Insurance provides financial protection and peace of mind and it comes in many different forms. We have health insurance to protect against catastrophic illness, life insurance to protect against sudden death, and accident insurance to protect against a crippling mishap. But among all types of insurance, the most common of them all is auto insurance. The majority of state governments require at least a minimal level of car insurance and while a few people manage to circumvent these laws and cruise the highways protection- free, the vast majority of individuals do, indeed, purchase auto insurance; not necessarily because it's the law, but because it protects against expensive lawsuits, costly car repairs, and lengthy loss of vehicle. We all know the local body shop is busy replacing smashed fenders, shattered glass, and broken accessories resulting from a collision.
Many people resent the financial service known as insurance because they feel it is money down the drain. But most people recognize the usefulness of insurance and understand fully its use as a means of protection against loss. But how does one go about purchasing auto insurance? What is really necessary? Are some protections overpriced and unneeded? Let's take a closer look at the car insurance buyer's dilemma:
What are Important Considerations when shopping for auto insurance?
Several important factors must be considered before accepting an agreement to purchase insurance for your car. Among them are:
Premium Car Insurance Rates: This is the most common reason cited for "shopping around" for a new car insurance policy. Always looking for a way to save a buck, consumers are naturally drawn to insurance companies that offer the cheapest car insurance. Differences are generally small from one provider to the next, thanks to the market force of competition leveling- out the prices charged by most auto insurance providers. But most auto insurance holders are ready to look for a new and better deal when their expiration date draws near, and with a little shopping around, car insurance rates can be reduced by anywhere from five to fifteen percent.
Amount of Insurance Coverage Desired: Another important consideration is the amount of insurance protection desired. Do you want protection against bodily injury? How much protection? What about full collision coverage, to guarantee that your car will look exactly the way it did before the accident? Does uninsured motorist insurance have any appeal? These and other questions need to be answered when comparing auto insurance companies, and everyone's situation is a little different. For example, if you own a new or late model vehicle, then full body coverage is probably important. For someone who owns an older vehicle, this type of coverage is probably not worth the money because the cost of repairs (both parts and labor) would likely be greater than the value of the vehicle itself.
Amount of Deductible: Keeping car insurance rates to a minimum takes some adjusting of coverage, but the greatest way to easily reduce premium costs is to increase the insurance deductible. As many already know, the deductible is the amount of money that must be paid out of pocket, before the insurance company will contribute its share of the total repair cost, liability payments, hospital charges, etc. With a low deductible, premium rates are very high because the insurance company knows it will have to pay a very large share of the total cost of an accident. By increasing the deductible to $500 or even $1,000, the premium rates will be drastically reduced. The reason is simple: With a deductible of $1,000, the car insurance companies know that many small accidents, like fender benders, will not cost them any money at all because the total repair cost will very likely be below $1,000. Some consumers worry that a high deductible will cause financial hardship because they will have to cough up the full deductible amount in case of an accident. It is true that a high deductible will cost a large amount of money up- front, but the savings from reduced premiums will easily offset this added cost. If you're a safe driver with few accidents over a long period of time, then it makes good sense to increase your deductible to the highest level possible.
State Requirements: The majority of states require that citizens who own a vehicle also have some type of auto insurance coverage. This requirement varies greatly from state to state. In some states, simple liability coverage (protection against lawsuits and nothing more) is the only requirement. But other states have far stricter rules and require a minimum amount of coverage to the body of the car as well as a minimum amount of bodily injury coverage, as possibly liability protection. Some research will be necessary to determine how much coverage is required in your state.
Claims Processing: Some car insurance companies have a positive reputation for processing claims quickly and for making claims easy to file. The ease of filing can take on many forms, and there are some considerations that consumers may not even think about when they select an insurance provider. For example, some insurance companies make the process as easy as possible by accepting a repair quote directly from a repair shop of the customer's choosing. Other auto insurance providers require that the quote be made by one of their own agents and they will refuse to pay a repair or other bill that exceeds this estimate by more than a few percentage points.
