basic information necessary to get you a quote. For auto insurance, you be asked about your car’s make, model, mileage, your zip code, current insurance provider, and driving history. For life insurance, you’ll be asked about your age, weight, zip code, and medical history. After providing basic information related to the insurance you want, you’ll receive comparison quotes from different insurance providers.
AI technology can be biased against women and people of color
Many online insurance marketplace providers also use artificial intelligence (AI) to provide estimated quotes, and insurtech companies use this technology for the underwriting process with no medical exam life insurance policies. However, there are some potential drawbacks to this approach.
The Insurance Information Institute noted the “promise and peril” of AI technology in insurance due to its implicit bias towards women and people of color. For instance, if you’re located in a predominantly Black or Hispanic neighborhood, you will likely receive higher rates for auto and homeowners insurance.
For life insurance, most insurtechs don’t accept applicants over 55 and below standard risk. If you don’t fit the model applicant profile and have health concerns, you will most likely will be denied coverage.
Watch out for lead generation platforms
Unfortunately, not everyone in the online insurance marketplace is simply trying to help consumers find comparison quotes. Some sites that say they provide insurance quote comparisons, but instead they gather your data and sell it to third parties.
These companies are known as lead generation platforms. You may never receive a quote from them, but instead receive spam emails or phone calls.
Be wary of any website asking you to enter your current insurance company account number and password in order to provide you a quote. It’s not unusual for online marketplace providers to ask who your current insurance provider is, but it’s a red flag if they’re asking for access and passwords to other online accounts you have. If you are constantly being redirected to another website, it may be a lead generation platform.
When online marketplace providers aren’t enough
If you’re simply seeking the cheapest auto insurance to comply with state laws or purchasing renters insurance as required by your landlord, then online insurance marketplace providers are good at helping you find the cheapest quote.
However, if you’re seeking homeowners or life insurance, online insurance providers can be helpful to give you an idea of pricing, but they should be a first step in your research — not the last.
For most Americans, their home is their biggest asset. Getting the cheapest insurance is not likely to provide the protection you need for your home and belongings. It’s worth talking to an agent to make sure you have proper coverage, especially if you have pets, custom jewelry, high-end electronics, or live in a disaster-prone area requiring additional coverage riders. You want your agent to go over flood, sewer, and other riders you may need.
A survey from Plymouth Rock found that the majority of homeowners want a provider that has been in the business for a while and has a strong financial rating. Half of homeowners are also looking for a great user experience and response to claims.
According to Bill Martin, president and CEO at Plymouth Rock Home Assurance, it’s important for homeowners to shop around, compare quotes, coverage offerings, and research the financial stability and reputation of homeowners insurance providers.
Life insurance is another area where you’re best off speaking with a professional, not simply going through an insurance quote provider and choosing the cheapest option.
Life insurance is not merely something to cover the cost of burying the dead; it can be used to build wealth and as an investment tool with tax-deferred benefits. This type of insurance should not be looked at in a vacuum, but as part of your larger financial and estate plan. “A financial plan is built on a strong foundation of life insurance and risk management holding everything up,” said Silvia Tergas, a financial planner with Prudential.
Online insurance marketplace providers focus on term life insurance only. Although that is the most affordable option, it doesn’t help you maximize the wealth building aspects of permanent life insurance. Term life insurance lasts for a specified period, and when it’s up you can reapply for coverage, but the premiums most likely will go up as you age and your health deteriorates.
Permanent life insurance never expires, has a death benefit for your beneficiaries, and a cash value that you can use during your lifetime. It’s like owning a home, where you gain equity that can be used as collateral — and your home can be left to your heirs leaving a legacy. Many financial advisors recommend a combination of term and permanent life insurance.
Your life insurance needs change as you age, and you’ll need to consider children, marriage, divorce, retirement, and caring for aging parents. You want to have a discussion about life insurance as part of a comprehensive financial plan to ensure you have the proper coverage for your goals and life changes down the road.
Like homeowners insurance, a life insurance company’s reputation, customer satisfaction ranking, and claims history determines whether beneficiaries are going to receive their death benefit in a timely manner. The last thing a grieving family needs to deal with is an insurance company being unresponsive and delaying payments.
Nothing beats the comprehensive knowledge of a professional
Online insurance quote marketplaces and online insurance calculators are helpful to get an estimate of how much insurance you will need, and they work well as a starting point. If all you want is cheap auto or renters insurance, going through an online marketplace could be fine, but understand that the cheapest quote may not always offer the coverage you need.
Many homeowners do not understand the coverage they have or need until it’s too late. Many Americans don’t have life insurance at all, and many that do have life insurance are underinsured. Getting the cheapest quote may mean that you don’t have proper coverage and may be underinsured.
When considering insurance, especially life and homeowners insurance, it is wise to consult a financial advisor, accountant, and estate planning attorney to make sure you have the proper coverage you need for your goals and financial situation.
The bottom line
If you just want cheap insurance for auto and renters, online insurance providers like The Zebra, Policy Genius, and Insurify could fit the bill. But if you want to maximize the benefits of life and homeowners insurance, it’s wise to talk to an agent or financial advisor who understands the various insurance products to ensure you have proper coverage that adapts as your life changes.
Ronda Lee is an associate editor for insurance at Personal Finance Insider covering life, auto, homeowners, and renters insurance for consumers. She is also a licensed attorney who practiced litigation and insurance defense.
Related Content Module: More on Life InsuranceJoin the conversation about this story »