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Coverage vs. Cost: Does Cut-rate Insurance Save You Money?

Who wouldn’t want to save money on automobilebigstock-Saving-For-Buy-Home-148741919.jpg
insurance? Lower rates mean more money to spend on other essentials or luxuries, but switching to an insurance company that offers a lower cost policy may cost you more in the long run. Your new cut-rate policy may not offer the same protection as your previous policy – and it may be up to you to make up the difference if you’re in an accident.

Before you make the switch, make sure you know all the answers.

Does My New Policy Provide the Same Coverage as My Old Policy?

Lowering coverage limits is the easiest way to decrease policy costs, although you may not be fully protected if you choose one of these lower cost policies. The unbelievably low price the new insurance company quotes may only be good for its bare bones policy. Take a look at your old policy and make sure that your new policy will offer coverage in the same dollar amounts.

Also make sure that both policies offer the same type of coverage. For example, if you currently have both liability and collision insurance, switching to liability coverage only will definitely lower your costs. You may think it’s worth the risk because you can’t imagine you’ll ever be involved in an accident, but more than five million people find themselves in accidents every year.

Unfortunately, if you only have liability coverage, your insurance policy will only pay for repairs or replacement for the other driver’s car and not yours.

How Much is the Deductible?

Increasing the deductible (the amount of money that the insured must pay before an insurance company will pay a claim) decreases the amount of the premium (or monthly payment). Paying a higher deductible for a lower premium might sound like a good idea now, but it may not be worth it when your car is damaged and you have to fork over the deductible. If your previous deductible was $250, and the new one is $1,500, it may be hard to find the money to pay for your portion of the repairs.

Do I Know How the Company Will Handle Repairs?

Make sure you understand how repairs will be handled before you agree to a policy with a new company. Ask these questions:

  • Will my car be repaired with new parts or used parts?
  • Am I limited to specific auto body shops?
  • If so, are any of those shops close to my home?
  • Will the policy pay for the full replacement cost of my car or the depreciated value?
  • Does my policy cover the cost of a rental car while my vehicle is being fixed?

What Type of Customer Service Can I Expect?

Accidents are upsetting and stressful. Dealing with your insurance company shouldn’t add to your stress, but all companies don’t offer the same level of customer service. Your new company may be able to offer lower prices because it hires far fewer claims agents than your current company.

When an accident happens, you want a quick response from your insurance company, your claim processed without delay and repairs completed in a reasonable time frame. No company is going to admit to poor customer service, but you can find out how happy customers are by reading online reviews and asking friends and family members about their experiences with their insurance companies.

An Independent Agent Can Help You Find the Best Policy

Choosing a new insurance policy based purely on cost alone may end up being more expensive than you could have imagined. An independent insurance agent can help you weigh the pros and cons when you’re considering making the switch to a new insurance company. Because independent agents don’t work for one particular company, they can research several companies to find the best coverage at a reasonable price. They may even be able to offer cost-saving suggestions that you didn’t know were possible.

Topics: Auto Insurance, Cut-rate Insurance