3/20/2013 3:30 PM ET|
7 gotchas of cheap car insurance
You may think a nonstandard policy is a great deal, but make sure it really provides the coverage you expect to have.
Some insurers promise cheap car-insurance rates even if you have a string of speeding tickets or bad credit.
How can they do it?
The answers are in the fine print of their car-insurance policies. Behind a seemingly great bargain could lurk a series of exclusions and limits that reduce the likelihood you can file a claim.
But you can't tell solely by the price they charge. Shopping for affordable insurance isn't like shopping for cheap gas. One insurance company's quote could exclude coverage that another might include at the same price.
"It's OK to compare prices, but once you see the prices, you have to find out what's covered and what's not covered and make sure you're comparing apples to apples," says Penny Gusner, a CarInsurance.com consumer analyst.
If you're a low-mileage driver, you might want to look first at what are known as "pay-as-you-drive" plans and consider other common types of car-insurance discounts. If none of those seems like a good fit, here's what to watch out for as you explore other options.
7 fine-print gotchas
Preferred or standard car-insurance policies are geared to drivers with clean or moderately clean driving records and decent credit ratings. Nonstandard policies are designed for risky customers who don't qualify for standard or preferred rates. Some are written specifically for specialty cars, such as a Ferrari or a restored '57 Chevy.
Smaller companies that specialize in catering to high-risk customers or classic-car owners used to dominate the nonstandard market. But today, many major insurers, such as Allstate and State Farm, sell both standard and nonstandard policies.
With nonstandard car insurance accounting for about a fifth of the private passenger auto insurance market, according to industry analyst Conning & Co., it's easy to see why insurers want a piece of the action. But no insurance company is going to take on extra risk without offsetting it, either by charging higher rates, reducing coverage or both.
Here are seven surprises that might be hiding in cheap, nonstandard policies:
No. 1: No coverage, or reduced coverage, for some drivers
Generally a standard policy covers you, the listed members of your household and friends or relatives you let borrow the car occasionally.
But if you have a risky driver living with you -- a teenage boy with a speeding ticket, for instance -- a nonstandard policy might require you to exclude him from coverage.
Some nonstandard policies also exclude coverage for “permissive” drivers -- people who use your car occasionally with your permission. Or they might exclude coverage for permissive drivers under age 25 or 21.
In some states, insurers can include step-down provisions in their policies. Under a step-down provision, the liability limits are reduced to state required minimum levels when someone who's not named on the policy drives your car. So even if you pay for higher-than-required liability coverage, you could have less protection when you let a friend borrow your car than when you're driving.
No. 2: More driving-record checks
"If you're a preferred driver, an insurance company may check your driving record once a year or maybe once every other year," Gusner says.
But if you already have a checkered driving history, the insurer might check your driving record every six months, before each coverage term begins, so it can adjust the premium accordingly.
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they do background checks on us, but why are we not able to check their background? I work for a national chain body shop company thats neeb in business for over 30 yrs, and ive delt with almost all insurance companies and there are only a few that will take care of a customer with proper OEM parts, rentals and any possible other problems and concerns a customer has or even we as a body shop would recommend repairing or replacing. i have found that State Farm & Liberty Mutual is one of the best insurance companies and AllState is the worst. Which just comes down to proper repairs and replacement of parts. Allstate offers one of the cheapest insurance policies out there. Why are they so much cheaper, its because when you should happen to get in accident, they will repair your vehicle with nothing but junk aftermarket, chinese parts that dont fit right, molded right and are just junk. They will use these parts due to their price is so much cheaper. for instance the OEM bumper cover is $300.00 and the aftermarket cover would cost them $75.00. This is why they sell policies so cheap. When i get into a accident I want my vehicle restored to what the manufacture built my vehicle not have all these junk china parts installed on my 2010 Camaro or Mustang. We want the USA to thrive and keep jobs but with the insrance companies buying these parts and putting them on your vehicle we are just sending are money over seas.I tell my customers you buy cheap you get cheap.
I was ripped off by an insurance company that I was with for a very long time. They don't care, I wasn't enough to hurt their bottom line. Getting tossed back and forth from my agent to the idiot handling my claim. The check was in the mail and if I didn't like it.. they FLAT OUT TOLD ME to SUE THEM. Insurance Company's have a special place where they can rot in Hell for all I care...
I was with the same insurance company since I got my first car as a teenager, (over 20 years ago). My parents used them for over 30 years. Know what I got when I had my first accident? HALF, yes, that's right, HALF of my cars value, (I took the averages from several websites, Kelly Blue Book, Edmunds, and NADA.) I had to DOUBLE what they gave me to REPLACE my car. (NOTE - I was NOT asking for a brand new car. Just the value of my old one and what it would take to replace it with a same year, same options, similar mileage vehicle). I had asked on three separate occasions if my car had enough coverage and if it was covered for REPLACEMENT COST (MY replacement cost, what it would take me to get the SAME vehicle back if it was totaled, not a new one), all three times the slime ball said YES, then took my money. (I had even inquired about some type of collector car coverage or anything like that and he told me that I was fine and that I didn't need it.) After the accident he told me that he was sorry but he didn't have anything to do with that part of the claim, and I had to call some claims adjuster. She just said the car is totaled, WOULD NOT give me an amount, WOULD NOT tell me how much actual damage my vehicle had sustained, nor tell me WHERE MY CAR WAS towed to, (just that it was in one of their "secured lots"). After many, many, many calls, she finally gave me an amount, and told me if I didn't like it to sue them. (I bought the car back for salvage value because I made more off of the parts/new tires, etc. than she sent me a check for.)
ANYBODY that tries to sell you the SAME coverage for MORE money and INSISTS that you shouldn't be informed and/or shop around is a crook. LOYALTY means nothing any more.
Needless to say, I shop around for the cheapest (same/better coverage, and yes, I actually read my contracts) insurance now, and it's all been better coverage than those jokers ever gave me.
I understand most of the underwriting criteria insurance companies use to rate auto coverage. But I could never understand why a person's credit rating has an impact on their rates! The premiums are not financed. If the insured stops paying the premium, coverage stops. I can't imagine how a person's credit rating can make him/her a better or worse driver.
Can any one out there explain this to me?!
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