February 5, 2010

Why Smaller Auto Insurance Companies Might Not Provide Adequate Coverage

Everyone who operates an automobile needs to have auto insurance. In fact, it is mandatory to at least have liability auto insurance coverage in order to drive legally in the U.S. When shopping for auto insurance, keep in mind that auto insurance is controlled by the provisions and guidelines of individual states. Just having a liability only auto insurance policy may not be adequate coverage for you no matter who you buy your insurance from. For instance, if your automobile is financed, you will need to have a policy that provides comprehensive coverage. Liability-only coverage will only cover damages or injuries if you are at fault. Even then, a limited liability policy may only cover damages done to the other driver and his or her automobile.

In an effort to save money, many automobile owners consider going with a smaller auto insurance company. Many times, the smaller insurance companies will have cheaper premiums than larger insurance companies. There are all kinds of smaller insurance companies out there that offer competitive rates and a variety of coverage packages.

However, there are a few reasons why smaller insurance companies might not provide adequate auto insurance coverage. One of the reasons is that the smaller auto insurance company may not have adequate funds to cover a large accident. A smaller insurance company generally has a smaller pool of money to pay out from, which may pose a problem for them when having to pay out for a major accident. The more clients an auto insurance company has, the larger their pool of money will be, and the easier it will be for them to pay major accident claims. However, some smaller auto insurance companies have been around for a long time and are fully funded for such claims because they only insure the safer drivers who have excellent driving records. When shopping for a auto insurance policy, make sure you ask how the company pays claims. If they their explanation of their pay out claims satisfy you, then it may still be worth getting auto insurance through them.

However, you should also keep in mind that cheaper premiums do not necessarily guarantee you will have adequate coverage. If you are financing your automobile, you will need to have comprehensive coverage, which means higher premiums. When shopping for comprehensive coverage insurance from a small insurance company, make sure the policy they are offering you will sufficiently cover all your needs. This way you will be adequately covered if you are still paying on an auto loan. Having adequate insurance coverage is essential when you own an automobile.