cheap car insurance - what to look for in an insurance company

Most people when looking to buy car insurance will shop around and end up going with the cheapest quote, or one with best coverage at a reasonably low rate. Very few people will actually look at the financial strength of the insurance company prior to making a decision about whether or not to use them. This could well end up being a big and costly mistake for a number of reasons.

Nowadays most people will use the internet to buy their car insurance. They will either use one of the many cost comparison available or possibly approach an insurance company directly. Pre internet it was a very different approach. There were no cost comparison sites and most insurance companies preferred that the general public approached them through an insurance broker. The insurance broker would receive a commission from the insurance company in the form of a percentage cut of the premium quoted, normally around fifteen or twenty percent. One of the roles of the insurance broker was, and still is, to get the best deal for their client. This involved getting the cheapest possible quote, in conjunction with the greatest financial stability of the possible insurance companies involved. Now that most people use an insurance company directly online, either direct or through a cost comparison site, those checks don't happen.

There is a simplle reason why this matters. Whilst insurance policies run for a year, if you are involved in an accident which could lead to you making a claim regarding third party damages, this could well run into several years. Most third party claims for personal injury( apart from whiplash claims) tend to be claims that need a long time to assess in terms of how much damage has been suffered by the person involved.
This means that it could well be five /ten years before a claim is finally settled, and it will be for a lot of money. One thing you want to absolutely sure of is that your insurance company is still around. If they are not, they you will still be liable to pay any damages yourself. The reality is that issuance companies do go bust and do get into financial difficulties for a lot of reasons, but primarily because they are in the risk business and they think in terms of probabilities, which don't always turn out to be right.

Also there are often time periods when insurance companies will enter a market such as car insurance and undercut other companies in order to get business. Car insurance premiums are a very good source of cash flow for many insurance companies. Once they have been in it for a few years they get out. Whilst they may still be liable for any claims it becomes much more difficult to settle, because they are not in active trading in that type of business anymore.