Why It’s Not Just The Price That Matters When Buying Car Insurance

I often turn on the TV and see these ridiculously low-budget commercials for car insurance companies that are screaming about how ridiculously low their rates are and how you can stay within the legal limits of the law for almost no money. When I see these I can’t help but think that people who dial the number are setting themselves up for a rude awakening when they go to make a claim. There are good deals and value to be hand in the car insurance industry (just like any other), but these companies that are offering absolutely bargain rates have to be cutting corners somewhere, and you have to ask yourself if you are comfortable with that before you sign on the dotted line.

The business model for insurance companies is deceptively simple. You take money in, in the form of premiums and deductibles. You invest that money, make money off of your investments, and pay out claims when people have accidents or have their car stolen etc. Your core expenses are the basic staff and office expenses that most companies have. So if a company is offering such low premiums, I would definitely ask how they are able to achieve this. Almost assuredly the company is skimping on customer service costs, or they are trying to do everything they can to not pay out insurance claims. Neither of those cost cuts are beneficial to you as a car insurance consumer.

I have seen nightmare scenarios where people get into an auto accident and they have a lot on their proverbial plate in terms of dealing with hospital stays, not having a interim vehicle, having a tough time meeting prior obligations etc. This inevitably stretches peoples’ endurance and patience to a breaking point. If at this time you cannot get a customer service representative on the phone, or to return your emails, your life can very complicated and frustrating in a hurry. Your time and sanity must be taken into consideration when deciding if a certain insurance provider is appropriate for you. An even worse set of circumstances can occur if you are dealing with all the common aspects of a vehicle accident, and then you have trouble with your insurance coverage. If insurance companies are saving money by not paying out legitimate claims, this can be a terrible reality. This can put an individual and/or a family in a huge financial hole if they have to pay for a replacement vehicle out of pocket. Situations like this are obviously rare, but they are not something to leave to chance.

In order to make sure that you know what matter when buying car insurance you should do some quick research on the options available in your area. Often you can find a decent 3rd part reviewer who takes an honest look at several different options. This is much more effective than visiting the specific sites of the respective insurance companies since the testimonials they post there are biased at best. When checking out the information provided by a 3rd party source you want to make sure that the company has a proven track record over an extended period of time. If a company is offering extremely low rates and hasn’t been around very long I would be very sceptical of what sort of clientele they were trying to attract. Look for criticisms as well as positive reviews, and see how the two balance out. No insurance provider is perfect, but if you find a disproportionate number of negative experiences, then it is probably safer to stay away, even if you are saving some money on your monthly premiums.

When determining the true price and value of a car insurance coverage it is necessary to look at the whole package, and not just the monthly, quarterly, or yearly premiums. Some places advertise extremely low premiums, but then place the consumer in a disadvantaged position with a massive deductible in the case of an accident. Sacrificing some deductible room for lower premium costs is fine, but remember the risk involved and the relationship between the two. For example, it might be well worth it to pay an extra couple of dollars a month to be protected from car theft.

Price isn’t everything when it comes to vehicle insurance. It is definitely an important consideration, but you have to consider other factors as well. One method I recommend using is to present some of the bargain basement quotes you have collected from other insurance agencies to the one that you trust. Chances are that many of these agencies have price-match room built into their negotiation price. You likely won’t get an exact match on some of the rates (because the company with the great reputation for honesty and customer service isn’t cutting corners), but you will slice off as much of their profit margin as possible. This is how you can ultimately arrive at the best value for yourself in terms of vehicle insurance, by doing your research and then leveraging the best price out of a legitimate company, not by calling the number from some cheesy insurance commercial.

Hi, my name is Teacher Man, and I write about a variety of personal finance topics over at My University Money.

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