Talk About Cut Rate Insurance

Many of you may have seen the surprising news that Wal-Mart plans to start selling auto insurance in many of its stores. There is a precedent for this. Sears and Allstate insurance had a similar relationship for decades (at least while Sears was still relevant). While there are plenty of reasons to attack Wal-Mart, and I’ll leave that for another post, one thing you most certainly do NOT want at a cut-rate is auto insurance. The cheapest possible policy is almost never the best answer and I’ll tell you why.

First, if you buy the absolute cheapest policy available you may not be covered for damages that you cause or which are caused by storms or floods. You may not be covered for hit and run accidents or if you are struck by someone who does not have insurance. In RI, you would be surprised by how many people are driving without any insurance at all. Also, you may not have enough coverage if you seriously injure someone in an accident you caused or if you total someone else’s Mercedes. If you do not have enough auto insurance coverage, then you may be personally liable and are subject to having your wages levied or house attached.

Second, I do not trust Wal-Mart to pay enough money to someone educated enough to tell you about insurance. In other words, do you want to take insurance advice from someone making a cashier’s hourly wage?

My third and final point – There is a huge difference between insurance companies. You should talk to a respected and educated insurance advisor to understand the reputations of each company. The ultra cheap insurance is cutting costs somewhere and it likely means that when you need them, you may never receive a phone call or they will tell your auto body of choice that they want to put cheap second rate parts on your car. You should understand that sometimes for $100 more per year you might end up with an insurance company with a much friendlier and respected reputation.

The point of this rant is that you should always do your homework when selecting auto insurance. It is NOT as easy as finding the cheapest rate available. Make sure that $50 savings do not come back to hurt you for thousands of dollars later. For all of those reasons, I’m not sure I would be picking up auto insurance with my dog food.