Have you gone shopping for the best car insurance coverage lately? If not, you may be throwing money away.

The National Association of Insurance Commissioners, or NAIC, recommends that consumers review car insurance policies every year. Yet, only 20 percent to 35 percent of people actually do so, according to the NAIC.

There are many benefits to annually reviewing your car policy. Either you'll confirm that you have the right coverage for your needs, or you'll gather crucial information for making smart decisions about switching providers.

If you decide to shop around for a better deal, investigate new companies carefully to avoid any policy pitfalls. While most consumers simply look for the best price, it's important to consider other factors. Can the new company successfully underwrite a policy under the terms you request? Is it considering rate hikes in the near future? Have you timed your switch so that you won't have a lapse in coverage?

Look for a quality reputation
Most of us purchase insurance and hope we will never have to file a claim. But accidents happen, so do some homework to make sure the new company will deliver when you need it most.

"As policyholders, we don't cash in auto insurance policies very often, but it's important to have the right company for the times that we do," says Dick Luedke, a spokesman with State Farm Insurance, based in Bloomington, Ill.

"Find out as much as you can (about the new insurer). Talk to your state's department of insurance about complaint ratios, ask other people that you know who filed a claim what their experience was like, and find out what you're purchasing."

Before signing an agreement, make sure the new insurance provider is permitted to do business in your state. A call to your state's department of insurance can verify whether the new company is allowed to sell you a policy. Also, you can check the financial stability of the insurer with a ratings company like A.M. Best. Information can be accessed online and at many local libraries.

"Get all the information you can," Luedke says.

Get accurate quotes from prospective companies
Fast quotes are convenient, but companies need more complete information about you and your car to provide a realistic view of what your premiums will be.

"Make sure you can rely on the quote given, and (that) the new insurance company will actually deliver the policy for the quoted price," Moore says. "The new provider has to run all of the necessary reports -- credit report, driving record and claims history."

Your driving record, geographic location, age, gender, marital status, vehicle make and model, and insurance history can all affect your premium.

It's not legal for an insurance agent to intentionally quote you an unrealistically low price -- a practice called "low-balling" -- just to get your business. But it is possible that the agent can give you a quote that's lower than the actual amount charged due to inaccurate information received.

The insurance company makes the final decision about your premium rates after it reviews and verifies the information on your application.

Even if your new quote is accurate and you get a great rate, remember that you could face a premium increase if the company institutes a rate hike before your policy renews.

Jones recommends asking your provider when it last made a rate change. Insurance companies have to get approval from their state's insurance department before they do a large-scale rate increase.

"It could be that the new company will go through a rate change soon. They just haven't gotten approval (from their state's department of insurance) yet," Jones says.

Buyers of new policies must be aware of the risk of a rate increase, which could happen at any time.

Make apples-to-apples comparisons
Before searching for a better deal, understand exactly what you have with your current insurer.

"People often ask me for a quote on a new policy, so I'll ask them, for example, what their current bodily injury liability limits are," says Jones. "Their answer is usually, 'I don't know.'"

In such instances, Jones asks potential clients to pull out their declarations page and read the information to him. The declarations page, located at the front of the written automobile policy, summarizes the main parts of your plan. It includes the policy term, a description of the vehicles covered, the policy number and coverage limits.

Once you understand your current coverage limits, make sure that quotes from potential new providers are based on the same limits and deductibles. That way, you'll get an accurate cost comparison between the old and new policies.

"I have one client who considered switching to another company because they quoted a lower rate, but it was because her coverage limits would be lower," says Frank.

She says that under the new policy, the property damage coverage for the customer's automobile would have been just $50,000.

"But she had a Mercedes," Frank says. "I reminded her that cars like hers are worth $90,000. If her car was totaled, her insurer would only be able to pay off $50,000.

"The customer changed her mind about switching."

Of course, some insurers will be able to offer lower premiums for truly comparable coverage, because rates vary between companies. In such cases, switching providers is likely worth it.

Check your current company's discounts first
As you're shopping around, don't forget to check with your existing provider to see if you can get a better deal than the one you have now.

"If people get a renewal quote in the mail, sometimes they go (insurance) shopping," says Jacki Frank, owner of Tri-County Agency of Brick, N.J. "But their current agent could also offer them another solution."

For example, many insurance companies provide discounts to consumers who purchase multiple policies. So, if you've just bought a home and are considering insuring it through the same company that covers your car, check to see if a discount is available.

Also, verify that your current insurer is aware of any changes you've made that could qualify you for a car insurance discount. Installing anti-theft devices, getting good grades at school, taking a driver-safety course or switching to a vehicle with lower mileage can help reduce rates.
If you're happy with your company and coverage, but just want a lower premium, consider raising the deductibles on your current policy. You'll have higher out-of-pocket expenses if you have to file a claim, but you can budget a lower cost of insurance if you remain accident-free.

Even if you find a better deal elsewhere, remember that leaving one insurance company for another has its own risks. For example, policyholders who switch companies may lose longevity benefits.

"We give continuous service discounts," says Jones. Those discounts wouldn't apply if you were a new customer with a new insurer.

In addition, long-term clients with Jones' company who have clean driving records are more likely to be "forgiven" after a claim, so they wouldn't face premium penalties.

"If that same customer switched policies, then had that same claim, they probably would have a surcharge (at their policy's renewal)," Jones says.

Determine if your needs have changed
When reviewing your current policy, think about whether recent life changes might require you to revise coverage limits or to add new coverage.

"Don't just copy existing coverage," says Pat Moore, a partner with Antalek and Moore Insurance Agency in Beacon, N.Y. "Your situation may have changed, requiring different coverage treatment."

Factors that may cause you to reconsider the terms of a policy include events such as adding a new member to the family, driving to a different job location or purchasing a new car.

"I find that a lot of people are underinsured," says Mike Jones, an agent with Alfa Insurance Company in Montgomery, Ala. "For example, some policyholders may only have $25,000 of coverage to repair someone else's vehicles. If you consider that the average car is in the $25,000 to $35,000 range, then a multiple-car accident will wipe out your coverage. The other people involved in the accident will be looking to you personally to make up the difference."

In addition to reviewing coverage amounts, this is also a good time to examine optional products such as rental reimbursement coverage and emergency road service.

Shifting gears

Changing insurance companies can sometimes save you money, but also consider other factors when deciding which policy is best for you.

Annual car insurance review:

1. Determine if your needs have changed.
2. Check your company's discounts first.
3. Make apples-to-apples comparisons.
4. Get accurate quotes from companies.
5. Look for quality reputation.
6. Make sure you have continuous coverage.

Make sure you have continuous coverage
Before changing insurance companies, check the end date of your current insurance policy on the declarations page. Most insurance policies end at midnight on the day of expiration. Check to make sure your new policy begins at 12:01 a.m. the next day.

"Never terminate one policy before having the replacing policy secured," says Moore. "You have to make sure you have continuous coverage through the transaction."

Some consumers might switch carriers in the middle of their policy term to eliminate the chance of having a lapse in policy when switching carriers. If that is the case, cancel the old policy in writing. Based on the terms of the agreement, the old company will probably mail a refund of the unused premium. However, your old provider may also charge a cancellation fee.