You Get What You Pay For
So often, when I mention that I sell insurance, people will ask about our prices. Many people expect high-quality insurance for dirt-cheap prices. If you believe it's possible, then I have a lake house in Arizona to sell you. To get the best insurance for your needs, move beyond the mantras you see online.
If you want the lowest possible price for your auto insurance, be prepared for some major headaches if you ever need to use that insurance. The lowest priced carriers often sell you a piece of paper to keep you legal. Some of these low-cost carriers hide behind fine print and an aggressive legal team.
Imagine that you have liability-only coverage for your car with a low-cost carrier. You have a perfect driving record and are going to the grocery store. You are at a stoplight and the signal turns green. Then you drive through the intersection and boom! The other car came out of nowhere and t-boned your vehicle. The other car ran a red-light causing significant injuries and a total loss for your vehicle. The accident causes you to be stuck in the hospital for days, then the recovery begins.
The recovery goes on for over a month before you have time to file your claim. The driver of the other car also has liability-only coverage with a low-cost carrier. Unfortunately, when you attempt to file a claim with the carrier of the driver at-fault, they refuse to pay. This low-cost carrier put some legalese in the fine print that prevents you from collecting the claim if you file after 30 days.
State law may prohibit this practice since the law states you have at least 90 days to file the claim. However, the low-cost carrier is armed with their aggressive legal team and you don't have the money to fight off these lawyers. These situations don't always work out well for the insured trying to collect for their vehicle damage.
With any type of insurance, the annual premiums can be lowered through higher deductibles and lower coverage limits. Think of the deductible as a form of self-insurance in the case of a minor loss. The lower the deductible is, the higher your premium will be. You either pay for the insurance upfront or later on when you file a claim.
A higher deductible gives the insured less flexibility to file a claim for claims that may be within the deductible limit, but outside of their emergency spending budget. According to Bankrate's 2018 financial security index survey, only 39% of Americans have enough savings to cover a $1,000 emergency. The extra $20-$30/month in premium could mean the difference between a $1,000 deductible and a $2,500 deductible or greater.
At Statewide, we always advise and warn our clients that cheaper insurance is not always cheaper. You may pay a lower premium and have less coverage. This lesser coverage with a stingy carrier could cause some serious financial pain later on. The difference between a low-cost carrier and a high-quality carrier can be thousands of dollars when it comes time to collect on a claim.
Next time when you shop around for insurance, make sure you ask your agent about the carrier, the deductibles, and coverage limits. As a consumer, you have every right to know what you are purchasing and what you get for the price.