The Cheapest, or The Best?

Whether you’re going to purchase auto insurance for the first time, or your policy is coming up for renewal and you’re wondering whether you should make some changes, there is a fundamental issue you need to address. Are you going to be seduced into buying the cheapest policy you can find, or are you going to think about what the insurance is for: covering expenses when you need them?

There was a sexy little piece on the net not too long ago written by a personal finance geek, rhapsodizing about what you can do with the money you save when you cut your insurance payments. Hey, I’m all for saving money, but I also want to get my money’s worth when I buy something. I want to know that the company’s going to be there for me when I file a claim. I don’t want to damage either my car or my body only to find my insurance company ready to litigate the claim or refusing to pay.

That’s why it bears repeating that you need to do your homework. You need to research insurance companies licensed to do business in your state. You’re probably going to be surprised how many there are. Most companies don’t advertise aggressively. Most insurance companies are not household names. I always watch out for products and services that are household names, especially if they got that way through saturation marketing. Advertising is very expensive. Is that the way you want your insurance company spending your premium? By the way, most of their money is made by taking the premium money and investing it. The way the economy is going, I’d want to look very carefully at the financial stability of any insurance company I hire to watch my back. Are they watching their own?

The way you find out is the time-honored, old-fashioned way. Hie thee to the nearest library. Ask the reference librarian to show you where the insurance ratings books are. Believe it or not, it’s actually quicker to do this kind of research in the real world rather than clicking a mouse. Look up your state. You will find listings for every insurance company licensed to do business in your state (no matter where their headquarters are.) There should be some sort of rating for each company. Start looking at the highest-rated companies in the alphabetical portion of the book. There will be a review of the company and a thumbnail analysis of their financial strategy. There may be more detailed information about the types of policies they write and an explanation of the rating.

You could, of course, pay to have access to this info on the net. You could also buy the ratings book. But you’ve already paid for the library with your taxes, and the ratings books come out quarterly and cost hundreds of dollars each so… (Besides, while you’re in the library, you can check the catalog to see what DVDs they have. You can save a small fortune on rentals if your library has a good selection!) Make a short list of the companies that look good to you. Those are the companies you will research on the net. Don’t just read their own homepage. See if they’ve made the news for any reason, good or bad. Read the ‘I hate _______’ or ‘_______complaints’ pages with your gut to see if complaints seem valid. You’re always going to get some bozos complaining about the impossible, but there shouldn’t be too many stories that make you just cringe. Check and see if the Better Business Bureau has had dealings with them.

Price of a policy is, of course, an important part of your decision, but it shouldn’t be the only one. Do they have a good track record of paying claims fairly, and in a timely manner? Are they solidly invested or in danger of collapse? You don’t want to make a claim only to find they’ve shut up shop or are in so much trouble they can’t pay out what you need.

Start thinking about your transportation Plan B. We’re all going to have to make major changes in the way we live. Why not get a jump on everyone else and do it for yourself while it’s still a matter of choice. That way, you get first pick of options. For instance, I no longer carry auto insurance. I decided to support myself rather than a car. A monthly bus pass is $20 where I live and I can take the bus anywhere I don’t feel like walking. Think about that twenty dollars the next time you fork over for gas, maintenance, car payment and depreciation, let alone insurance!

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