Buying a car can simultaneously be one of the most exciting and stressful purchases you will make. There is a lot to consider before you drive the vehicle home. Not only are the total costs and monthly payment critical, but you must also think about insuring the vehicle.
While carrying auto insurance is not required by law in all states, all states do require some form of financial responsibility that show you can pay for any damages caused in a car accident. However, having car insurance is the easiest way to protect yourself and your vehicle. Further complicating matters, states have different minimum requirements when it comes to insurance coverage and there are a variety of options and protections you can choose.
Though you never hope to have to make a claim, you can have peace of mind knowing you have coverage to back you up in a time of need. There are certain factors to consider as you pick a plan. But whatever you do, do not neglect the essential elements of car coverage. While it may be tempting to go with cheap auto insurance to save money, it’s always better to be safe than sorry.
Is cheap auto insurance worth it? The short answer is no.
Here is why you shouldn’t rely on cheap auto insurance.
Car insurance comes in many shapes and sizes. Different types of coverage is available depending on your situation and needs. Insuring a new car may look a little different than covering a used vehicle. Also, insuring a car with a warranty and insuring one with no warranty may require some adjustments. This may cause you to question whether extended warranties on cars are worth it.
Regardless, make sure your coverage has both liability and collision coverage. Liability coverage protects you in the event of an accident that results in injury or property damage to another. On the other hand, collision coverage helps pay for repairs to your vehicle in the case of an accident. Put simply, one helps pay for damages to your vehicle and the other helps pay for damages to another person or vehicle, or both.
In case of serious accidents, it is important to include personal protection coverage in your plan too. This coverage helps pay for medical care and lost wages if you are seriously injured in an accident, even if you were at fault.
Aside from the musts listed above, you’ll need to try and balance your coverage with a monthly payment that you can afford and deductibles you feel comfortable with.
Why Cheap Auto Insurance Isn’t Worth the Savings
Potential for Legal Troubles
Some people make the mistake of skimping on liability coverage. Going the inexpensive route or having the bare minimum in this area may save you money in monthly premiums, but the consequences could be disastrous.
This coverage protects you in the event of an accident you cause. If you are at fault, and the collision results in injuries or property damage, this coverage will pay the costs. Without this coverage, or if it is not enough, you could be responsible for paying large sums out of your pocket.
Worse, without the right liability insurance, the other party could sue you. The resulting costs in settlements and legal fees could be significant and lead to financial hardship. The potential for legal woes and the financial impacts that could follow aren’t worth saving a few hundred in car insurance.
Never go as cheap as possible when it comes to choosing liability coverage.
How much is enough? Talk to your agent and let them help you determine the amount of protection you need to make sure all your assets are covered.
You Cannot Predict What Will Happen on the Road
Every time you get behind the wheel there are risks. Poor weather conditions, mechanical failure, and your bad judgment and that of other drivers can cause accidents. As attentive as you may be behind the wheel, you never know when a collision could occur. Chances are, if you drive long enough you will be involved in some sort of accident.
If you do not select an adequate auto insurance plan, you could find yourself paying hefty bills to repair your vehicle or care for injuries. Therefore, it’s important to have enough collision coverage that your vehicle can be repaired or replaced.
You can select the right amount by evaluating your driving habits, including how often you drive and where you go. You can also assess how many drivers will be on the policy and the skill level of each driver. Again, make sure you don’t just go for the cheap auto insurance policy, but the one that covers you and your situation best.
You Cannot Predict Non-Collision Incidents
As with other aspects of car insurance, you should not skimp on comprehensive coverage. This pays for the damage your vehicle may suffer from causes other than collisions such as vandalism, theft, and weather-related incidents.
Some may be tempted to ignore this coverage when it is time to purchase a policy. Again, it is not worth saving a little bit of money on your premium without comprehensive auto insurance.
Without it, you are on your own to replace windshields, pay for bodywork, or repair any interior damage to your vehicle. Out-of-pocket costs in these scenarios could set you back hundreds or even thousands of dollars.
You Do Not Want to Be Underinsured
No one wants to pay too much for auto insurance, but it does not make sense to miss out on coverage because you want to save a few bucks. Your agent can help walk you through important coverages and help show which ones would be helpful in your case.
