We all want to get the best bang for our buck. That’s why we strive to find cheap car insurance rates that still match the coverage we want. It is also a shared secret that the insurer and the vehicle owner know that everyone is looking for business. To entice customers to sign up, insurers advertise cheap car insurance rates.
However, if you are involved in an accident, cheap auto insurance can come with a high cost of ownership for auto repairs or medical expenses. With better information, that cheap plan suddenly isn’t as great as you thought it was.
Given that you need auto insurance to protect your finances whenever you drive, let’s examine some shortcomings of a cheap insurance plan.
What are the disadvantages of a cheap insurance premium?
While some cheaper insurance rates can be a good idea, it’s important to understand the potential consequences of the cheaper rates. Exceptionally cheap auto insurance should remind you of this fundamental truth: “You get what you pay for.” However, all driver auto insurance premiums vary, and your budget and risk appetite will determine how much coverage you need.
For this reason alone, it’s wise to work with a local insurance provider to see what coverage makes sense for your lifestyle and financial situation.
You could pay more out of pocket later with a cheap auto insurance plan
Opting for a lower premium automatically means that some critical risks have little to no coverage. This means more expenses if you’re found guilty of something the policy doesn’t cover.
Nothing is a simple incident when you have insufficient coverage with high deductibles or need to pay cash even on a minor incident. Medical bills, repair costs and legal fees can quickly run into the tens, even hundreds of thousands. Or worse – they all come in at the same time.
The penalties alone can lead to financial hardship. It’s better to pay for insurance and not have to find out.
You take more risks
One of the most popular ways to reduce insurance premiums is to increase your deductible. Such cheap insurance rates shift much of the liability onto the policyholder and mean that the driver must pay a significant amount of cash up front before coverage begins.
This means you would get into a serious problem with the law or risk your investments and savings. Their property and assets may be foreclosed on or confiscated to compensate accident victims or damage caused. In the long term, this also affects your creditworthiness.
You’ll get fewer packs if you have a cheap auto insurance plan
Higher tier insurance policies often come with different coverages. This can be emergency roadside assistance or car rental cost recovery, but the bottom line is that they come with a more expensive insurance premium by default. These little extras are great because you never know when you might need them.
In addition to these benefits, purchasing a higher policy class can qualify you for automatic rebates from many brokers. This is a fantastic opportunity to further reduce the overall price of the policy.
It’s less personalized
Most cheap insurance plans are fixed packages with little flexibility in coverage types. However, an insurance broker can help you choose your preferred coverages with a reasonable insurance budget. This is possibly one of the best ways to create a policy with endorsements and add-ons that fit your lifestyle. For example, a water damage clause can help you recover after a disaster if you live in a flood-prone area.
You’d be surprised how many insurers use your credit score and driver’s license to set your insurance rate. You must keep these records immaculate.
Related: Auto Insurance Myths You Shouldn’t Believe Anymore