Dave Ramsey Said This Is a Big Problem With Going the ‘Cheapest Route’ When Buying Car Insurance

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Don’t buy car insurance without reading this Ramsey advice.  

Buying car insurance can be a pretty complicated process. There are many different types of auto insurance available, and a huge number of different companies offer policies.

For drivers who are overwhelmed with their coverage options or who aren’t sure what they need, it may be tempting to just go with the cheapest possible auto insurance. But, as finance expert Dave Ramsey explains, this may not be the best approach. Here’s why.

Buying the cheapest car insurance could be a huge problem

According to Ramsey, there’s one very clear, very serious issue with opting for the lowest price auto insurance coverage.

“There’s just one problem with going the cheapest route: Saving money isn’t the only part of buying car insurance,” Ramsey warned. “You also have to think about protecting your finances from the possibility of a 10-car pileup. (Okay, so that’s a little unlikely, but you get the point: Car accidents can be expensive.) You need coverage that actually covers you — the kind that protects you from budget-busting car wrecks.”

The cheapest coverage, in other words, could end up costing drivers an absolute fortune if it doesn’t provide a sufficient amount of insurance to protect against anything that could go wrong.

Here’s why drivers need to heed Ramsey’s warning

Ramsey’s warning about opting for the cheapest coverage is important for every driver to read before they go shopping for an insurance policy.

See, states set minimum coverage requirements, which usually require liability insurance and sometimes personal injury protection (PIP) coverage. Liability insurance only pays for damages a policyholder causes to others, while PIP pays for a small amount of medical bills and lost wages for a collision regardless of who was at fault for it. Buying state minimum coverage is usually the cheapest auto insurance available.

But, complying with just the minimum requirements and getting the cheapest coverage would offer very little actual financial protection from devastating losses. A driver with minimum coverage would have no insurance to pay for their own vehicle’s damage in the event of a crash or other covered incident such as vandalism or encounter with a deer, or auto theft. The policy limits on minimum insurance are also pretty low, so drivers could find themselves being personally sued for excess losses they cause to others that their insurance doesn’t cover.

A driver who shops based on price alone could also find themselves with an auto insurer who has a bad reputation — and who doesn’t pay out claims promptly. And, since policies with higher deductibles cost less, a driver could also end up with huge out-of-pocket costs in the event of a crash if they chose a large deductible to save on premiums.

Instead of buying the cheapest insurance, drivers should follow Ramsey’s suggestion and make sure they have full coverage for losses they’d need help covering — including collision and comprehensive coverage. Paying more to avoid a potential financial disaster down the line is well worth it, especially since auto insurance that offers full protections can still be pretty affordable for drivers who shop around.

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