Cheap auto insurance is not always the bargain you want

There’s a story that crosses over from England about a local millionaire businessman who had just a little too much to drink before being asked to give a talk about his business. He asked himself the question, “How come I can sell stuff so cheap?” and answered with what he took to be the obvious answer. That what he sold was very poor quality. Except customers don’t like to have their noses rubbed in the truth. They liked to think they were just getting very good value for their money. For the millionaire to be laughing as he admitted to selling c*** left his business in ruins. So here’s the message. You get what you pay for in this hard world. There’s no sense in deceiving yourself.

Applying this to insurance, you cannot assume all policies are the same. It’s a bit like melons. You can go down to your local store and buy one for a few dollars but, if you live in Japan, you can look at the prices of Yubari melons which start around $60 in the cheap stores and go up to $20,000 per melon in auction. The Japanese evidently appreciate the finer qualities of melons. The first rule when buying auto insurance is to read the small print in the policies. These magic words define exactly what the policy covers. In the cheapest policies you will discover there are so many limitations and exclusions, getting a claim through the process will be like winning the lottery. But as the premium rates rise, the language slowly grows more favorable to you. In the most expensive policies, almost every risk is covered and there are few limitations.

Except there’s a small problem. These auto insurance companies employ a team of attorneys to write these policies and most of them use complicated language. This makes the terms difficult to understand for the average person. So here’s the best approach. Before you buy the policy, the insurers are always helpful. They want your money so they will answer your questions. Make a list of those questions and spend a few minutes on the telephone working through them. When you are done, you should be able to say which policy is good value for money, giving reasonable coverage for a fair auto insurance rate. Buying cheap is almost always a false economy!