Is ‘Cheap Auto Insurance’ Really Cheap?
It is amazing how much literature has been written about the car insurance business online. The main approach in use by the bulk of the writings is in the direction of selling car insurance, rather than offer it in the proper context of insurance product or ‘a product to protect your assets and wealth.’ That is why when searching for the phrase ‘auto insurance’ a large number of websites emerge with the ’selling’ phrases like affordable auto insurance, or cheap auto insurance or low cost auto insurance.
According to Google AdWords there were 74,000; 8,100; 9,900 monthly searches for the above key phrases, respectively, at the time of publishing this article in February 2011. In contrast, there were only 110 monthly searches for the phrase ‘reliable auto insurance’, 170 monthly searches for ‘quality auto insurance’, and 8,100 monthly searches for ‘top auto insurance companies.’ It is rather easy to come to a conclusion that most of the auto insurance searches on line are price oriented, not quality oriented.
A basic principle in marketing is to understand what people ‘want’ and design and package your product or service to meet what the folks want. Looking at those numbers we can tell that most people want cheap auto insurance. As a marketer, if you design any campaign without considering that analysis you may eventually flunk the marketing tests, close your website and go do something else.
So what’s the difference between auto insurance polices? From a ‘financial planning viewpoint’ car insurance comparison should never be based on price only, and perhaps most people agree that cheap insurance is not necessarily the best car insurance. But what most people do not know is that an insurance policy with the best rated company may also be one of the most problematic contract. An auto insurance policy should be compared in reference with three factors:
1. Premium: Certainly, lower premiums are better, assuming other things are the same.
2. Insurance Company Rating: Non standard insurance carriers are less stiff than their standard or preferred counterparts concerning past violations found on the MVR of the operators and the financial credit score of the insurance applicants. However, non standard companies are harder than others in customer service and paying claims. Most of consumer complains come from practices of non standard insurance companies. At the same time where preferred companies do not hesitate to quickly pay for smaller claims suck as nine or ten thousand dollars claim, or even little more; all insurers from top to bottom will examine the insurance application to see if they have to or do not have to pay a $100,000 claim.
3. Liability Limits. This is the most ignored, least understood, but is the most important aspect of the policy from a financial planning standpoint. Liability limits affect customers during time they need the insurance most, when they are sued. It measures how much protection the insured person has in the event he/she gets sued because of negligent driving. A professional financial planner will never offer you a car insurance policy at low limits if he/she has enough information that you possess enough wealth to be sued for, in the event that you or a family members cause a major auto accident and your auto insurance pays the maximum on the policy limits, which happens not to be adequate.
There are several insurance plans sold with top rated insurers at the lowest liability limits mandated by the state. In the Illinois the lowest limits are 20/40/15, which means that in the event you or a household member become responsible for an auto accident and you get sued by others, your insurance company will pay to other people on your behalf no more than $20,000 for bodily injury for one person, no more than $40,000 for bodily injury for all other people in the accident, and a maximum of $15,000 for any and all property damages caused by that accident. If you are a business owner or a retiree with a sizable 401K plan and you cause a major accident resulting in a successful lawsuit of $300,000 and your insurer paid the max on the policy and paid your policy limit of $20,000 , the difference of $280,000 will have to come from your own savings or 401K!
Ed Sneineh, an insurance professional since 1989, former college educator of insurance, and founder of Insurance Navy, a leader in providing Chicago car insurance quotes. Visit our website and get your Illinois SR22 insurance quotes in 5 minutes or less.
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