Getting cheap auto insurance is not as simple as carrying minimum liability limits only. It is a myth that those with the lowest limits and coverages always pay the least for their auto insurance. Insurance companies are in the risk game. Typically, they gather as much data as possible, about different groups of people, to determine who has the best risk characteristics. Once they have identified their target market and who they want to attract, they price their products accordingly, in order to bring those clients in. Remember that insurance companies are for profit entities. In the simplest terms they generate profits by selling policies, keeping those policies in order to continue the revenue stream and controlling claims costs in order to pay out less in claims than what is brought in.
Insurance companies also generate revenue by investing their money but for the sake of simplicity, we will keep the discussion to premium in and claims cost out. Statistically, the group of clients that purchase minimum liability limits and no other coverages have more accidents and stay with their insurance company for the shortest time. Little to no profit is made on this group of customers. Therefore, they typically pay the most upfront and experience the largest increases when rates are changed. Conversely, customers that purchase higher limits and more coverages, such as collision and comprehensive, typically have fewer accidents and stay with an insurance company for longer. The insurance companies not only want to bring these customers in by offering a lower initial rate but they also want to keep them which means their increases are smaller.
Some of the less obvious things that insurance companies are looking for:
1. People who purchase better and higher coverages.
2. People that have stayed with one company for a year or more. Don’t move simply because your rate went up. It is always going to go up. Studies show that people that switch frequently, end up paying more. There is a down payment to consider as well as the second payment due date which in some cases is 20 or 25 days from the date the initial payment was made. Some agencies also charge a broker fee on top of the premium.
3. People that have all or most of their business with one insurance company.
In summation, clients have more control over whether or not they are in the target market than they realize. Putting yourself in the group of the most desirable customers means that you will get the best initial rate and your renewal will be better than if you are not in this segment, be open to better coverages and higher limits as you may actually pay less. Stay with one company for a year or more and if possible, bring all of your business.With all of this in mind, it is important to have an agent that not only writes for several different companies but also what insurance companies are looking for, in order to get you the best rates and cheapest insurance premiums possible.
Contact Stellar Insurance of Las Vegas and see how we can save you a whole lot on auto insurance coverage.