Why cheap car insurance isn't the best policy

When you’re on a budget, looking for the lowest possible car insurance rates seem logical. Unfortunately, cheap car insurance can hurt your finances when you need to file a claim. 

Why cheap car insurance isn't the best policy

Nobody wants to overpay for insurance, especially when it feels like you need to sell a kidney to afford a cart of groceries. When you’re on a budget, looking for the lowest possible car insurance rates seem logical. Unfortunately, cheap car insurance can hurt your finances when you need to file a claim. 

If you’re not an insurance pro, it can be hard to tell whether cheap car insurance is too good to be true. Luckily, we are insurance pros. Let us show you how to save money on car insurance without putting yourself at financial risk. 

Why is car insurance so expensive right now? 

You’re not imagining it: car insurance is getting more expensive over time. Insurance companies set car insurance rates based on how much it costs them to pay for claims. As the cost of cars, car repairs, medical care, and property repairs has risen, insurance companies have had to raise their rates to keep fulfilling claims and make a profit. The result is more expensive car insurance. 

Is it okay to buy the cheapest car insurance I can find? 

Even cheap car insurance will meet the legal minimum insurance requirements in your state. If you get the cheapest car insurance, you will be legally permitted to drive your car. In that sense, it’s okay to buy the cheapest car insurance. If you don’t need to file claims, you’ll save some money every month (or year). 

However, cheap car insurance has downsides, ranging from annoying to life-ruining. 

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You might not get a great deal for what you buy 

When you choose cheap car insurance, your insurance company may not give you their best prices. Insurers put more effort into satisfying their higher-paying customers, like those who buy comprehensive insurance or bundle multiple policies.  

Your deductible will be higher 

When trying to save money on car insurance, people often raise their deductibles. A deductible is the amount that you have to pay out of pocket when filing a claim. Say your insurance deductible is $500 (the average choice). If you filed a claim to repair your car after an accident, you would need to pay $500 of your repair bill before your insurance coverage kicked in. 

The cheapest car insurance can have deductibles higher than $1,000. With a higher deductible, you pay more per claim. You may feel like it’s not worth filing a claim for smaller losses anymore. 

Your insurance won’t cover repairing or replacing your car 

The cheapest car insurance only includes liability coverage. If you’re not familiar with car insurance coverage types, you might not know what that means. Liability coverage only pays for damage you do to others with your car. If you cause an accident, liability coverage helps pay for the other driver’s medical costs and auto repair/replacement costs, plus damage you cause to property like a fence or telephone pole. Liability coverage does not cover your injuries or damage to your car. 

Comprehensive and collision, also known as full coverage when paired with liability, cover your car. If you're at fault in an accident, in a single car crash, or your car gets stolen or damaged by weather, these are the coverages that will fix the damage. If you can’t pay for the repairs out of pocket, you’ll be stuck without your vehicle. 

You won’t have enough coverage for most car accidents 

The limits of a cheap car insurance plan could leave you owing someone hundreds of thousands of dollars if you cause an accident. A cheap car insurance policy might have a $10,000 or $30,000 coverage limit per accident. A car accident, even a small one, can easily cost more than $30,000 in medical bills and car repairs. Once you pass your liability coverage limit, you’re on the hook for the rest. 

Find the right insurance at the right price 

You deserve more than the minimum. You’ll be thanking yourself later if you get into an accident or something happens to your car. 

Instead of looking for the cheapest insurance possible, look for insurance that meets your financial needs now but will help prevent the worst-case scenario if you file a large claim or are at fault for an accident. That means: 

  • Considering coverage beyond liability coverage, like comprehensive or collision, that will pay to repair damage to your vehicle 
  • Buying liability coverage that’s the same as, or more than, your net worth (the value of all your savings, investments, and property, minus your debt). 
  • Choosing a deductible you know you can afford 

These choices will result in less cheap car insurance rates, but they’ll also save you from falling into dire straits in the case of an accident. Plus, there are other ways to save money on your car insurance besides opting for less coverage or higher deductibles. 

How to find affordable car insurance coverage 

Rather than looking for the cheapest car insurance companies overall, look for a company that offers a competitive quote for your specific insurance requirements. It can be hard to get the best quotes on your own, so we recommend working with an independent insurance agent like the agents at Surround Insurance. When getting quotes, see if you can earn discounts for safe driving, being a good student, or being a member of certain organizations. 

Need help with quotes or coverage limits? Contact Surround Insurance. We’ll make it simple. 

This is general information based on questions our customers ask us. It may not be right for your specific situation. You should get some advice from a licensed insurance agent (like us!) before you make a decision on your own insurance.