Hidden Costs of Cheap Car Insurance

Posted October 3rd, 2019 by Amy Danise

Summary of hidden costs of cheap car insurance

Saving money on car insurance is important for many people. You may have found cheap car insurance, but at what cost later? Sometimes cheap car insurance can mean you’ll pay much more in the future if you’re in an accident.

Here’s a look at the hidden costs of cheap insurance.

Hidden cost of really low coverage

One way to reduce car insurance cost is to buy only the minimum car insurance needed to legally drive. But if you’re in an accident, you could easily find yourself facing huge bills that aren’t covered by insurance.

  • If you have low liability insurance, other drivers can sue you for what your insurance doesn’t cover.
  • If you saved money by not buying collision and comprehensive insurance, you won’t have insurance for damage to your own car. So if you back into a pole, get flood damage, have a tree branch fall on your car or other problems, you don’t have insurance. You also won’t have coverage for car theft if you don’t have comprehensive insurance.

Examples of hidden costs of cheap car insurance

Hidden cost of a very high deductible

If you took a high deductible to save money, don’t be surprised if you get a low insurance payout if you make a claim. Deductibles are the amount subtracted from an insurance payment if you make claim on coverage such as collision or comprehensive insurance. So if you have a $2,000 deductible and $2,500 in car damage, the insurance check would be only $500.

Hidden cost of lying to a car insurance company

Some people lie on their insurance applications in order to get cheap car insurance. For example, some people who live in expensive areas for auto insurance will lie about where their car is “garaged” in order to get a lower rate. Verisk, a data analytics provider, estimates that 10% of policies have some sort of garaging address error, whether unintentional or on purpose.

Signing an insurance application with inaccurate information is fraud and can bite you later. Depending on the fraud, an insurer could drop you, deny a claim, or charge you back premiums at the correct rate.

Hidden cost of driving uninsured

Driving without car insurance is common, even though only New Hampshire allows some drivers to legally drive without insurance.

Nationally, 13% of drivers are uninsured, according to the Insurance Research Council. The percentage rises much higher in states such as Florida (26.7%), Mississippi (23.7%), New Mexico (20.8%) and other states.

Driving without car insurance is like financial roulette. If you’re unlucky and cause an accident, other drivers can sue you for injuries and property damage, possibly putting you in financial ruin. And your own car damage won’t be covered in many situations without collision and comprehensive insurance.

In addition, if you’re caught driving without auto insurance you can face fines and license suspension. And when you do buy insurance it will cost more due to the lapse in coverage.

2 best ways to get cheaper car insurance

In EverQuote’s many years of insurance research we’ve found the two best ways to save on auto insurance are:

  • Compare auto insurance quotes from multiple companies. Choose good coverage limits that will financially protect you and then get several quotes to find a good deal. Comparison shopping alone has the potential to save you hundreds of dollars a year.
  • Bundle auto insurance with another policy from the same company. If you need homeowners or renters insurance anyway, get the good discount that usually comes from buying multiple policies from the same company.