Do the benefits outweigh the risks when I buy cheap low rate car insurance?

The benefits of buying cheap, low-rate auto insurance are lower premium payments that are easier to manage. The risks of buying cheap car insurance might outweigh the benefits due to the hidden costs that pop up when you make an insurance claim and the lack of accountability that some of these discount car insurance companies are guilty of. Read our guide now and compare insurance quotes below to see if the benefits outweigh the risks when you buy cheap, low-rate car insurance.

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Tonya Sisler has a Bachelor’s Degree from the University of South Carolina in Journalism and has worked for 15+ years in management. She has also completed a proofreading certification and is currently a professional writer.

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Brad Larson has been in the insurance industry for more than a dozen years. He started out as a claims adjuster for a national carrier. He has since switched to the agency side of the business. Brad is licensed in all P&C lines.

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Reviewed by Brad Larsen
Licensed Auto Insurance Agent

UPDATED: Oct 31, 2020

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The benefits outweigh the risks when you buy cheap, low rate car insurance if you can find the type of coverage you need without sacrifice. In other words, cheap is not always better unless you find exactly what you are looking for.

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Virtually everywhere you look these days, you can find advertisements on television, the radio, or the Internet where car insurance companies claim they can provide you with the lowest rates around. The problem comes when you find yourself in the middle of a collision and realize you are not as protected as you thought you were. Or worse, you try to contact the agency and no one comes to your aid.

The good news is there are several ways you can ensure that your car insurance rates remain low, while you have peace of mind and proper coverage. You just need to know where to look and how to get started.

The Benefits of Buying Cheap Car Insurance

The most obvious benefit of purchasing cheap car insurance is the price. Some of the lowest rates can save you hundreds of dollars on an annual basis. The majority of people who choose to buy cheap car insurance definitely enjoy the low monthly payments. In fact, some find it much easier to simply pay the entire premium off in just one or two payments rather than dragging it out for six or 12.

Cheap car insurance is also much easier to manage because most are online companies and everything can be completed using a PC, laptop, or even Smartphone. In today’s automated world where everyone wants to take care of business as quickly and efficiently as possible, cheap car insurance companies can be a dream come true. They very rarely offer local offices where you can visit them in person.

You will be covered in the event of a collision or traffic stop. Since you are required to carry valid, car insurance while driving a motor vehicle in the United States, you will not have to worry. A minimum of liability is needed in every state and in certain states, comprehensive and collision is also required.

Cheap car insurance ensures some protection, depending on the level you select.

You should check with your state by clicking here to visit the National Association of Insurance Commissioners website and clicking on your state. You will be directed to the official insurance site for your state and all of the information regarding car insurance requirements can be found.

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The Risks of Purchasing Cheap Car Insurance

There are several risks involved with purchasing cheap car insurance. The most important is the limited coverage. It can be extremely difficult for car insurance companies to offer rock-bottom prices along with unlimited coverage. The two just do not go together.

If your policy quote seems much lower than the others it may be due to the lack of coverage they provide.

Hidden costs go hand in hand with the lack of coverage and can be another telltale sign that something may be missing in your policy. The reason your car insurance quote may be so cheap is that the agency may work on something called a tiered system. This is when they build your policy from the ground up, quoting the lowest price possible, then adding coverage at astronomical prices.

Lack of accountability can also present a problem. Cheaper car insurance companies may skimp on hiring professionals to handle their customers, or worse, have no customer service department at all. Remember, it takes money to properly train and retain employees and if they are giving you radically low prices, they may not be able to afford this important service.

Keeping Your Car Insurance Rates Low

There are several ways to keep your car insurance rates low without having to resort to choosing an inferior insurance company. This is especially true if you are still in the car-shopping phase and have not purchased a vehicle yet.

The type of vehicle you buy has a direct impact on your car insurance rates and the Insurance Institute for Highway Safety has a huge database filled with vehicle ratings that you can review. By accessing this resource, you can see how these cars rate in the area of crashworthiness. Car insurance companies use similar sites when calculating their rates.

Being proactive can save you time and money if you pick a vehicle with high safety ratings and features. This shows the car insurance company that you are a responsible person and are less likely to become involved in a high-speed accident or collision.

Compare and Contrast – Find Out What the Hype is all About

One of the best ways to make sure you are not caught without sufficient car insurance coverage is to do a little research. Compile a list of the top three or four car insurance agencies by asking around. Your close friends, family, and even co-workers can give you a wealth of knowledge. Ask them who they use and what their experience has been like so far.

Pay close attention to the details that affect you personally, like customer service and options. You probably want to know if they are reliable and you especially need to know how they respond to claims.

You can also check with the leading rating companies, like J.D. Power. They have three separate ways they rate auto insurance companies:  Auto insurance provider ratings, Auto claims ratings and Auto insurance purchase experience.

This is an excellent way to determine how well your choices will pan out. Depending on the number of stars they receive, you should be able to make a decision, or at the very least, weed out the ones you are certain will not live up to your expectations.

Another choice is the Better Business Bureau (BBB), a very reliable source for customers. The BBB has long been used by millions of Americans as a way to investigate the inner-workings of a company. By logging onto their website, you can review the number of complaints per month and the type of complaints.

You can also see how quickly they respond to their complaints and the overall grade they received. If a company rates lower than an A, this means they do not take their customers very seriously and their customer service is less than stellar; anything lower than a B is below industry standards and less than a C puts them out of compliance. Avoid any company that rates this low.

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Make the Right Choice

You do not have to be hesitant when looking for a car insurance company if you do your homework and follow the proper steps. In fact, if you take your time before you make your selection, you will be in a much better position. In addition to checking the ratings and financial stability of the company, you should also think about what kind of specials you may qualify to receive.

For example, some car insurance companies cater to corporations and you may receive a discount if you work for that company. Use your Human Resources department to your advantage and find out if your company is listed as a qualifying organization.

If they tell you yes, you may be able to sign up for cheap, low rate car insurance without seeing a decrease in coverage. While many may not be eligible for this type of discount, it never hurts to inquire.

Understand how Deductibles Affect Your Car Insurance Rates

Instead of choosing cheap, low rate car insurance, you can simply choose to raise your deductible. A higher deductible can actually help lower your insurance rates because you will assume responsibility for more out-of-pocket money; car insurance companies love this option.

Rather than choosing to pay $250 or $500, select $1000 and watch your annual premium drop as much as $100 to $500 per year. Think about your current driving record and how many accidents you have had in the past three to five years. Low risk drivers often pick high deductibles because they are much more cautious on the road and know they will benefit substantially.

If you have never been involved in an accident or filed a claim, you should definitely take advantage of this option. You will need to make sure you manage your funds accordingly, just in case. Even if you do not cause the accident and the other person’s car insurance covers the damage, you will be responsible for paying the deductible before repairs are authorized.

The pros and cons should be carefully considered before increasing the deductible, but for many, this can be a very wise decision. The car insurance rates will be much lower and coverage will not suffer. There are several options to exercise when it comes to keeping car insurance rates low.

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