Why Inexpensive Auto Insurance Is Not Always the Best

There are a few reasons why inexpensive auto insurance is not always the best choice for you. This is something you should reflect on long before you purchase your automobile.

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Getting low-cost car insurance has several consequences, and if you do not recognize all of the negative repercussions, you might have disastrous results.

Don’t Visit a Car Lot without Coverage

The most important step you should take is to verify your obligations. Buying a new car from a dealership is tricky, because they will not allow you to drive the car off the lot unless you have proper coverage. This becomes a catch-22 scenario, since you probably do not have a policy yet.

Many people make this mistake. They arrive at the dealership, listen to the sales pitch and decide on a vehicle. Once they complete everything, they think they can simply drive away. However, unless you can show the dealer a current auto insurance identification card, you car will remain on the lot.

If you purchase a used car from a private owner, this is a little different. They have no responsibilities of ensuring coverage. They just sign the title over to you and take your money. If you do not have car insurance after you take possession, you are on your own.

Both of these kinds of situations can prompt you to obtain a car insurance policy quickly and for the least amount of money possible. Many times, online shopping is the best way. However, unless you prepare in advance, you may find that your cheap auto insurance coverage does not align with your personal needs or expectations.

A New Car Often Requires More Coverage

Most of the cheaper car insurance policies provide you with minimal coverage, which is why the rates remain low. On the other hand, to take advantage of these great low prices, you may not satisfy your lender’s requirements. Of course, this only applies to those who take the finance option.

However, the Federal Trade Commission reports that most people do need some level of financial assistance because of the rising cost of automobiles. In fact, most new car dealers and even used car facilities automatically assume you will make payments.

It is very rare for a consumer to purchase a vehicle outright. These days, not too many people actually have this kind of disposable income. Since the odds are high that you may fall into this category, you need to know about the levels of coverage the lenders expect from you, or at least have a basic knowledge of how coverage works.

Most use the term “full coverage,” which includes liability bodily injury along with property damage. You also need comprehensive and collision. These three levels protect the vehicle more than liability would, each one has its own price point, and you must select limits and deductibles. Many times, the lender dictates your selections and may not accept low numbers.

You need to abide by their terms, so the best thing to do is agree on higher rates with your auto insurance provider. If you fail to adhere to their requirements, and you have an accident or your vehicle has some type of damage, you could nullify your contract.

You could also receive a letter from the lender advising you of your non-compliance, which leads to a worse outcome. They could easily demand full payment from you since you decided not to increase your coverage.

You Cannot Foretell the Future

Even the best and safest drivers can encounter an unforeseen circumstance that requires them to take out an auto insurance claim. This does not always mean accidents, either. Sometimes, an unpredictable weather pattern brings damaging winds, hail or other disasters. You could quickly become the victim of these devastating occurrences.

In 2011, the National Oceanic and Atmospheric Administration reported more than $20 million in property damage due to weather-related issues like lightening, tornadoes, high winds, hail and floods. Regardless of the region, you could experience these kinds of problems at any time.

If you have an inexpensive policy, your levels of coverage may not protect you enough because the lower the rate is, the less security you will receive.

This is one of the only ways to acquire cheap coverage.

Even if you do have comprehensive, which takes care of non-accident related damage, a limited amount cannot cover the entire cost. Without sufficient car insurance coverage, you reduce the amount of your claim payout. You may not receive proper reimbursement to repair or replace your vehicle.

You Place Your Assets at Risk

Cheap car insurance is a sure-fire way to place your assets at risk, in more than one way. By choosing to pick low rates, you often restrict your options. This could mean state minimum liability protection and basic collision or comprehensive. In no-fault auto insurance states, you may choose the lowest personal injury protection amounts.

This puts you in a number of sticky situations if something happens to you behind the wheel, beginning with restitution and ending in litigation. No-fault states pay immediately; neither the victim nor person causing the accident needs to wait for a decision. Unfortunately, this could backfire if you do not have enough to pay for the damage to your car or other property.

You need to review the limits in your state as you take stock of your personal assets to determine the best amount.

