Car Insurance Sold at Dealerships are Overpriced and Substandard

A new study found that consumers shelled out $1.6 billion in insurance premiums and they have been duped into getting an expensive, poor value insurance products that provide them with little or no benefit, according to the Australian Securities and Investment Commission (ASIC).

They have reviewed the sale of add-on insurance purchased through car dealerships for the span of three years. Add-on insurance products are sold to consumers when they purchased a brand-new or used car at a dealership. It usually include tire and rim insurance, mechanical breakdown insurance and extended warranties.

Australian Securities and Investment Commission (ASIC) chairman Peter Kell said there are serious problems with the industry.

"There are serious problems in this market that need to be immediately and comprehensively addressed by insurers," he said. "ASIC will be undertaking further work, including potential enforcement action to ensure that this market delivers acceptable outcomes for consumers."

Car dealers like selling this type of insurance since they receive big commissions on it, with salesperson earning $602 million, this is more than four times what consumers received in claims. The report also said that consumers paid $1.6 billion in premiums and received only $144 million in successful claims.

Payment for this type of add-on insurance was usually packaged into the customer's car loan as a single upfront premium, which could significantly increase the cost of the vehicle by increasing the loan amount and interest paid.

Consumer Action Law Centre advise the car buyers to not be tricked into buying insurance in a car dealership and they should shop around and consider all the options first that are available in the market so that they can get a good deal rather than accepting what the car dealer has to offer.



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2016 Car Insurance Rates Rankings by State

The state with the most expensive car insurance premiums in 2016 goes to Michigan, they bag the top spot for third year in a row in the Insure.com’s 2016 state-by-state comparison of auto insurance premiums. Michigan average car insurance premiums is at $2738.
The 2nd spot goes to Montana at $2297, while New Jersey is in third with $1905.

Florida is the 8th spot they are paying an average of $1,654 annually for insurance, $329 higher than the nationwide average of $1,325.

Maine grabbed the No. 1 spot for the cheapest car insurance at $808 annually.

The rates are based on the average for the 20 best-selling vehicles in the U.S. in order to present more accurate rates for the average driver, without high-end sports or luxury cars skewing the data.


National average     $1325
1     Michigan     $2738
2     Montana     $2297
3     New Jersey     $1905
4     Louisiana     $1842
5     Oklahoma     $1778
6     DC             $1773
7     California     $1752
8     Florida     $1654
9     Maryland     $1610
10     Rhode Island     $1608
11     Delaware     $1607
12     Georgia     $1559
13     Texas             $1510
14     West Virginia     $1456
15     Wyoming     $1421
16     Colorado     $1393
17     Connecticut     $1367
18     South Carolina     $1353
19     Arkansas     $1345
20     Alabama     $1337
21     Massachusetts     $1325
22     Pennsylvania     $1305
23     Kentucky     $1295
24     New Mexico     $1277
25     Mississippi     $1277
26     Oregon             $1267
27     Minnesota     $1257
28     Nevada             $1221
29     North Dakota     $1200
30     Nebraska     $1188
31     Arizona     $1188
32     South Dakota     $1168
33     Washington     $1168
34     Tennessee     $1145
35     Kansas             $1135
36     Indiana     $1113
37     Alaska             $1078
38     Utah             $1061
39     Missouri     $1056
40     New York     $1050
41     Hawaii       $1049
42     Illinois     $1035
43     Virginia     $1020
44     Iowa        $989
45     North Carolina     $987
46     Vermont     $942
47     New Hampshire     $941
48     Idaho       $935
49     Wisconsin     $912
50     Ohio        $900
51     Maine       $808

Vehicle insurance

Vehicle insurance (GAP insurance / motor insurance / auto insurance / GAP insurance / car insurance) - are insurance for cars, motorcycles, trucks, bus, and other vehicles used for roads. Insurance are purchased to provide financial protection against damages and bodily injuries resulting from traffic accidents and collisions.

It is a form of risk management primarily used to hedge against the risk of a contingent, uncertainty loss.

Terms of vehicle insurance differ from every region depending on legal regulations. Vehicle insurance may also include theft of the vehicle, and other damages sustained from things other than traffic collisions like floods, storm surges water damage, etc.

Vehicle insurance can cover some or all of the following items:

•     The insured party (medical payments)
•     The insured vehicle (physical damage)
•     Third parties (car and people, property damage and bodily injury)
•     Third party, fire and theft
•     In some jurisdictions coverage for injuries to persons riding in the insured vehicle is available   without regard to fault in the auto accident (No Fault Auto Insurance)
•     The cost to rent a vehicle if yours is damaged.
•     The cost to tow your vehicle to a repair facility.

Policies should specify each item that is covered. For instance, car insurance can be insured against fire damage, accident damage, theft, or flood damages independently.

You can check online for insurance quotes depending on the car and place of residence it can go from $450 to $1000 per year.

Insurance quotes for vehicles in the U.S. are determined by the insurance companies like
GEICO, Progressive, Allstate, State Farm etc. The sum of annual payment is calculated according to complex scheme of points and bonuses, discounting the car cost and insurance driver's history for the past year.

The lowest insurance package will cover only a part of damage in a claim, the rest of the expenses will be covered by the driver.

The minimum insurance package does not cover a lot of things like legal defense and court costs and haulage of crashed cars.