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HOW TO PROTECT YOURSELF WITH
AUTOMOBILE INSURANCE
There are many ways you can purchase car insurance. You can
buy it over the Internet at literally hundreds of different
web sites. You can call an 800 number and buy it over the
phone directly from an auto insurance company. You can call
an insurance agent. In some cases, you can buy it at your
bank or credit union.
It’s not surprising you can buy it so many ways. After
all, there are hundreds of insurance companies that sell auto
coverage in your area. How do these companies differentiate
themselves? Some brag about their superior service when you
have a claim. Some tout how easy it is to buy from them. But,
often, auto insurance companies try to compete on price, just
as if you were buying a plane ticket, a radio or soda pop.
* Tip. Some people believe auto insurance is just a commodity.
It’s not.
You’re not buying a soda. You’re protecting your
financial well being...and the choices you make could affect
you for the rest of your life.
But before explaining how complex auto insurance products
are, let’s talk about price. It’s pretty complex,
too.
No Insurance Company Has the Lowest Price for Everyone
* Note. No auto insurance company -- no matter what it says
in its ads -- offers the lowest price for every driver in
every location. There are companies that are often among the
lowest. And there are companies that are usually among the
highest. But no company is the lowest for everybody.
* Tip. Also, be aware that prices fluctuate. Sometimes companies
“buy the market” with low prices to gain new consumers...then
their prices gradually – or not so gradually –
sneak up.
They also have to change prices based on their profitability,
losses and other factors.
Every company has a slightly different appetite for the risks
it wants to take on. Some insurers want only very good drivers
who have no tickets and no accidents. Some companies, believe
it or not, actually want bad drivers. In fact, these companies
specialize in insuring people with lousy driving records.
Some companies target drivers who live in certain areas. There
are insurers that really like to do business in big cities,
and there are others that would prefer to stay away from highly
populated areas.
* Tip. Remember that sometimes “you get what you pay
for.” The cheapest option may not provide you or your
family with the best protection. The saying goes, “you
don’t need insurance until you have a claim.”
When you do have a claim – something that goes wrong
– that’s a terrible time to discover you don’t
have adequate protection!
If you think auto insurance is a commodity, consider this:
A person with a good driving record will pay three, five,
even 10 times less than a driver with a couple of tickets,
an accident or who has been cited for and convicted of driving
under the influence.
A person who lives in a major city -- say Los Angeles, Chicago,
Houston or Denver -- will pay three, four, even five times
more than someone who lives in a rural area or small town,
even though the two have the same driving records.
* Example. The last two paragraphs are average differences.
Auto insurers are all over the map on prices in a given area.
Say you live in Everywhere, U.S.A. (don’t we all)? Say
you have a good driving record. One insurance company might
charge you $500 a year for a policy that provides most every
coverage available. Another insurer might charge you $1,500.
As you can see, it can pay to shop around. Just be sure:
§ You really understand the different coverages in your
policy, or,
You have an agent you really trust who can examine coverages
and prices for you.
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