InsuranceLecturer — Is it wise to buy the cheapest cover? To answer this question, we must assume you have free choice. Sometimes the financial situation at home is poor and, no matter what you actually want, you can only afford the cheap car insurance policies to keep yourself legal on the road.
So when you’re shopping around, let’s assume there’s some degree of flexibility. What factors should you consider when deciding whether to buy one of the cheapest, if not the cheapest policy.
What are the advantages of cheap car insurance?
One of the advantages of our interconnected world is that it’s easy to find the latest offers from all the major insurers. If time is not a problem, you can go to the sites operated by the individual companies and check out whether there are good rates on offer.
If you already have insurance, your current company may well send you advertising material offering better rates the next time you renew. There will also be ads in your state’s media signaling what cheap car insurance rates are available.
If time is a problem, search and compare sites like this one offer the quickest way to find the low-cost insurance options. Remember, you will be paying the cheapest rates because you are a safe driver in a safe vehicle.
To get the lowest possible rates, check you are being offered all the discounts for which you are eligible. If in doubt, ask whether there are other discounts and how you qualify.
Failing to ask usually means failing to receive all the discounts. If you’re doing everything in your power to avoid making a claim, buying cheap car insurance is usually the right decision.
What are the disadvantages of cheap car insurance?
All the major insurers are for-profit corporation so, when they offer you a cheap rate, they are not offering you the best product. The cover actually sold will be narrowly drawn so it excludes all but the bare minimum risks.
There will also be limits on the amounts you can claim. If you are underinsured and live in an at-fault state, anyone injured by your driving can sue you personally to recover all the money not covered by your policy.
This makes the decision whether to buy cheap car insurance more difficult. If you have assets to protect like a home, stocks in your 401k portfolio and so on, it’s economical to sue you. But if you live in a rental and have no savings, most attorneys will advise their clients not to sue.
So look very carefully at your own financial situation. If you can afford the losses if you crash your own vehicle or it’s stolen, having liability cover only makes sense. The really cheap car insurance is for the mandatory minimum cover but, if you have assets at risk, but enough liability cover to protect yourself against the worst claims.