Dangers of cheap auto insurance: pitfalls of choosing a cheap car insurance provider.
If you own a car, truck or other motor vehicle, most states require you to purchase Auto Liability insurance, which can protect you and your passengers in the event of a covered loss.
Auto insurance rates are based on many factors and quotes can vary widely. Among the factors that insurance companies often consider when setting rates are age, gender, driving history, and the year, make and model of the vehicle. Additionally, in some states insurers can consider credit histories (credit scoring) when providing rate quotes.
If your car is financed, your lender will likely require you carry some form of Comprehensive insurance (sometimes known as "Other than Collision Coverage"). This type of insurance protects you against damage caused by things other than a vehicle collision such as fire, hail, flood, vandalism or theft. Collision insurance is coverage that applies to your vehicle if it is damaged as a result of colliding with another object—another vehicle, for example, or a tree.
Another step is to check the credit-worthiness of your insurance company through Moody's, Standard & Poor's and AM Best. If your insurance company has a strong financial rating, chances are excellent that it will have the ability to withstand a major catastrophe, such as claims produced by a hurricane, flood, earthquake or wildfires.
Here are some tips to consider while shopping for a quality provider and affordable rates:
- Shop around: Use the Internet and your phone to obtain free quotes from several insurance companies. Additionally, if you are planning to purchase a new or used vehicle, make a phone call to your insurance agent—or prospective insurer—and obtain quotes for the vehicle. Many factors — such as different models, different engines and accessories—can impact your cost of insurance.
- Maintain a clean record: A good driving history is your best defense towards obtaining and maintaining affordable insurance. Obey traffic laws, keep a light foot on the accelerator, and—if you choose an insurer that uses credit scoring in their evaluations—pay your bills on time.
- Bundle your insurance: Many insurance companies sell other types of insurance, such as homeowners, renters or condo insurance, or mechanical breakdown protection. Consolidating your insurance policies with a single provider can create a substantial discount on your premiums.
- Drive an economical car: Insurance rates are partially based on the type of car you drive. If your vehicle has low safety ratings, a high theft rate or a high incidence of vandalism, you may pay a higher premium.