Is Cheap Car Insurance Worth It?

When you buy your first vehicle or renew your car insurance policy, you might be surprised by the cost of coverage. This may lead you to seriously consider a cheap insurance policy that promises coverage at an exceptionally low price. However, it's important to understand what is and is not covered in minimal policies, which come at a great price but provide coverage that could leave you high and dry in the event of an accident.

What's Included in a Cheap Car Insurance Policy?

A cheap car insurance policy typically includes bare-bones coverage that only meets your state's minimum insurance requirement for liability coverage, which consists of:

  • Bodily injury liability: Pays for the medical expenses of those injured in an accident where you're at fault.
  • Property damage liability: Pays for the physical damage you caused to another person's property in an auto accident.

If you only purchase a minimum liability car insurance policy, it's important to know that you could be sued if you cause an accident that results in serious bodily injuries. A liability policy with higher limits will at least protect you from losing your personal assets, such as your home.

Avoiding Car Insurance Scams

When it comes to buying a cheap car insurance policy, you get what you pay for. You might see advertisements offering nice levels of liability, personal injury, collision, and comprehensive insurance coverage at a low price. If it seems too good to be true, it probably is.

It's important to do your research to make sure any auto insurer you're considering is licensed to sell insurance in your state. Check with your state's department of insurance, which has records of insurance scams and/or complaints about insurance scams to look out for.

Finding a Cheap Car Insurance Policy

A foolproof method for finding the cheapest policy is simply calling around to get multiple car insurance quotes. Keep in mind, there are many discounts you might qualify for. Some discounts to ask about include (but aren't limited to):

  • Good driver.
  • Good student.
  • Low mileage.
  • Anti-theft device.
  • Combined policy.

If you have a low income, check to see if your state has government-sponsored low-cost policies. These policies usually provide liability-only coverage, meaning you could still be held responsible for paying some expenses out-of-pocket if the damages and/or injuries are serious enough.

What Could Happen If You Don't Have Auto Insurance

If you cannot provide proof of car insurance coverage when you renew your driver's license or when pulled over by the police, you could face suspension of your driver's license and/or vehicle registration. To have your privileges reinstated, you'll have to pay fees and may have to provide proof of having three years of continuous auto coverage. In the end, those expenses could be costlier than if you had paid for a standard minimum coverage policy in the first place.

If you don't qualify for a traditional car insurance policy, you might qualify for another option, through your state's high-risk insurance pool. You might also be able to find a private insurer that offers a non-standard policy such as liability-only coverage for high-risk drivers.

Not having insurance or only buying the minimum amount of coverage could have lasting financial ramifications. Understanding your state's minimum requirements and shopping around could help keep your bank account safe and keep you from being sued.