What Are the Benefits of Buying Insurance from a Small Insurance Company?

The benefits of buying insurance from a small insurance company include lower overhead expenses and affordable auto insurance rates catered to your local area. Many policyholders think the best benefit of buying insurance from a small insurance company is that you won't have to sit on hold with a giant call center when you need to speak to an agent. But before you decide to buy insurance from a small business, compare auto insurance quotes online so you know you aren't paying too much for coverage. Get started with our free comparison tool below.

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Rachel Bodine graduated from college with a BA in English. She has since worked as a Feature Writer in the insurance industry and gained a deep knowledge of state and countrywide insurance laws and rates. Her research and writing focus on helping readers understand their insurance coverage and how to find savings. Her expert advice on insurance has been featured on sites like PhotoEnforced, All...

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Leslie Kasperowicz holds a BA in Social Sciences from the University of Winnipeg. She spent several years as a Farmers Insurance CSR, gaining a solid understanding of insurance products including home, life, auto, and commercial and working directly with insurance customers to understand their needs. She has since used that knowledge in her more than ten years as a writer, largely in the insurance...

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Reviewed by Leslie Kasperowicz
Farmers CSR for 4 Years

UPDATED: Nov 12, 2020

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90% of Americans get their car insurance from larger companies like State Farm, GEICO, and Farmers. Some Americans, however, choose to work with smaller, local insurance companies.

What’s the advantage of buying car insurance from a small, local insurance company? Why should you consider buying car insurance from a smaller provider? Today, we’re explaining some of the benefits of buying car insurance from a smaller company.

Local Insurance Products for Local Insurance Needs

Smaller, local insurance companies are often based in your local area. They insure a pool of drivers or homeowners in your city, county, state, or region. Their calculations consider the risks of the local community.

Instead of shoving you into a pool with, say, 1 million other 25-year old male drivers across the United States, you get a customized insurance quote catered to your local insurance needs.

A larger insurance company might see that you’re a 25-year old guy from rural Indiana with an expensive truck. They might charge you the same high premiums they charge other rural drivers with a small truck. A smaller insurance company, meanwhile, might know you’re from a town with one stoplight, minimal crime, and virtually no accidents. They might know you’ve driven a truck safely to and from work every day for 30 years. Because of that, you may get lower insurance premiums.

Put simply, local insurance companies are able to provide local insurance products for local insurance needs. They don’t have to shoehorn different drivers into ill-fitting risk pools.

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Customized Insurance Premiums Based on Local Cost of Living

Smaller insurance companies may also be better able to provide more flexible insurance products. Let’s say you live in a low-income part of the country. Countrywide insurance companies may not give you a discount compared to other drivers in your state. A local insurance company based in your local area and paying your local area’s wages, however, may be able to offer a discount. Their cost of doing business is cheaper, so they’re able to offer cheaper insurance products.

Furthermore, local insurance companies will pay local mechanics to repair customers’ vehicles. If you live in an area with a lower cost of living, then all of these savings add up to lower insurance premiums from your local insurance company.

Lower Overhead Expenses

Smaller insurance companies, by definition, have lower overhead expenses than larger insurance companies. They don’t have 10,000 call center employees in 15 different countries. Instead, they might have a small but dedicated team of insurance industry professionals.

These lower overhead costs may allow the smaller insurance company to pass on big savings to policyholders like you.

Of course, this isn’t always the case. Sometimes, due to economies of scale, the larger company has a significant advantage. The larger company pays lower overhead costs as a percentage of their total expenses.

More Flexible Payment Options

The people who work at a local insurance company may be members of your community. They could be friends, family, and neighbors. These people may be more flexible when it comes to payments – say, if they know your family has recently fallen on hard times.

Some say smaller insurance companies are more willing to be sympathetic to a community’s needs. They may be more willing to easily switch you over to a month-to-month insurance payment plan instead of a six-month or twelve-month plan, for example.

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Modifying, Upgrading, and Downgrading your Policy May Be Easier

Did you suddenly retire and now drive fewer miles? Talk to your small, local insurer to change your policy needs. Did your daughter recently move away to university but still wants to drive your family car when home? Call to update your policy.

Changing your policy to reflect your unique needs may be easier with a smaller, local company. Drop by during normal, working hours to update your policy.

Avoid Spending Hours on Hold with Call Center Employees

To cut costs, larger insurance companies hire legions of call center employees from all over the world. Any time you need to interact with the company, you’ll need to work your way through this maze of call center employees.

Sometimes, this can be useful. You can change your billing information at 3 AM with minimal hassle, for example. But when dealing with complex insurance issues – like an incorrect claim or similar troubles – you could quickly run into issues.

Dealing with call centers can be frustrating. One benefit of working with a smaller, local insurance company is that you’re unlikely to encounter call centers again.

Easy Bundling Opportunities

Smaller, local insurance companies may accommodate a wide range of insurance needs. They rarely specialize in just car insurance, for example, they specialize in home and life insurance too. Some even manage mutual funds or have similar investment products.

With certain smaller insurance companies, bundling opportunities may be plentiful. Any time you need to add a new insurance product to your policy, just call your insurer to add it.

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You Don’t Necessarily Have to Compromise on Amenities

Smaller insurance companies may offer big service. A small insurance company could cover several states, for example, allowing the company to maintain a 24/7, locally-based call center. You may get the amenities of a larger insurance company and the convenience of a local company.

Final Word

Smaller, local insurance companies aren’t perfect. Sometimes, they’re twice the price of their larger competitors. In other cases, however, you get a perfect blend of value and affordability while getting the satisfaction and convenience of working with a smaller, local provider.

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