A lot of people would normally jump at the thought of getting cheap car insurance. Especially when an insurer says that they can get a huge amount for the policy for so little payment every now and then. However, when they start to balance their check book, they get the surprise of their lives when they realize that a lot of money has already been spent paying for coverage.
So the question is, is cheap car insurance really that cheap? Or are clients just being led around in circles?
It is a basic rule in insurance that for an automobile to be covered, it has to have insurable interest. In other words, it has to mean enough to the owner for him to pay money to protect it. Following this rule, insurance companies need to know how much a vehicle is worth because they are following a schedule of values to base the amount of coverage on.
For instance, if your car is worth $50,000, most providers may insure it for around $25,000, taking into account its depreciation. Normally, you would pay $3000 to $8000 for the policy for, say, ten months. You will then be paying $300 to $800 per month. Some cheap car insurance salesmen would offer you the same amount of security payable in more than ten months for lesser amounts. For a newbie, it would seem that premium payments are indeed lower. However, if you have experienced paying credit card bills, you would have discovered that this is not so. When you add all the payments you have made, you will still arrive at more or less the same expense you might have spent if you transacted with another company.
You will notice that some policies being sold out there follow this promotion scheme. You have to look out for the terms of payment to arrive at the total amount you need to pay. This is not to say, however, that these providers are cheating you out of your wallet. The practice is perfectly legitimate and is being done by a lot of insurance providers in every state.
Although there are cheap car insurance packages being offered by companies, most use devices and schemes to convince their clientele that they are getting a good deal. It may be more convenient for them because premium payments are spread over a longer period, meaning lesser financial burdens per payment schedule. However, the fact remains that not everything you hear is true. It is still best to thoroughly study a contract before signing it. Better yet, get some advice from friends who have had experience on the matter.