Pros and Cons of Cheap Car Insurance

If you’re getting ready to purchase a new car, congratulations! Enjoy that new car smell and the excitement that comes with driving it off the lot. But before you sign on the dotted line and drive off on that epic trip into the sunset, you’ll need to take care of one more vital consideration: Car insurance.

While there are a myriad of options at your disposal, not all types of car insurance policies are created equal. There are as many traditional brick and mortar agencies and online conglomerates as there are expensive and cheap car insurance policy options, so choosing the right policy for you can mean navigating some confusing waters.

Given all these choices, the decision can sometimes come down to price. When the number of that premium is staring you in the face, it can be hard to choose anything other than the smallest figure you’ve found. But before you opt for the cheapest policy you come across, remember that car insurance policies are much more than the premium you pay…

Pros and Cons of Cheap Car Insurance

PRO: You can save money upfront

With a cheaper policy, you won’t have to pay as much upfront. This means much lower out of pocket expenses and less strain on your budget.

Usually, this is achieved through higher deductible amounts or choosing a lower level of coverage (state minimums vary but people usually go with what their state deems the lowest possible amount of legal coverage).

CON: You might have to pay more later

However, that cheap rate isn’t always a blessing because if you happen to get into an accident, you could end up owing far more in the end than if you’d chosen a lower deductible or more coverage options in the beginning. Especially if you are at fault, you could owe thousands for medical expenses (you’d also be held responsible for any expenses for the other driver and passenger(s)), towing, rental car coverage, etc.

There could also be hidden fees that accumulate once you’re in the claim process or after you’ve had your account open for a certain amount of time (for example, some discount companies charge fees for account reviews, paper documents to be mailed and service charges for sending in your payment via check or money order).

PRO: Cheap car insurance often means easier account management

Chances are that the cheaper the premium, the more likely the company is to be doing business online. This means the ease & convenience of 24/7 account access and a more self-service approach to choosing your options and managing your policy and payments.

CON: You lose out on the expertise of a dedicated agent

Dedicated (sometimes called captive) agents are highly knowledgeable in the field of car insurance and receive extensive training that’s specialized for the industry. When you have someone like this helping you out, it can mean the difference between a relatively easy process or an absolute nightmare should you have to file a claim. The peace of mind of knowing you have a professional helping you who has your best interests at heart can be worth an extra $10-40/month!

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6 thoughts on “Pros and Cons of Cheap Car Insurance

  1. Darren

    It’s almost impossible to eliminate cons but we can do something to lessen the risk and maximize the benefits. Seeking for expert’s advice before getting an insurance will help to ensure that you get the quote best suited for your needs. It’s not bad to consider cheap insurances since most of us aims to save money but there are ways to achieve worthy deals at a less price. We just need to be smart and keen to details to avoid unnecessary expenses.

    Reply
  2. John@MoneyPrinciple

    We have just got a new car so have been looking at insurance. The main thing we have is that being a little bit older, the policies are rather cheaper than for the 21 years olds.

    We always have comprehensive insurance (which in the UK covers pretty nearly everything), have a £250 deductible and take legal cover too in case we need to argue a point.

    We don’t drive many miles a year so our new baby (a Skoda Citigo) cost £205 a year to insure. Not bad and a lot cheaper than the car we had before…

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