Why Cheapest Car Insurance Quote May Not Be the Best

Are you always searching for the cheapest car insurance quotes? Well, that is a very good idea but the cheapest car insurance may not mean that you have the best deal. Before I go further into this article, may be, it will be nice to share this experience of my wife with you.

As we were preparing for Christmas, she had a list of what she wanted to buy. We usually buy things ahead of yuletide period as much as possible. The reason is that, prices of some items normally skyrocket during this period. I think it is just because of the effects of high demand in the market. I guess this is as a result of the effects of the law of demand and supply. For people who are not economists, I will explain what the law of demand and supply mean. It states that, the higher the demands, the higher the price and vice versa. That is, if demands are higher than supply, price tends to go up. Apart from the fact that one is usually faced with heavy traffic if you go out to buy things around this period; prices may not be that fair for certain items like drinks and wines. Thanks to online platforms where one can easily place orders nowadays without the need to step out of your home. So, back to the story I was about telling you. Part of what my wife bought from the market was toilet tissue paper. She mentioned that the price of the toilet tissue paper was unnecessarily high compared to how much she bought it the previous time she went to the market. However, it was not long that she came back to me to tell me her new discovery. She realised that the quality of the two toilet tissue papers are not the same even though they were made by the same company. The ply of the new one she bought is thicker. Therefore, she wouldn’t need many rolls to clean herself. But in the case of the first one, you need to make a fold of many plies before it could be enough for use. So, the new one actually lasts much longer than the thin initial one.

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I am sorry if I bored you with this story but that is just the reality we all face while trying to be too frugal. There is nothing bad about frugality, it is what I practise too. However, we should come to the understanding that the cheapest thing may end up to be the most expensive. So, how does this apply to car insurance rates? People shop around in order to get and compare car insurance quotes. That is a smart thing to do. But the danger there is when you make price your only basis for the comparison. Have you ever thought of this by asking yourself a question; what will make an insurance company quote a rate that is totally outside the range of what its competitors charge? Well, there is no just one answer to this as price is relative. However, in some cases, price can be a direct reflection of the value or benefits customers will enjoy from purchasing a product or service. Here, I will tell you why the cheapest car insurance quotes may be that cheap.

Why you should beware of cheapest car insurance quotes

Insufficient Coverage: I need to be sincere with you by letting you know that some of the so called cheap car insurance quotes will only give minimum coverage on your car. That is, if your car get involved in an accident with another car, the coverage will only help you repair the other car while you will be responsible for the repair of your own car. In USA, each state sets its minimum car insurance requirements which represent the minimum coverage on the three types of car insurance coverage. For instance, if the minimum car insurance requirement is set at 20/50/25, this can be interpreted as follows:

  • $20,000 of bodily injury liability for one person in one accident;
  • $50,000 bodily injury liability for all persons injured in one accident; and
  • $25,000 property damage liability for one accident.

The minimum car insurance requirement may help you fulfil the law as you are required to insure your car. Driving a car without insurance coverage is illegal. If you are caught driving a car without insurance policy, you can be prosecuted and fined. It is not enough to have a coverage, the danger is that, minimum car insurance may not be sufficient to provide enough coverage that you need. Let’s use the minimum car insurance requirement of 20/50/25 given above for an illustration here. Supposing you cause damage to someone’s property while driving that will take $35,000 to repair, your minimum car insurance will only reimburse you up to the maximum amount of $25,000. That means you will need to pay the remaining $10,000 from your pocket. This is actually risky as you may not have that much to cough out. If you are unable to pay, the person whose property is affected can drag you to court. That is just an example how the coverage provided by minimum car insurance requirement may not be sufficient. Remember that it does not provide any coverage for fire, hail, flood, vandalism or theft at all. So, before you settle for that cheapest car insurance quote, you may need to look at the coverage it provides. If it is not sufficient, it might be better to purchase additional coverage. This will give you peace of mind.

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Poor Customer Service: Another reason why the cheapest car insurance quote may not be the best choice is that, the insurer may not have good customer service. You may not know the importance of good customer service until you call your insurer and they can’t respond to your questions or complaints on time. This can be frustrating. Some insurance companies have friendly online supports on their websites. You can even request for the cancellation or review of your policies online without you having to go to the insurer’s office. A good insurance company will not only meet its customers’ needs; it will strive to surpass their expectations. A good insurance company should engage competent staff with good interpersonal and human relational skills. However, you will agree with me that this will cost money and the insurance company may pass the costs to its customers. This will reflect in the quotes you receive. So, insurance companies without good customer service may not incur much cost. This will make their quotes to be cheaper. Therefore, if your plan is to go for the cheapest car insurance quote, you should equally know the level of customer service to expect. Remember that what you pay for is what you will get.

Poor history of claims payment: The purpose of car insurance is not just to fulfil a legal obligation. It is for you to be able to file a claim and be reimbursed anytime there is need for it based on the coverage that your insurance policy provides. There are insurance companies with bad reputation when it comes to honouring claims. They will have hundred and one reasons why they will not pay your claims. That is why you should not just read the terms and conditions of the policy, you need to ensure you understand the fine prints. If there are certain clauses you don’t understand, you should endeavour to ask for explanations. You can even engage an insurance agent so that you can be at safer side. Insurance may contain some jargons that laymen may not be able to understand. Insurance agent will help you crack all the hard nuts you may not understand. It will also make sense to go online to research more about the insurance company. Read customers comments about the insurer. There are also review websites where you can read about the strengths and weaknesses of the popular insurance companies. If you can’t find your choice insurer on such websites, you may need to have a rethink. It could be one of those fake companies that open business today that will suddenly disappear into the thin air. I need to mention that you may not totally depend on the information you get on review websites as some of them are affiliates. They can decide to write good things about the companies that they are affiliated to in order to motivate customers to make buying decision. They earn a particular percentage as commission on every sales initiated from them.

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No discounts or other benefits: At times, it only costs little extra to enjoy adequate coverage on your car. Good enough, some insurance companies do give discounts to their customers that purchase their standard policies. But if you go for the cheapest car insurance, you may not be able to enjoy any discount. Also, insurers do advertise some packages and special benefits to customers that buy their products. This perks are usually available to people that buy the standard package and not people that only buy minimum car insurance. At times, you may not know what you are missing when you are trying to be too frugal.

Deductibles: One of the things people do to get the cheapest car insurance quote is to increase their deductible. What is deductible? Deductible is the amount you, as a policy holder, must pay towards repairs that need to be carried out based on the coverage your insurance provides before the insurance company pays its portion. The higher the deductible you set for yourself, the lower the car insurance rate you will pay. The downside is that if the deductible is set too high, you may find it difficult to meet your own obligation. And without you first paying your deductible, the insurance company will not pay its share.

One thought on “Why Cheapest Car Insurance Quote May Not Be the Best

  1. I agree. We shopped around for cheaper car insurance this year with the hope of saving some money as some of our other expenses are climbing a bit more than usual (health/dental insurance). Also, we had to add a teenager to our policy. We’ve been with the same company for many years. We called around based on a few recommendations on Bogleheads, but even the “cheaper” ones were generally not as good for one reason or another. I also work for the state, and the state-offered insurance couldn’t match it. One rep even told us we probably wouldn’t find anything better than what we already have. (I realize there are many different factors as to why one company is better or cheaper than another for a given person or location).

    On top of that, if you have a bundled homeowners/auto insurance policy, you lose the discount if you go with another company for just auto insurance.

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