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How to Get Cheap Car Insurance

Getting cheap and reliable auto insurance without sacrificing coverage may seem impossible, but it doesn’t have to be. Cheap auto insurance is available to those who know where to look for it. A little bit of online research and comparison of insurers can lead to savings of hundreds of dollars every year.

You may have often wondered about why your auto insurance has to be so expensive. The reason is that insurers decide your premium and other charges based on your risk profile. Well, not exactly.

They decide your premium based on the risk profile of people “like” you – people in the same age group, who have similar lifestyles, cars and driving habits. Your history of insurance and traffic violations are also considered and a computer usually draws up your risk profile and calculates your premium and other charges.

Another aspect of the insurance underwriting process, which cannot be neglected, is that different companies work with different guidelines. This means that not all insurers will offer you the same rate.

The best way to ensure that you are not paying extra for your insurance is to use an insurance comparison website. 

Most people are under the impression that when it comes to auto insurance, expensive equals good. But the truth is that the auto insurance is highly competitive these days, and it is possible for an informed person to shop around and get the same coverage and benefits for a lower price. Moreover, not all types of coverage are necessary. If your insurance agent is honest, he will tell you that there a number of coverage options that are neither required by law, nor make any economic sense.

Your insurance cover must be adequate to cover all your assets. Any coverage that you purchase on top of that has to be considered from a marginal utility point of view. That is, is the extra protection offered by the cover worth the extra amount that you need to pay for it?

Collision cover takes car of the repair expenses and replacement cost of your car after an accident. Comprehensive coverage insures loss due to theft or damage due to fire, flood etc.  Both of these covers are compulsory if your car is brand new or if you have purchased it on a loan.

On the other hand, many people overlook the fact that if your car is old and not worth very much, it makes no sense to pay for comprehensive and collision coverage.

Over the years, the premium that you pay will probably be worth more than the car. Your insurance agent should be able to analyze each client on a case-by-case basis to decide exactly what each one wants, instead of selling blanket and generic insurance packages.

Optional covers like the underinsured/uninsured motorist coverage can be useful and there is no question about their marginal utility. On the other hand, as mentioned earlier, collision and comprehensive cover is not worthwhile if your car is old, not in the best condition or not worth a great in market value.

PIP or personal injury protection covers medical, funeral and related expenses for your household. While this is a good idea in itself, if your health and disability insurance is comprehensive, this cover can be redundant. In that case, you can make a great saving by choosing the minimum amount for this cover.

Property-damage cover removes the liability of the insured to replace other people’s automobiles and property. With this cover, it is actually a good idea to increase your cover, as state minimum requirements are a usually poor guide on the cost of acquisition of a replacement car.

To find out about the rates offered by different insurers, you can check quotes from the websites of the individual insurance companies, but a better way would be to use one of the many websites out there, that allow you to compare quotes from a number of insurance companies.

These websites are not only easy-to-use, but are also extremely useful in weighing the pros and cons of each insurer, in relation to each other. Some of these websites even provide live access to insurance professionals and experts online, through chat or via phone.

The first step is to make a list of exactly what you want in your insurance coverage.

* The amount of coverage that you need. State law stipulates the minimum requirement.

* Your deductible and premium have an inverse relationship. You need to decide on a balance between premium and coverage.

The online system will also require some of your information.

* The make and model of your car, along with the anti-theft and other safety devices in the vehicle.

* Any other relevant information on your driving habits.

When you have all the information that you need, getting the quotes from the insurance comparison companies is straightforward. Apart from insurance cover and price, you also have to take into account the nature of your insurance company.

Low premium or excellent coverage does not make up for terrible customer service or if the insurer is not prompt with claims when it matters the most.

Consumer Reports publishes the service ratings of large insurers, but then of course, no consumer report will be better than a personal insurance referral. If you know anyone who has gone through before with a particular company, use that person’s referral. If not, you can also ask a company representative about their claims processing time.

In troubling financial times such as these, it is also not a bad idea to check the financials of the company.

An A rating or higher from Standard & Poor's or an AA ranking or better from Moody's Investor Service is a good indicator of financial strength. An A or AA rating from one of the top insurance rating agencies (S&P, Moody’s, Weiss) is a great indication of the financial well being of the company.