Is Cheap Car Insurance Always Better?
If you’ve seen one of the new Allstate commercials featuring Mayhem, you know Allstate’s message about cut-rate insurance: Cheap policies might not cover you when you need them. Although this marketing ploy seems aimed directly at competitors offering low rates, there is a grain of truth to it. There are benefits and drawbacks to cheap insurance rates, and companies must recover the cost of their premiums somewhere. Depending on your own driving history, cheap auto insurance may not give you the coverage that you need; on the other hand, you might be able to get low-cost coverage without sacrificing coverage if you are a good driver.
What Low-Cost Insurance Really Means
Auto insurance premiums vary from one person to the next depending on several factors. Depending on where you live, how old you are, what kind of car you drive, and your driving record, your rates will vary. They also vary from one company to the next. Nevertheless, it’s generally true that good drivers pay less for insurance than people with a history of accident.
If you have a good driving history, you’ll qualify for low rates with nearly any insurer. At that point, the main price difference will depend upon the discounts that you receive. For example, one company may offer a 10% discount for accident-free driving, while another could offer a 20% discount for the same thing. No matter where you go, however, your rates will be low.
Low-Cost Insurance for High-Risk Drivers
Where low-cost insurance becomes important is for people with medium or high risk. For drivers who normally cannot get low rates, the allure of cheap insurance is strong. Some companies advertise to these people, offering low-cost insurance regardless of a driver’s history or credit. In many cases, these companies also advertise to people who may currently be uninsured and need insurance right away to fill out an SR-22 form. In this case, these insurers must cut corners to provide cheap policies:
— They may offer bare-bones policies with high deductibles and low limits, or they may not offer full coverage insurance at all. The coverage will be cheap, but it also won’t protect you in all situations. You can get a policy like this from any insurance company for a low price, so you’re not limited to those that advertise highly affordable rates.
— The insurance policy may be limited, filled with exclusions or cover only certain perils. Anything not explicitly listed on the policy could be denied. For example, a policy may cover damages caused by fire and theft, but not vandalism or flooding. The insurance company should advise you of these details when you purchase the policy, but you might not know prior to purchase unless you ask.
— The company cuts costs by keeping a small staff, which can affect the quality of its customer service. The company may outsource its call centers, or it might offer customer service during limited hours.
— The company utilizes direct sales instead of agents, or it sells policies only through independent agencies rather than a dedicated sales staff. You can find independent agents in the phone book or search online, or you can just buy a policy through the company’s website after obtaining a quote.
— The company may be a subsidiary of a larger company, allowing it to service a niche market without losing profits. For example, Titan is a well-known subsidiary of Nationwide insurance. Although it operates independently, it’s financially owned by the larger company, allowing it to offer lower-than-average rates to many drivers.
Because there are so many different ways an insurer can offer low-cost coverage to medium and high-risk drivers, it’s important to review a company that claims to provide cheap insurance. Most of these companies are legitimate insurer, but there are trade-offs that you will need to make. Depending on your needs, these may or may not be worthwhile.
For example, it’s worth it to some people to have a policy that protects only against limited circumstances. They are willing to take a calculated risk on their car. Other people would rather pay more for the peace of mind of knowing they’ll always be covered. Similarly, some people place a higher value on customer service than others. Though you may never need to use your insurance, high-quality service can make any interactions simpler and more comfortable.
Once you get a low quote from an affordable company, take the time to read some reviews and also talk to a representative from the company itself. This will answer any questions that you have about the insurance and help give you an idea of what the company is like to work with. That way, you can choose the best insurance company for your needs.