Is Cheap Car Insurance Really Worth It?

Everyone wants to save money on their car insurance. The less you pay, the better; lower premiums mean you have more money for the things that matter. The problem is, buying a cheap car insurance policy can be risky and may cost you a lot more in the long run. 

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Price is important but it’s not the only thing that matters here so before you rush off to get the cheapest possible car insurance with the lowest required coverage, you should ask yourself if cheap car insurance is worth the hassle.

What is Cheap Car Insurance?

Cheap car insurance, like a cheap car, is something that covers the bare essentials but leaves a lot to be desired in key areas. For instance, instead of dropping $30,000 on a new car, you could purchase a rundown older vehicle for a few hundred bucks, saving yourself a huge sum of money in the process.

That vehicle will get you from A to B. It’s legal and it may be all you need for your daily commute and occasional visits to the grocery store. But it’s also more likely to break down at the side of the road and leave you stranded; it’s more likely to refuse to start on a winter morning and force you to miss work. And, more importantly, the lack of safety features, when compared to a newer vehicle, means you’re more likely to be involved in a very costly (both physically and financially) accident.

Insurance coverage works in a similar way. You can get the basics and that will cover you for what you need. But what happens if you’re in an accident with an uninsured driver? What happens if you hit a deer or your brand-new car gets vandalized? Your insurance policy may not cover you, and if you have the cheapest possible premiums, it almost certainly won’t.

What is the Cheapest Possible Auto Insurance?

Most states have a minimum requirement for car insurance. In the majority, it covers liability insurance, including bodily injury coverage (per person and per accident) and property damage coverage (per accident). You’ll be required to have these three forms and to meet all other state minimum requirements for you to be legal, and if you don’t, you’re underinsured and may face penalties.

In addition to this liability coverage, there are also several other types of cover, some of which are mandatory, most of which aren’t. If your state allows it, there’s nothing stopping you from sticking with the bare minimum; it could bring your premiums down to less than $500.

The problem is, liability insurance only goes so far.

Liability insurance is designed to cover the other driver and their vehicle, not you. If everyone has this cover, all victims of a road traffic accident will automatically be covered. 

If you’re hit and injured, the other driver’s liability insurance will ensure your vehicle and physical injuries are covered.

But this doesn’t extend to accidents that don’t involve other vehicles, such as when you hit a wall or tree; it doesn’t cover you for weather damage (flood, hail, winds) or animal collisions, and it also won’t cover you if the other driver is uninsured or underinsured.

As a result, by only sticking with the minimum you are rolling the dice, hoping that nothing will happen or that you’ll be able to cover the costs if it does.

What You Need to Consider

When trying to reduce insurance costs as much as possible, you need to ask yourself a few basic questions:

Do I Need Vehicle Cover?

If you have a brand-new car, or even one that is just a few years old, you can’t afford to risk not buying collision coverage or comprehensive coverage. If you’re involved in an accident and not covered by liability insurance, you may lose every cent invested in that vehicle.

It’s akin to walking around with $30,000 in your pocket, because you’re always one mishap or act of criminality away from losing it all and when that happens, there’s nothing that the authorities or your insurers can do about it.

When you have an expensive vehicle, you need to focus less on getting the cheapest car insurance and more on getting the most comprehensive car insurance, including add-ons like New Car Replacement, which is offered by many of the biggest auto insurance companies.

Of course, if you have a cheap vehicle, it’s less of a concern. All insurance costs come with a deductible, which is the money you pay before the insurer takes over. If you’re driving a car that’s worth less than $1,000 and your collision coverage has a $1,000 deductible, it’s pointless. If anything happens, you can just scrap the car and move on.

Do I Need Personal Cover?

Sometimes, health insurance and other forms of insurance will cover you and negate the need for additional options like medical payments cover and personal injury protection (PIP).

These can still be useful to have, especially PIP, as it will compensate you for all lost work while also covering medical costs, but not if it comes with an extortionate price tag that you can’t afford to pay.

What is the Likelihood of Me Needing that Extra Cover?

If you live in an area with a lot of animal collisions and you regularly drive on roads with lots of deer, it makes sense to consider comprehensive coverage. The same applies if you live in an area prone to flooding, theft, vandalism, and hurricanes.

The fact you live in such an area will increase your car insurance premiums, but it will also make that cover essential.

Can I Get Discounts?

Car insurance discounts can reduce your monthly premiums significantly and make all additional coverage options more affordable. For instance, installing certain anti-theft devices or buying a car with specific safety features can secure substantial savings on a full coverage policy. Being a good driver with a safe driving record will also help, as will getting good grades as a student and reducing the mileage. 

The biggest insurers (GEICO, State Farm, Allstate, Progressive) weigh your risk on a per mile basis, and if you do fewer miles, you automatically reduce that risk.

Do I Need Optional Extras?

Car insurance providers will try to sell you optional extras like roadside assistance, sound system insurance, and whatever else they have available, but very few of these options are necessary and, in most cases, you’re insured elsewhere.

Roadside assistance, for instance, is provided as standard on many premium credit cards, and your belongings may be covered by your home insurance. We would recommend looking into ridesharing insurance if you drive for Uber or Lyft, and New Car Replacement if you have a brand-new vehicle, but beyond that, you can stick with the main types of cover.

Bottom Line: Is Cheap Auto Insurance Worth it?

Applying for affordable car insurance comes down to lower rates vs adequate car insurance cover. The latter should always be your main focus and you should never compromise, but once you get the cover that you need for your location and your car, you can trim the edges, save yourself a few bucks, and get a cheap policy all round.