Why You Should Be Wary Of Dirt-Cheap Auto Insurance Quotes

Insurance Blog

Every motorist is on the hunt for cheap auto insurance coverage. However, you shouldn't jump at the first dirt-cheap quote you find, because it might be fraught with dangers. For example, you may buy an ultra-cheap coverage only to find out that:

The Agent Selling the Quote Is a Fraud

Some insurance agents appear to offer super-low premiums while in real sense defrauding their clients of their hard-earned cash. Such fraudulent agents may use names and papers of real insurance companies, but don't sell real coverage. Insurance agent fraud comes in various forms, such as these two:

  • Fake policies – Some agents create fake policies and bundle them with bonuses and incentives to make them appear cheap. The agent then collects your money and lets the policy lapse before you can file a claim.
  • Skimming – Some agents will sell you real policies and collect your money, but end up not remitting your money to the insurance company. New customers are targeted by this fraud because they aren't likely to file claims soon after buying coverage. Therefore, the fraud may continue for a while before it is unearthed.

The Federal Bureau of Investigation (FBI) outlines these measures for preventing insurance agent fraud:

  • Know your agent by confirming their licenses and asking for references.
  • Always get receipts for all payments you make.
  • Get a copy of your policy and scrutinize it to confirm you are getting what was promised.
  • Don't let the agent pressure you into buying coverage; take your time while shopping for insurance.
  • Confirm your coverage with the actual insurance company.

The Rates Are Based On Incomplete Data

Another danger of ultra-cheap auto insurance quote is that it may be based on incomplete data. As you know, insurers use different parameters for calculating premiums. If one or more of the parameters is off, then the insurer may assign you a different level of risk than it would if it factored in all the relevant data. This may result in you paying lower-than-normal premiums.  

This may happen, for example, if you forget to mention some accidents on your driving history. When your insurer learns about the omission, it may recalculate your rates or cancel your policy if it deems you too risky to insure.

The Low Rates Do Not Provide Adequate Coverage

Finally, you should be wary of ultra-cheap rates if they don't provide you with adequate coverage. Auto insurance pays for various damages and injuries in case of an accident. However, the covered damages, injuries or accidents vary by policy. Coverage that excludes many accidents or damages may be cheap, but it will not help you much when you experience the excluded incidences.

Therefore, be keen while shopping for low auto insurance premiums. Ensure that the low rates are genuine and won't come to haunt you when an accident occurs.

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9 April 2016