Almost all car owners have to fit car insurance into their budget – and it’s tighter than most prefer. So if you come across dirt-cheap auto insurance, you could be pinching yourself. But can getting “a great deal” really be risky?
“TV ads sell consumers a general cargo,” said Chris Boggs, vice president of education at the Academy of Insurance, an online training center. “They convince (people) that it’s all about the price.” But that dream deal can have unwanted financial consequences.
Beware of Fraud
For consumers looking for cheap auto insurance, one of the worst-case scenarios is encountering unscrupulous or fraudulent agents. Some so-called agents are just skilled scammers. They use real names of insurance companies, present realistic documents and even send insurance proof cards. It’s not until you try to make a claim that you realize you didn’t have an actual policy.
Be wary of “agents” aggressively pursuing you, says Bob Hunter, director of insurance for the Consumer Federation of America. If in doubt about whether an agent is legit, Hunter recommends checking your state insurance department to verify that the person is an authorized agent.
Don’t give up cover
Cheap auto insurance rates may seem great these days, but not at the cost of the coverage you may need later on. It is important to understand what car insurance covers? so you make the right choice, not just the cheapest choice.
For example, while it may be tempting to accept a bare-bones policy with a low amount of liability coverage — and the resulting bargain price — evaluate what you have to lose in the event you cause a major car accident with damage and injuries to others. If you have significant assets, you are a good target for a lawsuit and will not have enough insurance to cover what you owe.
While buying a policy with high liability limits means paying more now, you could save thousands if you cause an accident.
Remember that quotes can change
In some cases, a great quote chops you up a lot lower than the final price for your policy. For example, you may forget to include past accidents in your inquiry and get lower quotes than you should. Other times, companies offer initial rates before examining certain risk factors, such as your creditworthiness (in states that allow credit as a factor in auto insurance quotes).
Hunter also warns against insurers that offer first-term deals but raise prices on renewal. Don’t be too comfortable with one insurer, he warns, and always be ready to implement Plan B: request new quotes and switch insurers.
Even if you’ve found a real bargain, you don’t want to sacrifice customer service. You can read customer opinions on the Better business agency, for example, or check JD Power satisfaction ratings. You might even hit the jackpot.
“Some of the (top rated) insurers have low rates, like USAA,” says Hunter.
Don’t go so low that you end up sunk.
3 signs your auto insurance quote is too good to be true
• Alarmingly low prices. Auto insurance quotes vary considerably, but anything 30% to 50% lower than the competition should be examined carefully.
• Your agent “haunts” you. If your agent is suspiciously hard to reach or doesn’t provide contact information, it’s possible you’ve been caught.
• Press to buy now. Scammers may push you to sign right away or warn you that the deal won’t last long. That tactic can fly at a flea market, but that’s not how car insurance works.
MORE: Compare car insurance
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