Some states, like Texas, have decent minimum liability limits of 30/60/25.

This allows you $30,000 for injuries, $60,000 for each occurrence and $25,000 toward any property damage, including the victim’s vehicle. This may seem like enough without involving your finances, but if someone has serious medical problems, $30,000 goes very quickly.

 

Other states, like Colorado, are much lower. This state requires a minimum of 25/50/15. Choosing a low-rate car insurance policy in this state could certainly influence your finances. Once you file your claim and receive the money, any balance due must come directly from your pocket.

After an accident, you might very well have to deal with ambulance costs, which, according to the District of Columbia’s Fire and EMS Department, can range anywhere from $428 to $735.

Most first responders bill on a per-mile basis, in addition to the types of procedures they perform.

Basic support is the least expensive and advanced support costs the most. You will not have any knowledge of these procedures until you receive notice.

Other types of medical costs, even the most basic like blood tests, cost around $50, according to experts at Fair Health’s Consumer Cost Lookup website. Physical therapy sessions cost approximately $45 to $50 for 15 minutes, and this touches just the surface of some healthcare charges.

However, you can see that the expenses can add up fast.

Having this information should make you reconsider choosing cheaper auto insurance rates, especially if you have numerous assets. Everything you worked to achieve can escape in a matter of weeks or months. If you go to court, the judgment against you can be devastating.

Your Cheap Rates Can Change Drastically

Many times, car insurance companies offer teaser rates to lure customers in and gain their business. This is not to say that they use unethical tactics, but it does mean you need to read the fine print. Almost every agreement will have certain restrictions or loopholes. They work to the carriers’ advantage, not yours.

If you are not careful, you could agree to a mid-policy increase, which is contingent upon your first six months with this company. They could also include a clause that penalizes you if you make a late payment or two.

Although the industry has state regulations, these laws do not have strong holds.

In other words, each car insurance company has the authority to create stipulations within their customer contracts.

You should be aware of what cheap auto insurance will really mean for your personal situation before you seek out low-cost services. Most times, these types of restrictions will not affect you as long as everything goes well. However, as soon as you have an accident, miss a payment, or break any of their other rules, you could see a completely different side of your provider.

They Could Have Terrible Service

Another area where you could suffer is by having a company with poor customer service. The awful truth is that you may not find this out for years. The average customer does not contact customer service until they have a problem. After all, you do not complete a quality control process upon receiving your policy.

You may simply assume that they have trained representatives who can provide you with sufficient answers to your questions. Unfortunately, this may not be the case, and if you have a discrepancy with your bill or see a price hike, they could give you a hard time.

This can be very frustrating and lead you to the conclusion that you are just a number, not a valued customer. One of the top reasons why customers leave or stay loyal to any one company is due to their level of dedication in the area of customer service.

If you come across a car insurance company that promises rock-bottom prices without compromise, make sure you test their customer service department in advance. Take the time to challenge them on their products and make more than one or two phone calls. You want to make sure each representative you speak with has the same information.

They May Not Last a Long Time

Did you ever stop to think that the reason these car insurance companies offer such low rates is that they do not plan to stay for the long term? Many unreliable online auto insurance providers have an ulterior motive. They have the funding to keep their business operating for about three to five years, and then they disappear.

It is important to review carriers’ ratings before making a decision.

Make sure you find their listing with the Department of Insurance in your state. Any trustworthy company sends their information to this state regulator annually. Further, the company should have a history that dates back at least 10 years.

This will decrease the chances that they file a Chapter 11 bankruptcy and leave you without proper coverage. If you choose an obscure auto insurance provider with a short and inexperienced record, you could very well receive something from your local DMV advising you that you do not have insurance anymore. This means you will have to begin the long research process again.

Shopping for low-rate car insurance does not have to come with a negative experience, but you must be on guard against getting something for nothing. You may have to pay a little more for the best.

Several honest companies will provide you with the proper coverage without striking you too deeply in the wallet. The key is to locate the right mix of stability, sincerity and directness.

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