What to Watch Out for When Buying Very Cheap Auto Insurance

Whether you’re on a tight budget or just trying to save money, buying very cheap auto insurance may seem like the best way to go. Although getting really inexpensive coverage for your car may be extremely tempting, there are several things you should watch out for before you buy anything.

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Owning a car is a big expense for most people and, as a result, there are lots of companies out there offering very cheap auto insurance. As often is the case, however, cheaper isn’t always better. If you come across an insurance provider that’s offering rates so low it’s hard to believe it, the following reasons could be why.

Bad Companies

While most insurance providers are legitimate and stable businesses, a company offering extremely cheap coverage for your car may not be. Companies offering very cheap insurance could be offering misleading and fraudulent policies. Although you may be familiar with many of the major insurance providers, if you come across a company you haven’t heard of, research it online to see if it’s authentic. A good place to start is the Better Business Bureau.

In addition, a company selling extremely inexpensive insurance could be in financial trouble. Naturally, you want to be certain that your insurance company is going to be operating when you need them.

As a result, you may want to stick with the major insurance providers, as typically they’re on solid financial ground due to their size. Also, it’s easier to find out more about them in comparison to smaller, less-researched businesses.

Another thing to consider with companies offering really cheap auto insurance is whether they provide good customer service.

While getting dirt cheap insurance may sound great, it won’t seem like such a good deal if the company won’t address your concerns when you have them.

Ask yourself, if a company is charging very low prices, can they still provide the customer service you expect?

You can find out more about a company and whether they’ve received favorable reviews by doing a quick search online, or by referring to industry governing organizations like the National Association of Insurance Commissioners’ Consumer Information Source website.

Internet Scams

In addition to the company itself, it’s important to be wary of websites that are offering really cheap auto insurance. Whether it’s a website claiming to represent a major provider, or a site that specializes in comparing insurance rates, it could be an Internet scam just trying to get your financial information.

Most sites that offer online insurance quotes require you to answer a few general questions before the company provides you an estimate. Usually, you will be asked several things like the type of car you have, how often you drive, and where you live before you receive a quote. No major provider or legitimate business should require your credit card information to provide a free quote. If a website asks for this, it’s probably a scam.

In addition, most established companies will not ask for your personal information, like your social security number, unless you’ve already received a free quote and need a more accurate estimate.

If a website immediately asks for more private and personal info, don’t share it.

Before you provide any information, check out the company’s privacy policies and whether the website has any security measures advertised. The U.S. Government also advises consumers to check and see whether the URL begins with “https:”. If it’s a website that specializes in comparing insurance rates, do a quick search online to see if other people have reviewed the service

Not Enough Liability Insurance

Another reason that a company could be offering such low rates is because the policy doesn’t include much liability insurance. Virtually all states in the U.S. require drivers to have liability insurance, which helps pay for the costs another person might have as a result of an accident you caused. The more insurance you purchase, the more protected you will be from costly damages that might occur in an accident.

By law, insurance providers are not allowed to sell less coverage than what the state minimum requirements are. If a company is offering really low rates, however, it might be wise to check out what the requirements are in your region. You want to be certain that the policy is at least legal.

The department that oversees auto insurance requirements varies from state-to-state. For example, in Washington State, it’s the Department of Licensing.

Even if the policy meets the minimum requirements for liability insurance in your state, it might be so cheap because it only includes that amount of coverage and not more.

Serious car accidents can easily cause thousands of dollars in damages and, if your insurance doesn’t cover it, you could end up paying for them. In other words, buying cheap insurance could end up costing you a fortune.

Lack of Additional Coverage

Companies can also offer really cheap insurance if the policies don’t include any additional coverage besides liability. While liability insurance will help protect you from damages you might cause to other people’s property, it won’t cover any repairs for your own car.

Depending on the vehicle you drive, the costs to fix your car could easily be in the thousands. If you don’t have collision insurance, and you cause an accident, then you’ll be on the hook for the repairs.

Really cheap policies probably don’t include comprehensive insurance either, which pays for damages your car receives in an incident not involving a motorist. For example, if your car is heavily damaged in a flood or is vandalized in a riot, you need to have comprehensive insurance to cover the costs. It’s important to remember that your vehicle doesn’t need to be in car accident to be seriously damaged.

There are other more extensive types of coverage, like personal injury protection insurance, which some drivers elect to purchase. While more coverage means higher insurance prices, you can at least rest easy because you’re better protected. You can learn more about the various types of coverage through the Insurance Information Institute’s website.

Limited Tort Options

Another way some providers can offer extremely low prices for their car insurance policies is by including a limited tort option. These options limit the amount of compensation you can sue for in the event of a serious accident. If you agree to a limited tort option then you may not be able to sue for pain and suffering damages, depending on the state in which you live.

While including this in your insurance is a way to reduce your premiums, it certainly won’t be worth it if you’re seriously injured in an accident and miss several months of work.

If you’re considering buying a really cheap insurance policy, check to see if such an option is involved. You can find out more about the limited tort laws in your region by contacting your state government.

Really High Deductibles

Car insurance rates may also be really cheap if the policy requires you to pay a large deductible. The deductible is the amount of cash you agree to pay towards the damages when you file a claim with your insurance provider.

If you decide to pay a deductible of $300, then you must pay $300 towards the costs and your insurance company pays the remainder.

The higher the deductible, the less a provider will have to pay in the event of an accident, and the lower rates it can charge. A company may try to convince you that you’re getting a really good deal, when in fact you might have to pay a huge deductible anytime you file a claim. If the insurance rates seem extremely cheap then find out what the deductible is.

Hidden Costs

Have you ever thought the sale price for something was unbelievably low, and then found out after taxes, shipping costs and necessary supplies it wasn’t so cheap after all?

The same goes for car insurance. A company may be offering extremely low rates up front, but once you’ve handed over your money, you may realize that there are plenty of hidden costs.

Before you buy anything, be sure to review the fine print or ask the provider about any additional costs like late payment fees, cancellation penalties, or other administrative charges.

A company may offer really cheap insurance rates, but then try to make up the difference with ridiculously high fees and fines.

Compare Providers

One of the best ways to protect yourself from scams and bad insurance deals is to take a little time and see what the major providers are offering. If one or two companies are offering prices that aren’t even in the same ballpark as the more established providers, then the chances are something isn’t quite right.

The reality is that if you have a solid driving record and pay your bills on time, then you can find affordable insurance without having to worry if what you bought was the real deal.

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