Branch Office Locations: There was a time when auto insurance was provided by a local agent and some customers liked the interaction with their insurance agent because of the personal element. Today, however, the game has changed and many consumers purchase insurance without the aid of an agent; researching and buying their insurance coverage via the internet or over the phone. Because of this, some car insurance companies do not even offer branch offices, preferring instead to conduct all of their business online. If you're the type who likes the personal interaction with an agent, then you will want to limit yourself to auto insurance companies that have branch offices in your local area.
Online Presence/Features: Since so many consumers research and purchase their auto insurance online, it is imperative that a web site offer a functional web site with plenty of features and an intuitive design. At a minimum, an online car insurance web site should offer account management, the ability to submit a claim and track its progress, general education on insurance, car insurance quotes for different types of insurance and different coverage levels, and the ability to make payments online.
Size/Reputation of Company: Large auto insurance companies might seem less personal than their smaller competitors, but they usually offer greater financial stability and a reputation for paying claims that is backed by years of experience. Smaller companies do not always have the financial solvency of their larger brothers, and hence might prove to be riskier to purchase insurance. Consulting an insurance ratings company is a good idea, to protect against buying auto insurance from a company that may not have the ability to pay its claims.
Who are the best Auto Insurance Companies?
Cheapest Car Insurance: If lower than average premiums is your goal, the first thing to do (like mentioned above) is consider reducing your coverage levels and/or increasing your deductible. If you still feel your auto insurance rates are too high, then it's time to conduct some shopping and when the process is completed, don't be surprised if the lowest rates quoted to you are from Geico Car Insurance. Geico has built a reputation for keeping rates low and it is able to match or beat just about any competitor's price. Among smaller, less well- known auto insurance companies, Amica Insurance and Erie Insurance also rate highly for affordable car insurance rates. These smaller companies do not have the name recognition that Geico enjoys, but their low rates are often just as good or very close to those offered by Geico.
Best Car Insurance for Branch Locations: Several different auto insurance companies still offer branch services, and some report that their local agents are their primary source of sales. Among these localized auto insurance companies, State Farm gets the nod for having the most accessible branch locations. State Farm started its auto insurance offering in 1922 and it has ranked at or near the top in terms of agents and branch locations for the majority of its years in existence.
Best Online Car Insurance Site: Some auto insurance companies operate exclusively via the internet and do not have any branch locations at all. The majority of auto insurance companies, however, get their sales from both local agents and the internet. One company that offers a small number of local offices and conducts the majority of its business online is Geico, and its web site ranks as the best of them all. Practically anything can be conducted using the Geico web site, including account management, processing of claims, rate quotes, news, and tips on how to save money on your auto insurance. Since Geico conducts a large percentage of its business online, it makes sense that this auto insurance provider would invest a large amount of time and money in its online presence. Progressive Insurance ranks a close second to Geico, with insurance offerings and web site functionality that is almost as good as Geico's.
Car Insurance Company with the best Customer Service: Customer service is very important to most consumers. Even those who claim it doesn't matter that much are quick to tell a story about a bad customer service experience and one bad experience is often all it takes to ruin an individual's impression of an insurance provider (or any other company, for that matter). Some auto insurance providers, however, seem to go out of their way to provide great customer service while others are more concerned with offering the best possible prices. One company that consistently scores high in customer service surveys is USAA Insurance. Ratings companies like J.D. Power consider USAA one of the best auto insurance companies in the United States, based on customer surveys. The only drawback with USAA Insurance is that its services are limited to those customers who have a military connection of some sort. Among insurance companies available to the general public, Erie Auto Insurance is a good choice, but its ratings are still slightly lower than those of USAA Insurance.
Best Overall Auto Insurance Company: When all things are considered, the auto insurance provider that ranks the best of all is Geico. Not only does Geico offer low rates and an excellent online web site, it also enjoys a solid financial rating from A.M. Best, above average marks from J.D. Power and other rating companies, and quick claims processing that basically puts the customer in charge and caters to his/her needs. There aren't many branch locations for Geico, so it isn't always easy to get personalized, face to face service. But the other plusses offered by this insurance giant make it the best choice among auto insurance providers.
