The Truth About Online Auto Insurance Companies

Every driver is looking for the best auto insurance company to provide the protection and coverage that is needed in this day and age. One new kind of auto insurance company that has emerged over the last couple of years is the online auto insurance company. It is important to understand the truths that go along with online auto insurance companies to make sure you are getting the best of the best.

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The truths about online auto insurance companies can be both positive and negative. It is important to understand how to tell the best from the rest, because only the best auto insurance provider will do. Researching a company before buying is always the best course of action.

They Could be Scams

The first thing every driver needs to understand about online car insurance companies is that they could actually be fraudulent companies. Every insurance provider is required to be licensed by the state or states in which it conducts business, but every state’s Department of Insurance does not have the manpower to police the Internet for fraudulent car insurance companies.

It is quite easy to create a professional-looking website with very little effort, so a flashy website is no guarantee that your provider is a real one.

One of the worst things that can happen after you suffer an accident or other loss is for you to find that your auto insurance provider doesn’t actually exist.

There are a few ways to spot scam car insurance companies online, such as really cheap rates or only a one-page website. However, the safest bet is to research any provider before purchasing coverage, according to the Coalition Against Insurance Fraud. You can look up the licensing information for any car insurance provider, online or otherwise, that is licensed to sell insurance in your state.

The National Association of Insurance Commissioners offers a map to link you to your state’s Department of Insurance website. There, you can search for an online insurance company’s license. Most states’ websites also include financial information, history, and customer complaints about each provider.

If you can’t find the provider on your state’s Department of Insurance website, then it is very likely that the online insurance provider in question is actually a fake. Spend a few more moments on your state’s Department of Insurance website to report the possible fraudulent activity.

The Biggest Are Online

While online insurance may seem like a dicey option, you must understand that the largest auto insurance providers maintain a large online presence as well. They have websites that contain a lot of information and support an array of activities. Many of the most well-known car insurance providers allow customers to change their policies, make payments, and report claims completely online.

So maintaining an online presence is not a bad idea for car insurance providers. In fact, it is a bit like a new frontier–many people enjoy buying their auto insurance online. What is bad is when a scam artist utilizes the anonymity of the Internet to dupe people out of their hard-earned money.

If you want to utilize the convenience of an online auto insurance company, but you are insecure due to fraud, unsecure data, and the like, go with a car insurance provider you recognize by name, and just utilize their online website for your car insurance needs.

They May Provide Really Cheap Insurance

Some online car insurance providers may truly provide cheap auto insurance. Online advertisements boast rates such as $49, $29, and even $9 a month for insurance coverage.

However, this falls under the old adage that if it is too good to be true, then it probably is.

In auto insurance, cheaper isn’t always better. Really, how much protection can a company offer you if you are only paying $9 a month in auto insurance? Claims generally cost thousands of dollars, so it doesn’t take a genius to see the flaw in such a business model.

While these online insurance providers might be licensed and follow the letter of the law, they more than likely aren’t very good. When it comes time for you to submit a legitimate claim for a car accident, theft, or other loss, you might be facing an uphill battle to get your claim paid in full.

There are many tactics that cheap auto insurance providers can utilize to get out of paying your claim. They can make it really hard to get an actual human being on the phone, and then they just might neglect to return your phone calls or emails. They may also include many clauses in your policy that exclude most types of claims.

While you do have the recourse of submitting a complaint with your state’s Department of Insurance, it is likely that you will be facing months of having your car damages unfixed and your medical bills unpaid.

Car insurance is meant to make you whole again after an accident or loss, it is not supposed to be a trial to get your cheap auto insurance company to pay for your damages. If you want to avoid the hassle that can accompany such cheap online auto insurance companies, then you need to choose a provider for more than just the low rates they provide.

They May Be the Start of a Great Company

However, it is not outside the realm of possibility to find the start of a truly great auto insurance provider online. Every business has to start somewhere, and the Internet provides entrepreneurs a way to get their budding companies off and running.

Some of the biggest names in auto insurance had truly humble beginnings. The Hartford, one of the oldest remaining auto insurance providers in the U.S., had to rely on the president’s personal wealth in 1835 to cover fire claims in New York City; the president hand-delivered the money after riding through a blizzard on a horse-drawn sleigh.

Another large insurer, Auto-Owners Insurance Company, was started in 1916 in Mt. Pleasant, Michigan. In 1917, the founder moved his company to Lansing, Michigan. This feat required no more than picking up his policyholder’s book and $174.25 in assets, and placing them in his pocket.

So, just because an auto insurance provider is online does not mean that it will provide only cut-rate insurance.

You just may be looking at the beginnings of the next giant auto insurance company.

Utilize Financial Ratings

One of the most useful tools for researching online insurance providers is financial ratings. These ratings are compiled by ratings agencies that have the history and experience to understand complicated markets such as insurance.

The ratings agencies look at a company’s financial information and determine if the company is making sound financial decisions. They might find that an auto insurance company is taking on too much risk or that they don’t have the assets to support their coverage.

Ratings agencies such as Standard & Poor’s, Moody’s, A.M. Best, and Fitch Ratings assign alphabetical grades to represent the financial strength of businesses such as auto insurance providers. Ratings such as “A,” “AA,, or “A+” are all good indications of sound financial practices.

It is important to have a car insurance provider with a strong rating. This indicates that your insurance provider will be able to honor the commitments it made to you when it promised to cover your claims.

Low ratings indicate that a company may not be able to weather a bad economy or a natural disaster such as a hurricane that will create a flood of automobile claims.

If an online company has a rating any lower than a “B”, you should probably look elsewhere, no matter how attractive the company’s offerings are.

Comparing Quotes Is a Useful Tool

One aspect of online insurance companies is quote comparison websites. These websites allow you to search for auto insurance online by inputting your information once, and then multiple car insurance companies respond with quotes for covering your auto insurance needs.

You may receive quotes from several unknown online insurance companies, and you may also receive quotes from some of the biggest and best-known. Either way, it is safe to look. It will not do one bit of damage to get quotes from car insurance comparison websites. It won’t damage your credit, and your current car insurance company won’t know that you are looking to exchange their services for another.

Getting quotes from comparison sites allows you to view all of the price ranges available to you.

It is likely the best way to find an affordable insurance package with a reputable company. For instance, a 2012 study conducted by the Consumer Federation of America found a $2,000 disparity between quotes offered for the same coverage from major auto insurance providers.

In the study, the four leading car insurance providers were asked to provide quotes for a female driver. All of the information for the imaginary driver was exactly the same: the same city of residence, the same car, and the same driving history. Quotes that were received ranged from $762 to $3,390 for coverage.

A quote comparison website may allow you to find a great online insurance provider, or even one of the biggest, to provide the best rate for coverage for you. Just make sure you research all providers beforehand.

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