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Just how safe is that "cheap" insurance company?

During the late 1960s and early 1970s there was a boom in car ownership and insurance companies mushroomed, but unfortunately half a dozen of them very soon failed including a company called Fire Auto and Marine run by a convicted fraudster called Emile Savundra which went bust leaving about 400,000 motorists without insurance, many of whom were already facing claims against them. Regulations were brought out very quickly to prevent this sort of thing happening again, but these regulations of course only affect British companies, not foreign ones. Some of the cheapest insurance companies or brokers which are featured on price comparison websites are registered in places like Gibraltar which have their own regulatory apparatus, but which is not anywhere nearly as strict as it is here in the UK. These companies may of course be completely sound and well capitalised, but at a time when even major international banks are only being saved from collapse by government intervention, do you really want to risk losing everything you have got just to save a few pounds? What many people do not seem to realise is that in the event of a car accident that they were judged to be responsible for, the claim for damages would be against themselves and not their insurance company. If that company refused to pay the damages, or went out of business, they could find themselves being chased through the courts for a debt that could very easily run into hundreds of thousands of pounds, a sum which would bankrupt just about anyone in the UK!

Even if the insurance company that you deal with is completely sound and stable, there is usually a reason for the fact that the insurance is cheaper than another company's, and that is simply because it offers less cover! Insurance documents can be very long and complicated, and the vast majority of people simply never bother to read them. This can very easily mean that in the event of a claim there could be limited cover, or even no cover at all! For example:

1) you may well be insured for driving on a public highway, but what happens if you are in a private car park and you run into someone, causing serious injury? Some policies can specifically exclude accidents on private land!

2) your fully comprehensive cover may well pay for any damage caused to your car if it is bumped by another driver, but what happens if a tile falls off your roof and hits it, or there is a gale and a chimney stack falls onto it? Cover could be excluded by both your car and home policies!

3) you may well be covered to drive any vehicle which does not belong to you, but just because you have a fully comprehensive policy, is that cover comprehensive too?? If you happen to be driving your friends expensive pride and joy and accidentally write it off, will the bill land on your insurance companies desk, that of your friend's insurance company, or your own?

These questions and many more may seem like mere detail when you are shopping around for car insurance and trying to save yourself some hard earned money but if you cut too many corners you could end up being severely out of pocket, or even bankrupted if circumstances went against you. The moral is to spend a little time making sure that you know exactly what it is that you are buying and make sure that you are comparing like for like when you judge one policy against another; the idea should be to find yourself the best value, not the cheapest possible price which could end up costing you infinitely more if your luck ran out!

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