Should you opt for the cheapest car insurance? No one wants to spend more on auto coverage than they have to. But buying the cheapest insurance is not any different from buying a cheap car. While the vehicle can take you from point A to point B, it offers less comfort and may not be as reliable as an expensive one.
When comparing auto insurance quotes, it may be tempting to settle for the cheapest option. However, even though the cost is not an essential factor, it’s still crucial that you get proper coverage.
So, when should you opt for the cheapest auto insurance? Can you find a policy that offers the coverage you need cost-effectively? Read on to find out.
Table of Contents
When It Offers Essential Benefits
A car insurance policy bundles up crucial coverage and benefits into one package. In most cases, expensive insurance plans offer better coverage benefits, while lower-priced policies come with fewer benefits, naturally.
If an insurance policy offers you essential coverage at an affordable price, then it would be worth buying it. What is more important is making sure that a cheap auto insurance policy does not strip you of the essential coverage benefits.
For example, higher-priced policies may have a broad range of coverage that includes extras such as hotel expenses and driving abroad. Many of these extras may not apply to you; you may not need to use your car abroad or have your hotel expenses covered if you only drive locally.
It’s important to compare different auto insurance policies and perform a cost-benefit analysis. This way, you won’t settle for a cheaper policy at the expense of essential benefits.
When It Has No Impact on the Policy Coverage
An auto insurance policy is as expensive as the coverage it offers. While all policies provide you with financial coverage when involved in a car accident, coverage levels vary from one policy to another.
While it may be better to cushion your vehicle with comprehensive coverage to eliminate any chance of financial stress in unfortunate situations, third-party coverage will still bring you peace of mind. It’s easy on your pocket and quite beneficial when it comes to premiums. If your car’ has a low market value, it’s prudent to get third-party insurance. It wouldn’t make any financial sense to spend thousands of dollars insuring a car that you’ll sell for nearly half the cost of your policy.
When You’re All Good With High Deductibles
A deductible is the amount of money you pay out of your pocket to cover an insured loss. When you’re involved in a car accident, for example, the amount of the deductible is subtracted from your claim payment. It’s a way of sharing the risk between you and your insurer.
Low-priced auto insurance policies come with high deductibles. This is because it significantly reduces the amount that an insurance company will have to pay when you make a claim. Let’s consider a vehicle accident worth $2000 in damage, for example. With a deductible of $500, the insurer pays $1500. But when you raise the amount of deductible to $1000, the insurer pays only $1000.
Of course, if you file claims frequently, high deductibles are not beneficial. It means that you’ll have to raise a considerable amount to cover the losses in a short time frame. But if you don’t file claims often, this can be a good thing. What’s most important is that you opt for a deductible amount that you can afford to pay when making a claim.
Where Discounts Come Into Play
Did you know that you can be charged $50 per month by one insurance company and $100 by another, and the difference could be based on something as simple as having anti-theft devices installed in your car? Auto insurance discounts can reduce your premium rates by a significant percentage. You can qualify for different discount packages based on your age, profession, driving record, and many other criteria specified by your insurer.
One of the ways that you can reduce your premium rates is by limiting your mileage. If you have low annual mileage, you cost less to insure because you are less likely to be in an accident. Improving your vehicle security can also land you more affordable premiums. You can do this by installing devices such as immobilizers, alarms, and locking wheel nuts. But first, get quotes on how much your insurance would cost before making any of these security upgrades. It won’t help if the extra cost is not worth the insurance savings.
When You’re All Good With Raising a Reimbursement Claim
Auto insurance companies allow you to file for cashless claims. Policies with cashless claims will enable you to take your car for repairs at the insurer’s network garage. This means that you won’t have to pay any money since your insurer will settle the bill directly.
Cheaper insurance policies will only give you an option for reimbursement claims. Under this type of claim, you cannot have your car repaired at your insurer’s network garage, which means that you’ll have to raise a reimbursement claim.
With a reimbursement or a cashless claim settlement, you still get compensated at the end of the day. The only issue here is whether you can stomach the delays that come with a reimbursement claim settlement.
The Bottom Line
Auto insurance companies cannot offer policies that do not meet their state’s minimum requirements. No matter how cheap a policy is, it’ll still keep you legal. Therefore, you don’t have to shy away from cheap insurance rates if you’re on a budget.
The best insurance coverage for your circumstance doesn’t have to be expensive. But it’s important to get it right. If it gives you all the coverage you need at a low price, then you’ll have the best of both worlds.