Some Well- Known Auto Insurance Companies:
Those who seek to learn more about car insurance products and services; get car insurance quotes online; find car insurance rates; etc. may want to consider the following online car insurance services:
NetQuote.com- NetQuote bills itself as the most popular insurance comparison site on the internet, and it is easy to see why. The service is quick and easy, requiring the entry of a five- digit zip code to get started. From there, it is only a matter of entering some basic information and answering a few questions. Within minutes, NetQuote will return a list of possible auto insurance providers in the local area and via the internet. Personal information will also be sent to local agents, so don't be surprised if you use NetQuote and suddenly notice insurance offers in your e-mail inbox.
CarInsurance.com- This web site is another useful tool for receiving quotes on auto insurance and it works in a similar way to NetQuote. CarInsurance.com offers a learning center complete with questions and answers about auto insurance; glossary of auto insurance terms; minimum insurance requirements by state; links to State Motor Vehicle Departments; and more. CarInsurance.com also has special links for auto insurance quotes for residents of Canada and the U.K.
A.M. Best Company- This is an excellent online resource for assessing the financial strength of an auto insurance provider. This rating company grades auto insurance providers on a number of factors that determine the financial solvency of an auto insurance provider, its ability to pay claims, etc. A.M. Best then rates each auto insurance company with a grade from A++ (superior) all the way down to F (liquidating). As a general rule, an insurance company should have a rating of at least B+ to ensure financial security.
JD Power- JD Power is also a ratings/rankings service, like A.M. Best. But the ratings at J.D. Power are a little different. They are based not on financial strength, but on customer satisfaction. J.D. Power sends out surveys to auto insurance customers and asks them a wide array of questions. The results of the surveys are included in the web site.
Shopping for auto insurance is much faster than it was in the past. In the days of yesteryear, a potential customer was forced to call individual agents in the local area and obtain quotes. The process was slow and agonizing, and it often reached a point where the customer would get tired of waiting and decide on a company based on only a few insurance quotes. There might be better offers available, but the research process wasn't worth the effort.
With the invention of the internet, auto insurance is very simple to research and multiple quotes can be obtained in a matter of minutes. Customers can visit the web sites of individual companies to obtain quotes, or they can logon to a general site like NetQuote.com and receive multiple quotes all at once. This makes shopping for auto insurance somewhat of an adventure. It is so easy, many consumers get quotes even when they are not currently in the market for auto insurance.
Auto insurance rates vary slightly from one provider to the next, and the differences are often so slight that many consumers will base their finial choice on other factors, like the online presence, the quickness of claim processing, or some other important consideration. One other thing to keep in mind is the possibility of purchasing multiple insurance policies from the same company. In some instances, an auto insurance provider may offer home owners and other types of insurance. By purchasing two or more policies, the consumer is often rewarded with a bundle discount, leading to an annual premium cost that is lower than what any company can provide, including the most inexpensive discount insurance companies in the market, like Geico.
Many methods exist for lowering auto insurance premiums, and consumers should think carefully before they pay big dollars for services they will likely never use. For example, $150,000 in bodily injury coverage might seem like a good idea and it may give some people peace of mind. The same is true of a low $100 deductible or full collision coverage. But consumers need to think about the necessity of these high levels of coverage before making a purchase. Greater security might be achieved, but the strain on the family finances due to higher premiums will quickly erase any positive feelings of well- being.
Auto insurance is, like many other insurance products, a necessary evil. It drains our pocketbooks each month and we have nothing tangible to show for the expense. But auto insurance still has its place and, when compared to the cost of health insurance and other insurance products, the price is relatively low. Proper research can result in even greater savings, and it can lead to the right coverage for the situation at the lowest possible price. A little investment of time- and access to the internet- is all it takes to compare different insurance companies and find the deal that is best for you.
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