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UPDATED: Jul 7, 2017
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When you’re interested in a specific consumer good, you can go to several retailers and find the exact product. The price may vary but the product is the same.
When you buy auto insurance, however, the quality of the product that you are buying depends entirely on the auto insurance company you are buying from. In the auto insurance marketplace, not all insurers are the same.
Failing to take the time to find out whether or not the company has good products or offers quality service could lead to some expensive regrets in the long run.
It is best to shop for value instead of price when you are buying something as important as insurance. If you are not quite sure how to spot the best value, here is a guide that can help.
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Why is it so Important to Choose the Right Insurer?
Online shopping has made it possible to find products sold all across the globe at the lowest possible price.
While this does give consumers bargaining power, in the insurance marketplace, it places too much emphasis on the importance of pricing for auto insurance.
Everyone wants to find a product that is competitively priced, but when the focus is on pricing entirely, the consumer may choose a company that has a less-than-acceptable reputation.
Auto insurance may be a mandatory product for vehicle owners, but it is also a product that can save your financial future when you have a loss.
By purchasing a contract, you are agreeing to pay premiums and the company is agreeing to pay for the covered losses listed on the policy contract.
If you enter into a contract with a company that delays the claims process, denies legitimate claims, or provides poor claims service, all of the money that you have paid into the policy will be in vain.
Having the wrong insurer is fine when you are not filing claims, but the moment you need a claims payment you will understand why finding a reputable insurance company is crucial.
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Steps to Find a Good Car Insurance Carrier
If you were to search for car insurance companies in your state, you would quickly find that there are more companies than you can count that advertise their products.
You cannot pick a company because it is at the top of the list in alphabetical order or because you like the company’s mascot.
Instead, create a list of the companies and then cross off the ones that do not make the grade until you have a few of the top-notch carriers left.
Here are the steps to know who to cross off the list:
— Step 1: Check the Company Licensing Status
In order to satisfy the state auto insurance laws, you are required to buy coverage from a company that is licensed with your state’s Department of Insurance.
Unfortunately, many consumers are not aware of the fact that not all insurance companies are licensed to do business in each state.
If you buy a company that does not have an active licensing status in your state, you could run into serious problems when it comes time to verify coverage.
Licensing is also important because the operations of licensed companies are supervised by the Department of Insurance. You will only have protection as a consumer when your insurer is licensed in your state.
— Step 2: Check the Complaint Ratio
Consumers have the right to file complaints against insurers if they feel they have a reason. Official complaints are filed through the state department and will be investigated.
The consumer complaint ratios are then displayed publicly so that people who are buying insurance can see.
You should review the complaint ratio, trends, and other data regarding operations.
Here are some of the types of complaints that are reported:
- Rating and underwriting discrimination
- Refusal to insure
- Premium surcharges
- Violation of insurance law
- False representation by agent
- Denial of legitimate claim
— Step 3: Check Financial Ratings
A company in the finance market that is expected to protect your finances should be financially stable.
Unfortunately, some companies do not invest premium money wisely or charge the right premiums to account for the risk on the books.
If you want a financially secure company, you need to check the financial records.
You can easily do this by reviewing grades from independent rating agencies. These grades will tell you if the company is creditworthy and secure.
— Step 4: Check the Consumer Ratings
A company does not need to have a long list of official complaints to have unfair practices.
It is possible that a company is not violating the law but is known for offering poor customer or claims service to their clients.
This is why you should check both the complaint ratios and the consumer ratings through a reliable company like JD Power & Associates.
This consumer rating agency takes surveys from actual customers and asks what they do and do not like about the carrier.
Consumers will be asked to rate:
- Policy offerings
- Overall satisfaction
— Step 5: Speak with the Insurer Directly
You can get a feel for the experiences others have had as you do your research, but you should get a feel for interactions yourself as well.
It can be helpful to call the company and just speak with a representative to see how customer-service oriented the company is.
You can also ask important questions about the company’s product offerings, how vehicles are valued, and if the company partners with repair shops. This will help you find companies with the best claims policies.
Buying insurance is more than just a price comparison.
When you buy insurance, you need to do your homework. If you would like to find companies with the best value, price the policies first by using an advanced rate comparison tool.
After you have compared pricing, you can go through the steps. You will be left with an insurer who is well-known in the marketplace and offers you a good rate.