Car Insurance Basics

Car Insurance Basics

Do not be swayed by commercials or cheap rates when buying your auto insurance!

Yes, companies like State Farm and Nationwide make some funny commercials.  Actually, they make a lot of them.  But have you ever thought about how expensive these ads must be after you factor in how much the writers and actors get paid, and then all of the airtime the insurance companies buy during every single prime time football game? How do they afford all of these funny commercials?  Where does all of that money come from?

Simple – the ads are paid for by the difference between what the insurance companies generate in income, i.e.  your premium dollars, and what they pay out in claims.  Just think: the difference between premiums and claims is enough so that State Farm and Nationwide can afford to pay Aaron Rodgers and Peyton Manning a lot of money to spout a few lines cooked up by highly-paid comedy writers.

Good for them, right?  Well, I suppose, but the important question is, what does this mean when you select an insurance company?  It means that if you ever need to make a claim against one of the insurance companies that spends a whole lot of money on advertising, then they are likely to be stingy when paying out the claim, or they will jack up your rates as soon as you submit a claim.  After all, they need the revenue to pay for all of those funny commercials!

The fairest insurance companies have premiums that may be a bit more expensive.  These companies probably don’t blanket the airwaves with funny ads during NFL games.  The better ones are not so worried about pinching every penny in a claim so that they can afford Peyton Manning’s commercial deal.  Rather, they spend their money on professionals who can evaluate claims fairly and pay a fair amount for claims when it’s appropriate.  As with most things in life, when buying car insurance, you get what you pay for.

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