Why Buying Cheap Car Insurance Could Cost You

October 26, 2017

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In life, cheaper isn’t always better. Don’t buy cheap trash bags (they rip). Don’t buy dried garlic from the dollar store (it tastes weird). And don’t buy cheap car insurance unless you understand the potential drawbacks.

We get it — nobody wants to pay more than they have to for insurance! But buying cheap auto insurance isn’t always the best idea. Here are three reasons why.

1. Cheap car insurance may not protect your assets

Why do we have car insurance, anyway? To fix your car — or someone else’s — when you get into an accident. Right?

Not entirely. Your car insurance protects more than your car; it also covers your assets. That means everything you own: your cash, your investments, your house, your stuff. And cheap car insurance won’t do a great job of protecting those assets if you get sued.

For example, let’s say you buy cheap car insurance in Arizona that offers the minimum coverage required by state law: $15,000 per person/$30,000 per accident in bodily injury liability, $15,000 per person/$30,000 per accident in uninsured and underinsured motorist bodily injury, and $10,000 in property damage liability. Sounds like plenty, right?

Then, during a sudden monsoon season dust storm, you smash into a car on the highway, causing a three-car pileup. Soon after that, you’re hit with not one, not two, but five lawsuits from the drivers and passengers in the other cars. They want money for their medical bills and car repairs, and your cheap car insurance policy is all tapped out. The lawyers are going to come after your assets now, and the court may even garnish your wages.

Fortunately, it’s possible to find super-affordable car insurance that still does a good job of protecting you. Start by comparing quotes for cheap car insurance on Compare.com. You can adjust your coverage levels to hit the sweet spot, where you have enough insurance to preserve your peace of mind while also keeping monthly premiums low.

2. Cheap car insurance may have terrible customer service

Super-cheap car insurance may work just great for you as long as nothing happens to you or your car. Then, when you actually have to make a claim, you may find out the real reason your insurance is so cheap! No one answers the phone. The customer service rep you finally reach is cranky and unhelpful. The appraiser never shows up to check the damage. The claim takes months to process. And at the end of it all, your insurance company grudgingly gives you a low-ball estimate.

The stress and aggravation of dealing with a cheap car insurance company may not be worth the savings. And when an insurer refuses to pay you what your car (or your car repairs) are worth, that’ll cost you. Fortunately, there’s some easy research you can do. When you’re considering buying car insurance from a new company, take a look at the J.D. Power customer satisfaction ratings for that company first. J.D. Power collects customer ratings for auto insurers in categories like price, claims, billing process and price. So when you find a company offering cheap car insurance, the ratings can help you figure out if it’s too good to be true.

3. Cheap car insurance might have hidden costs

When things are cheap, there’s a reason. And often, the reason a company can offer cheap car insurance is because the policy is cutting corners somewhere else. For example…

  • Depreciated repair costs: You probably know that a car is a depreciating asset — that means it loses value over time. Well, some cheap/nonstandard insurance policies argue that the cost of repairs should reflect this depreciation, too. That means they might give you $5,000 to repair body damage on a newish car, but only $2,500 to repair the same damage on an older one.
  • Limitations on who can drive your car: Most car insurance policies are generous in who they cover: household members, friends who borrow your car, etc. Some cheap car insurance plans exclude everyone except for the policy holder. That means if your roommate borrows your car and bangs it up, your policy won’t pay.
  • A high deductible: Yes, car insurance gets cheaper when you raise your deductible from $200 to $1,000. But when you back into the mailbox and you end up paying the entire repair bill, you may wipe out everything you saved by opting for the cheap insurance.

But cheap car insurance is possible to find!

Having said all that, we don’t want to discourage you. It is possible to find cheap car insurance that gives you solid coverage. You just have to shop around, then compare quotes and coverages to find the right option for you. And the best way to do it is to compare quotes for cheap car insurance on Compare.com.

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You could save up to 32% by using Compare.com!

Based on a survey of 100 California Residents. Average savings determined via a comparison of their selected policy against their self-reported annual premium.