That dirt-cheap car insurance quote can wind up costing you
Almost all car owners have to fit auto insurance into their budget — and it’s a tighter squeeze than most prefer. So when you stumble upon a dirt-cheap car insurance quote, you might feel like pinching yourself. But can getting “an amazing deal” actually be risky?
“TV ads sell consumers a bill of goods,” says Chris Boggs, vice president of education at the Academy of Insurance, an online training center. “They’re convincing (people) it’s all about price.” But that dream deal could bring unwanted financial consequences.
Watch for fraud
For consumers chasing cheap car insurance, one of the worst-case scenarios is running into unscrupulous or fraudulent agents. Some so-called agents are simply skilled swindlers. They use real insurance company names, present realistic documents and even send proof-of-insurance cards. It’s not until you try making a claim that you realize you weren’t holding a real policy.
Be wary of “agents” who are aggressively pursuing you, says Bob Hunter, insurance director for the Consumer Federation of America. If you’re suspicious about whether an agent is legit, Hunter recommends checking your state department of insurance to verify that the person is a licensed agent.
Don’t sacrifice coverage
Cheap car insurance rates may seem great today, but not if they come at the expense of coverage you might need later. It’s important to understand what car insurance covers so that you make the right choice, not just the cheapest choice.
For example, although it can be tempting to accept a bare-bones policy with a low amount of liability coverage — and the resulting bargain-basement price — evaluate what you have to lose in the event you cause a major car accident with damage and injuries to others. If you have significant assets, you’ll be a good target for a lawsuit, and you won’t have enough insurance to cover what you owe.
Although buying a policy with high liability limits means paying more now, you could save thousands should you cause an accident.
Remember, quotes could change
In some cases, an amazing quote that hooks you is quite a bit lower than the final price for your policy. For example, you might forget to mention past accidents on your application and get lower quotes than you should. Other times, companies offer initial rates before examining certain risk factors, like your credit (in states that allow credit as a factor in auto insurance quotes).
Hunter also warns of insurers that offer first-term deals but bump up prices upon renewal. Don’t get too comfortable with one insurer, he cautions, and always be ready to implement Plan B: getting new quotes and switching insurers.
Even if you have found a real bargain, you don’t want to sacrifice customer service. You can read customer opinions on the Better Business Bureau, for example, or check satisfaction ratings from J.D. Power. Maybe you’ll hit the jackpot.
“Some of the (best-reviewed) insurers do have low rates, like USAA,” Hunter says.
Just don’t go so low you end up sunk.
3 Signs Your Car Insurance Quote Is Too Good to Be True
• Alarmingly low prices. Car insurance quotes vary significantly, but anything 30% to 50% lower than the competition should be scrutinized carefully.
• Your agent "ghosts" you. If your agent is suspiciously hard to reach or doesn’t provide contact info, you may have been had.
• Pressure to buy now. Crooks may push you to sign right away or warn you that the deal won’t last long. That tactic may fly at a flea market, but it’s not how auto insurance works.
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Alex Glenn is a staff writer atNerdWallet, a personal finance site. Email:aglenn@nerdwallet.com
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