Is Cheap Car Insurance Always the Best Deal?

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The average cost of car insurance in the United States is $1,553 annually, or a bit more than $129 per month. Since that’s a major expense, many households look for opportunities to lower their premiums, turning to cheap car insurance when possible. But is cheap car insurance always the best deal? Here’s what you need to know.

What Is Cheap Car Insurance, Exactly?

Overall, the term “cheap” is inherently ambiguous, as it doesn’t reflect a specific dollar amount, percentage of disposable income, or any other well-defined metric. Generally, cheap car insurance is any policy that’s notably less expensive than what a vehicle owner is finding elsewhere.

What makes one policy cheaper than another can vary. Insurers use a variety of models to determine how much to charge a vehicle owner, so that can result in different prices. However, some cheap car insurance options involve significantly reduced coverage, essentially lowering the cost by eliminating benefits that policyholders would get elsewhere.

Are There Dangers in Getting Cheap Car Insurance?

Having cheap car insurance can come with risks. First, there are instances when incredibly low rates are offered by fraudsters. Essentially, the scammer – at times referred to as a “ghost broker” – poses as an insurance agent, promises great rates on reputable car insurance and then doesn’t issue a real policy.

However, even if the policy exists, having cheap car insurance is risky. The policy may come with oppressively high deductibles or offer minimal liability coverage, leaving you on the hook for far more out-of-pocket expenses than you may expect.

In some cases, a policy may be cheap during the initial policy period. Then, when a policyholder goes to renew, the price skyrockets. Similarly, some comparison shoppers may see a low advertised rate for a policy, only to see their premium price exceed it dramatically once the insurer reviews their specific information.

Finally, some cheap car insurance providers cut operational costs in many areas, including sacrificing when it comes to customer service. In these instances, filing claims, getting answers to questions, and receiving support after a qualifying incident can be surprisingly tricky, making it challenging to handle relatively everyday tasks.

How to Get Proper Coverage on a Budget

Instead of focusing on finding the cheapest car insurance policy, vehicle owners should focus on getting their coverage needs met at a reasonable price. Shop around for policies that offer you suitable coverage levels, not just barebones protection when it comes to liability. Consider the insurer’s reputation for customer service, and ask about available discounts that may be available.

If you have some money in an emergency fund, you can consider raising your deductible to an amount that feels reasonable to shoulder. Maintaining a good driving record and credit score also helps you in the long run.

Additionally, if you practice good driving habits, trying a company that offers discounts for safe driving using a connected device is worth considering. Just be aware that those devices can lead to higher costs if you drive in an unsafe manner or cover more miles than you previously claimed.