How Cheap Auto Insurance Can Lead to Unexpected Costs

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Cheap car insurance could leave drivers owing thousands. Read on for a breakdown of the surprise costs that could result from a subpar insurance policy. [[{“value”:”

Cheap auto insurance sounds like a great thing. And sometimes it can be. A driver who shops around for insurance coverage could reduce premium costs by anywhere from 5% to 25%, depending on the situation. Savvy motorists who take advantage of discounts, such as safe driver discounts, can also save.

But there’s a big caveat. A low-priced insurer offering affordable full coverage policies is a blessing. An insurer offering a cheap substandard policy is a curse. And there are a couple specific situations where a cheap policy could turn out to be very expensive for a driver’s bank account. Here’s why.

1. Cheap coverage can sometimes mean insufficient coverage

Getting cheap coverage could be a very expensive mistake if the reason premiums are low is because the policy offers too little protection.

In most states, drivers are only required to buy a relatively small amount of liability coverage. And liability policies only pay for losses the policyholder causes to others — and only up to the maximum limit on the policy.

A motorist who buys only the required $15,000 per person and $30,000 per accident in liability insurance, for example, could end up losing a fortune if they cause any kind of serious harm to others. Their insurer would pay only a maximum of $15,000 for each victim and $30,000 total for the whole accident, and those with uncompensated losses could sue the driver personally.

A driver who doesn’t buy add-on coverage such as collision insurance (to pay for their own car after a crash) or comprehensive coverage (to pay for losses not caused by a crash) could have to cover the entire cost of repairing their car. They might even have to buy a new vehicle if something happens on the road.

READ MORE: Types of Car Insurance Coverage

There is virtually no situation where drivers should not buy a full coverage policy and buy more than the minimum coverage needed to protect their assets. Otherwise, even a relatively minor incident that does real damage to a car or causes injuries could be financially ruinous.

2. Cheap coverage can sometimes mean an insurer cuts corners

There’s another issue as well. Some auto insurers offering affordable coverage are great. Others advertise cheap rates because they provide poor coverage. They may make it really difficult for drivers to make a claim, or could lowball motorists when it comes to valuing their car if it’s declared a total loss.

After an accident, most people just want to get paid what’s fair and get back on the road ASAP. They don’t really want to fight an insurance company or have to sue to get a claim paid. So, it’s important to look at an insurer’s reputation, not just its premium price. The National Association of Insurance Commissioners maintains a database of complaints drivers can view, and J.D. Power ranks insurers, so it’s worth taking a glance at that list.

Fortunately, drivers using these tools don’t have to settle for a cheap insurer who is going to give them a hard time — and drivers who understand the risks can make sure they’re getting the coverage they need. These smart motorists can shop around to find coverage that’s the best deal when looking at the big picture, rather than focusing on the cheapest car insurance alone and ending up with regrets.

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