There are millions of cars in the USA and all need insurance. There are many companies operating in a given zip code as well. Everyone is going for similar types of clients; good, mature drivers who would not cause them many problems by placing claims. If you are a good driver over the age of twenty-five with several years of no claims history and good credit standing you have many companies wanting your business.
The bigger the policyholder pool the better the risk is spread and therefore it would not be a surprise if the largest auto insurance companies are the ones offering great rates. Bigger companies tend to have cutting-edge technology in terms of underwriting and claim handling as well. So, you should not assume that cheaper insurers would be some unknown ones. You should always get a few quotes before making up your mind.
Advantage 1: Cheap Auto Insurance Policies Save Money
Even if motorists get quotes from only top 10 car insurers, they will see that there will be at least 20% difference between the most expensive and the cheapest for exactly the same coverage. This will bring around $25,000 to $30,000 savings over the driving life of an average person. This figure is more than you can ignore. You can buy a decent brand-new automobile for this amount.
There could be many reasons for why company A would be cheaper than company B. Some of them can be taken as pretty good signs. Running an efficient underwriting, administration and claim handling departments is one of them. When a car insurer does not waste money, they can afford to charge less to their customers. Another good reason is that they may be content with lower profit margins. They would be if they have millions of policyholders as compared to a small company that needs to pay fat cat wages with profits from a small number of policyholders.
Advantage 2: Good Drivers Can Make the Most of Competition
There are drivers who have not claimed for years and they are unlikely to claim in the near future. There are some who have never claimed over the last fifty years they have been driving. Those drivers buy insurance because it is a legal requirement and they sleep well at night knowing their vehicles are insured. If you are one of those drivers you just want decent coverage at affordable prices.
Luckily most companies are looking for policyholders just like you and willing to cut their rates to get you. Those companies are generally the big ones as they tend to stay clear of high-risk drivers and go for good ones. Managing risk is everything for many insurance providers. By choosing the lowest risks they reduce possible claim payouts and stay ahead of the rest. They can weather the hard times better as well.
Considering that a happy policyholder will stay with the company for years it is not hard to imagine how they make their money. If a vehicle insurance company is relying on policyholder retention and word of mouth for adding new customers, they would have to offer great service. Also, the bigger the firm is the costlier the bad publicity. Many people may believe that they will get cheaper quotes from smaller firms. This may not really be the case most of the time.
Disadvantage 1: There Is a Possibility of Reduced Services When Prices are Cheaper
It would be naïve to think that we can have it all every time. To maintain low prices companies will have to; employ cheaper workers like overseas call centers and reduce the number of workers by being more internet reliant instead of being available on the phone. This may lead to slight delays in handling automobile insurance claims and it may take a while for the support staff to get back to you or answer your phone.
Again, this may look particularly disadvantageous if you are likely to have claims and need contacting the company. If you are unlikely to contact the company it may not be a big concern. Also, you may think that what if it takes a week longer to finalize your claim as long as you can save a sufficient amount of money.
Disadvantage 2: Mind Who Is This Cheap Car Insurance Company
In search of cheaper and cheaper policies drivers may end up at the bottom of the barrel. You need to know when something cheap is too cheap to be reliable. When most companies are quoting around $1,500 premium you have to be cautious when you see a quote for $800. First thing you have to make sure is that they are quoting on the same basis. They may have missed out part of the coverage. Secondly you need to check if the company is reliable.
Check that the company you are told is the company behind your policy. Make sure you receive your policy quickly if you bought it through an intermediary. Also, check that details are accurate and coverage as agreed when you receive it.
Yes, it may be a boring task to deal with insurance details. However, it is important to take a little time to arrange it properly. You need to get the coverage right, insurer reliable and premium low.
