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Cheap, Low Cost, Affordable Car Insurance May Devalue Your Auto Insurance Policy

by Ed Sneineh
Charted Financial Consultant

It is remarkable how much literature has been written about the auto insurance business on the web. The key method in use by the vast of the literature is in the way of selling the insurance service with no regard to other criteria, not in the  right context of insurance product or 'a product to protect your wealth and assets.' That is why when searching for the keyword 'auto insurance' a large amount of websites show up with the 'selling' phrases like cheap auto insurance, affordable auto insurance, or low cost auto insurance.

According to Google AdWords there were  74,000;  8,100; 9,900 monthly searches for the above key phrases, respectively, at the time of publishing this article in February 2011. In contrast, there were only 110 monthly searches for the phrase 'reliable auto insurance', 170 monthly searches for 'quality auto insurance', and 8,100 monthly searches for 'top auto insurance companies.' It is rather easy to come to a conclusion  that most of the auto insurance searches on line are price oriented, not quality oriented.

A basic principle in marketing is to understand what people 'need and want' and devise and put together your product or service in a marketable position to meet 'what the folks want.' Studying these figures we can reach a result that most people want low-priced auto insurance, the really cheap one. As a marketer, if you plan any promotion without bearing in mind the previous analysis you may ultimately flunk the marketing exams, shut down your website and consider becoming a tattoo artist, not a marketer.

What's the variation among car insurance polices?  From a 'financial planning standpoint'  car insurance comparison should never be based on price only, and perhaps most people agree that cheap insurance is not necessarily the best car insurance. If you purchase tires for your 2005 Honda Pilot you maybe be able to use them with some tweaking to fit your Accord, but the situation will look clumsy and perhaps unsafe. But what most people do not know is that a car insurance policy with the highest rated insurer may also be one of the most difficult contract. In planning for your finance, an auto insurance policy should be evaluated in reference with three aspects:

1. Premium: Certainly, lower premiums are better, assuming other things are the same.

2. Insurance Company Rating: Non standard insurance carriers are less stiff than their standard or preferred counterparts concerning past violations found on the MVR of the operators and the financial credit score of the insurance applicants. However, non standard companies are harder  than others in customer service and paying claims. Most of consumer complains come from practices of non standard insurance companies. At the same time where preferred companies do not hesitate to quickly pay for smaller claims suck as nine or ten thousand dollars claim, or even little more; all insurers from top to bottom will examine the insurance application to see if they have to or do not have to pay a $100,000 claim.

3. Liability Limits. This is the most ignored, least understood, but is the most important aspect of the policy from a financial planning standpoint. Liability limits  affect customers during time they need the insurance most, when they are sued. It measures how much protection the insured person has in the event he/she gets sued because of negligent driving. A professional financial planner will never offer you a car insurance policy at low limits if he/she has enough information that you possess enough wealth to be sued for, in the event that you or a family members cause a major auto accident and your auto insurance pays the maximum on the policy limits, which happens not to be adequate.

There are several insurance plans sold with top rated insurers at the lowest liability limits mandated by the state. In the Illinois the lowest limits are 20/40/15, which means that in the event you or a household member become responsible for an auto accident and you get sued by others, your insurance company will pay to other people on your behalf no more than $20,000 for bodily injury for one person, no more than $40,000 for bodily injury for all other people in the accident, and a maximum of $15,000 for any and all property damages caused by that accident. If you are a business owner or a retiree with a sizable 401K plan and you cause a major accident resulting in a successful lawsuit of $300,000 and your insurer paid the max on the policy and paid your policy limit of $20,000 , the difference of $280,000 will have to come from your own savings or 401K!

Ed Sneineh, an insurance professional since 1989, former college educator of insurance, and founder of Insurance Navy.

posted on Wednesday, April 5, 2017