The perceived cost of insurance turns many Americans away from purchasing coverage. While on the other hand, choosing the cheapest option they can find leads to other problems. They are either uninsured and therefore unprotected in an emergency or underinsured with inadequate protection with the worse service possible.
Cheaper does not mean better. Because when it comes to cheap auto insurance, it means less of everything you need to protect you, your family, personal property, and finances.
Let’s see how the real risks of cheap insurance add up.
I | Cheap = Less Coverage and Less Coverage = Less Protection
Saving money is always a perk, but beware of the pitfalls of being “too cheap.”
Underinsurance
Auto insurance rates are relevant but aren’t the most crucial element. The goal is to ensure you have the right coverage to protect your family and property. It’s the whole point of investing in an insurance policy in the first place.
Skimping for the sake of cutting your insurance cost can leave you underinsured. Underinsurance is when an insurance plan can’t cover the expenses associated with a listed disaster. It’s a common problem across all insurance types, not only auto.
The Pitfalls of Short-Term Gains
After natural disasters like floods and wildfires, thousands of policyholders find themselves stranded because of coverage gaps. They worried so much about the cost of their monthly premiums that they overlooked their policy’s value and benefits.
One example is purchasing the bare minimum liability auto insurance coverage to drive legally on the road. Should you have an accident by some unfortunate chance, expect to pay an excessive amount of money upfront for repairs and replacements.
You’re not entitled to a rental car, and medical bills can easily blow the cap off the cheapest plan. Remember, liability insurance protects injured third parties, not you.
A liability car insurance policy’s average limit varies between $10,000 to $30,000 liability coverage per accident. Depending on the care required, like ICU visits and surgery, a single night in a hospital drops anywhere between $1500-$3000. In a major accident where you’re at fault, you can exceed your limits with medical treatments alone.
Always weigh the short-term cost savings against the long-term effects.
Lawsuits
Inadequate protection can lead to legal actions filed by affected third parties. Liability insurance protects you from this so long as the payout after you’ve filed a claim covers the medical bills and replacement or repair costs of affected third parties. Otherwise, the financial responsibility falls to you.
If you cannot meet your obligations, affected parties can sue for outstanding compensation.
II | Less Protection = Less Financial Security + Support
Save a bit of money now, and suffer the monetary consequences later.
Out of Pocket Spending and Debt
As I mentioned, being uninsured or underinsured does not absolve your financial obligations in an accident. One way or another, you’re expected to pay for the damages you caused. Whether or not you end up in debt is not the affected party’s concern because the fact is, either you pay, or they’ll have to pay.
No one is saying you need to splurge on an expensive policy. You can leave off the bells, and whistles insurance agents try to sell. Having a spotless driving record, insurance discounts, and specialized offers can help keep your monthly payments as low as possible.
Practice money-saving tips that balance cost and value.
Ridiculously High Deductibles
Raising the deductible limit is one of the standard methods policyholders use to lower their insurance premiums. Under normal circumstances, it’s flexible. When signing with cheap insurance companies, it’s a safe bet they’ll push for the highest limit, promoting the savings you make on premiums.
Some may minimize or omit the fact that the deductible marks the monies you need to pay upfront before your policy kicks in. In other words, if you meet in an accident and your deductible is $5000, you’ll have to pay that amount first before you qualify for a claims payout.
Be wary of any insurance provider who pushes for high deductibles. Choose your limits based on your budget.
Bad Customer Care Service
Quality service comes at a price. It’s why many companies offer different tiers of services. And if you check the highest level, you’ll often see boosted customer care privileges. Many customers opt for the higher package because of the added support.
This is not to say all companies offering cheaper services provide poor service. Smaller companies offering affordable policies for lower-income clients give their target customers excellent care and service options.
Unfortunately, bad apples spoil the bunch. Some of them will take advantage of your limited budget. On top of that, they practice shady business habits that affect the quality of the service you receive.
The ‘bad apples’ implement internal cost-saving measures to offer you the lowest rate possible, leading to them being understaffed and offering subpar policy packages with high rates of denied claims.
Customer care service suffers as a result of insufficient and often underpaid staffing. So does the time it takes to file an insurance claim and call wait times.
III | Less Financial Security + Support = Less Peace of Mind
It’s all a domino effect—one disadvantage leading to another. In a crisis, the last twist you need is learning that your insurance policy can’t help you recover from a disaster.
At the end of it all, you’re paying for peace of mind. Be wise when making insurance decisions and consult a reputable insurance professional for advice.
Read auto insurance reviews and check on ratings.
Conclusion
Don’t choose the cheapest car insurance available by default. The price tag doesn’t determine a reasonable policy at the of the day—it’s the provisions within its pages. And purchasing expensive policies isn’t the solution either. It’s about balancing your budget and your overall protection.
