Yes, it is important to get a low-priced auto
insurance policy so you can spend your hard-earned money on other
things. Yes, it is vital you find the policy that best suits your
needs. But what may be more important (and is a factor many people
do not take into consideration when shopping for insurance) is that
the company you choose is financially secure. If you're paying money
for insurance, you want to rest assured that you're covered, and
that your premium payments will ensure a timely payout if you ever
find yourself with a serious claim. How would you feel if your insurance
company told you they are in financial trouble and are unable to
pay your claim? As much as we like to believe our insurance company
is financially solid, and will be there for us in times of trouble,
unfortunately, this is not always the case.
Many people buy into the "bargain basement" mentality;
they buy the lowest priced insurance they can find to keep more
money in their pockets. Understandable, right? We all want to save
a few dollars where we can, especially when purchasing an intangible
product like insurance. But an unfortunate side effect of these
"bargain basement" insurance companies is their lack of
stability, and potential lack of available funds to pay claims when
needed. Often one or two major claims can have serious financial
consequences for a small financially strapped company, and the rest
of their customers may find themselves in a difficult situation
if they should get into an accident.
Luckily, the government has built a safeguard to protect insurance
consumers from insolvent insurance companies (an insolvent insurer
is an insurance company that is unable to meet its financial obligations).
Insurance companies are not eligible to file for bankruptcy under
the federal bankruptcy code, but if they become insolvent, the government
can step in. State-run insurance guaranty associations, which are
supposed to pay claims for insolvent insurance companies, exist
in each state. However, while these associations are an important
safety net for insurance consumers, they are by no means perfect.
Most of the guaranty associations have caps on the amount they will
pay out on a single claim, and most payouts are subject to long
delays, as state courts and state insurance departments control
The bottom line is this, it is very important that you pick an
insurance company with a good financial rating so the claims process
works as it's designed to. How do you go about doing this? There
are many rating companies out there to help you make an educated
choice. Rating systems vary from company to company, but most of
them use some form of a "report card" style rating method
(A-F), with many using pluses and minuses (A+ or A-), and double
or triple letters (AA or AAA+) to give insurance consumers as specific
a rating as possible. The ratings reflect the financial security
of both the individual insurance company and sometimes the holding
company it is a part of, and are based on financial information
the companies are required to provide to the government, as well
as information provided directly to the rating companies. The most
well known of these rating companies are Standard and Poor's, A.M.
Best, Fitch Ratings, Moody's and Weiss Research. Although researching
an insurer's financial standing can take quite a bit of time and
effort, InsWeb has already done the work for you. We only provide
quotes for you from companies rated highly by Standard and Poor's
and A.M. Best.
Now we all know price is still a major factor in choosing an insurance
company. Non-profit organizations like the Insurance Information
Institute recommend that you get at least three price quotes before
you select an insurance company. An online marketplace such as InsWeb
is the perfect place to do such research quickly and easily.
Remember, price is only one factor in selecting an insurance company.
Be sure you also make an educated choice by including the financial
stability of a company in your decision process.
You can start here to
shop for online auto insurance.
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