Top 3 Reasons Why Cheaper Insurance Isn’t Better Insurance

Cheaper insurance isn’t always better insurance — in fact, it usually isn’t. See the 3 moments when it’s better not to skimp.

Cheaper isn't better

With the new year comes the resolutions — join a gym, be more cultured, save money … you know the drill. But as you reassess your spending habits this year, we have one tip for you: don’t skimp on car insurance.

People who buy the coverage they really need, and not just the cheapest policy they can find, rarely look back with regret. But folks who skimp with bare-bones coverage are setting themselves up for a serious face-plant.

Here are the top 3 reasons why cheaper insurance really isn’t better insurance:

1. You might actually have to use your insurance

Having an ultra-low monthly premium is great … so long as you never actually have to use that coverage. When you’ve skimped on coverage or opted for a high deductible (or both), cheaper insurance isn’t likely to provide much relief if you get into an accident — in fact, it can become just another burden when everything else is going wrong. Opting for the low-cost/low-coverage option often means deferring serious payments until you’re already in crisis mode.

As it turns out, $20,000 in bodily injury protection, plus the same (though generally less) in property damage coverage, often won’t cut it — especially since the average cost of an injury-only accident is estimated to be around $126,000. And the more parties that are involved, the more likely expenses are going to skyrocket.

2. State minimums don’t always provide adequate coverage

Some states have high minimum coverage limits, while others have surprisingly low ones. But accidents don’t cost more in one state than they do in another.

Maine, for instance, requires drivers to carry personal injury coverage to the tune of $50,000 per person and $100,000 per accident, along with $25,000 in property damage coverage per incident (typically written as 50/100/25). Mainers are also required to carry substantial uninsured motorist coverage as well as medical payments coverage. All told, minimum coverage in Maine actually adds up to pretty good coverage.

On the other hand, Florida only requires drivers to carry 10/20/10 in personal liability. There’s no requirement to buy uninsured motorist protection in this state — even though a whopping 24 percent of Florida’s drivers are uninsured. (Maine’s rate is one of the nation’s lowest at 4.5 percent.)

Minimum insurance limits aren’t necessarily an indication of what you need. Buy insurance that will really protect you if something goes wrong.

3. Optional coverages can add a lot of protection

So you saved money by waving off those optional coverages. Awesome! Your bare-bones liability coverage will cover your stolen car, right? Wrong!

Options like comprehensive, collision, and uninsured motorist coverage aren’t usually required by law, but going without them leaves you responsible for a number of potential expenses. Standard liability insurance, which is the only required insurance for most states, protects other people and helps mitigate damages you may cause, but it doesn’t actually cover costs when something happens to you or your property.

If another driver accidentally damages your car, hopefully they’ll have liability coverage to take care of your costs. But what about an accident with a fire hydrant? That’s when collision coverage comes in handy and assists in fixing your car. And medical payments coverage can help you pay for hospital bills if you or one of your passengers is injured.

Take a look at optional coverages and decide whether you can afford to cover those costs yourself in the event of an accident.

Cheaper insurance isn’t always better

Although your minimalist insurance policy looks great for your wallet right now, it’s a safe bet that it probably won’t look so pretty after you get into a car accident.

Read up on your options with our coverages page or consult our Coverage Counselor® to help you find the coverages that are right for you.

One Response to “Top 3 Reasons Why Cheaper Insurance Isn’t Better Insurance”

  1. Byron
    January 21, 2013 #

    Sure it's easy for the insurance company to plant this seed. Insurance companies stand to collect boatloads of cash by scaring people into buying more insurance. When you have to make a decision between more insurance or more groceries; insurance loses everytime.

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