It is vital to start shopping with your mind on your needs. For example, if you select a coverage level that does not account for enough collision insurance or personal protection insurance, you could be left with a hefty out-of-pocket bill in the event of an accident. If you fail to get enough liability coverage, you could be in trouble if you are at fault for a collision and someone is injured.
There are some ways to save on auto insurance but going with cheap auto insurance simply isn’t one of them.
You Could Pay the Bulk of Repair Costs
When you purchase car insurance, there are many elements you must pay attention to and it can get confusing. Aside from the type of coverages discussed above, your deductible and premium will play a significant role in how much you pay out of your pocket following an accident.
Many drivers do not like the thought of having hefty monthly bills. While this is understandable, be aware that skimping on premiums will affect your deductible when an accident does occur. The deductible is the amount you pay toward an accident or claim. A low premium translates into a high deductible, which in turn will force you to pay more of the bill for minor and moderate repairs.
For example, someone with a deductible of $1,000 for collision coverage will need to pay the first $1,000 toward repairs and other damages to their vehicle following an accident. The average deductible is $500, but most policies will allow you to pick different deductibles for different parts of your insurance coverage.
The best way to approach these decisions is to look at your budget. Decide how much you can afford to pay monthly for car insurance. Tacking on even a little bit to your premium will lower the deductible, giving you more financial help if you need repairs made following an accident. Paying a bit more monthly may be worth it if you will have trouble covering an unexpected expense of $500 or more.
You also might want to look at your driving habits and history. If you are prone to being in a lot of accidents or having mishaps, it may be worth it to have a lower deductible. If such incidents are rare, it could be smarter to keep your premium down.
You May Have Other Drivers
If you are the only driver in your household, you may be comfortable being more lenient with your policy. But what happens if you have additional drivers on the policy?
Having multiple drivers on the policy, especially if they are young or less cautious drivers, is yet another reason to not go with cheap auto insurance.
Think about the effects a meager policy would have on teenage drivers. Most parents with young drivers want these less-experienced individuals to have as much coverage as possible. This protects you and other drivers, and it can give you peace of mind.
Statistically, adolescent drivers are more likely to get into an accident. If you need to make a claim but have insufficient insurance, you could face serious financial consequences.
You May Have Riskier Vehicles
Skimping on car insurance is also a bad idea for certain vehicles. Not all cars will carry the same rates, as some are more prone to being in accidents or attracting vandals and thieves.
For example, you will not want to go light on the insurance coverage if you have a sports car or luxury vehicle. These will cost more to insure anyway, but because the risk of damage or cost to repair is higher, you should plan on getting the most out of the coverage opportunities.
Also, do not dismiss the need for good coverage if you have a newer car. More recent models will cost more in insurance premiums than older cars, but they also cost more to fix or replace.
You Want to Look Out for Others
The last major reason you shouldn’t look to go with the cheapest auto insurance is that you want to make sure that others can get the care and repairs they need in the case of an accident for which you are at fault.
If an accident is your fault, the other driver and passengers will look to your insurance company for coverage. If you have enough coverage, your plan will pay for any personal injuries and property damage the other party suffers. Skimping on coverage could complicate these matters and draw you into court. Buying the right amount of coverage can give you the peace of mind you need if someone else is hurt because of your error.
Injuries and damaged vehicles are difficult enough to deal with, but you don’t want the added complication of your insurance not adequately covering for the needs of the other people involved. If you are at fault, the least you can do is make sure anyone you affect is covered.
Moral of the Story
Going as cheap as you can on auto insurance isn’t worth the savings, but that doesn’t mean you have to have inadequate coverage.
Affordable plans with good all-around coverage are available. When you are shopping for a new vehicle and new auto insurance, make sure you are protecting yourself, your family, your vehicles, and others out there on the roads.
You can have peace of mind knowing that you have financial backing even after serious accidents and mishaps. Talk with your agent today about coverage that makes the most sense to you and be sure to regularly shop around to see if you can find the same coverage for a better deal.
You shouldn’t buy cheap auto insurance, but you can look to save money by renegotiating your insurance bill on a regular basis.
Talk about Money Saved!
Sebastian is co-blogger at Money Saved is Money Earned. He emigrated from India in his 20's with $15 in his pocket. Despite facing adversity in his early life, Sebastian is an early retired Senior Financial Analyst for the City of Portland. He has owned his home free and clear for 15 years, has had income properties, put three kids through college, and travels to India regularly, all without a six figure income.