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The Downsides in Getting the Best Auto Insurance Rate


Insurance companies always try to outdo each other when offering the best auto insurance rates to discerning clients. They resort to various gimmicks and even go to the extent of spending thousands of dollars in freebies, bonuses and discounts.

The most common response of a potential client is to take a company’s offer which would usually mean being required to pay the least amount in premiums for the longest period of time. Call it a “bidding process,” if you will. Providers “bid” for potential clients.

However, despite all the glitter and glam of the best auto insurance rates out there, one has to think: could there be a downside to this? After all, in the business of insurance, nothing is really for free.

The answer is yes. In fact, here are two things a potential client should look out for.

The first is an acceleration clause. Although this comes standard in most business contracts, not all people are aware of it. This states that if an insured is not able to pay a premium at a certain time, the entire amount becomes due. Otherwise, if a client will not be able to pay, his contract is cancelled. Now, there could be some modifications to this clause, such as an additional amount, say, 10% of the obligation. This makes it less advantageous for every insured person to cancel a contract. The consequence is, when he enters into the agreement, he has to continue paying for a policy or he will be losing a lot more. Insurance laws allow companies to add this little detail for the rates they give.

The second is a pre-termination penalty. If a consumer is given the best auto insurance rates available, expect a higher penalty. This simply means that if the owner of a policy would opt to have it cancelled, maybe because he can no longer afford paying for premiums, he has to pay a certain lump sum to the company. Do not be surprised, this is a common business practice. Including this provision in a policy is the company’s safeguard to the effect that they will not be losing too much money should they lose a client.

The moral of the story is that when an offer appears too good to be true, chances are, it is. Just because a potential client is offered the best auto insurance rates does not mean that he is on the winning end. Studying the fine print will prove to be a very good move because there might just be something in there worth taking note of.