7 Ways Cheap Car Insurance Can Backfire on You

We all know that everyone wants to save as much money as possible on their auto insurance.   However, there are some mistakes that can be made that will cost you more money in the long run if you are not careful.

We wanted to spend this post showing what Arvada and Denver residents how cheap car insurance can backfire on you and cost you more money.

Here are seven ways cheap car insurance can backfire:

1. Not enough liability insurance to cover your assets

Many states have minimum limit requirements of only $10,000 or $15,000.   Unfortunately, those limits are no longer enough to really protect you and your family from any real claim.

All it takes is to hit an SUV and your insurance limits will be completely exhausted leaving you on the hook for the difference.

Also, many consumers are told they have full coverage, but don’t realize the limits on the policy they were sold were grossly inadequate to protect them and their family.

Tip:  We recommend most consumer purchase a car insurance policy with limits of at least $100,000.   Though more expensive, the limits are necessary to protect you and your family.

2. Raising the deductible too high

We all know that raising your deductible can help lower your auto insurance premiums.   However, you have to be careful that you don’t raise the deductible so high that it makes doing repairs on your vehicle unaffordable.

Tip: Try not to purchase a car insurance policy with deductibles higher than $1,000 on both comprehensive and collision coverage.

3. Watch out for the fine print

In many cases purchasing a cheap auto insurance policy can restrict or limit the coverage within your policy.

These are often considered no-frills policies that limit the coverage and protection provided by the policy.

Tip: Work with an insurance agent that understands all of the coverages and exclusions contained in your insurance policy to be sure he or she can provide proper advice on whether the policy you are purchasing is a good value.

4. Higher rates for tiny infractions

Cheaper auto insurance policies tend to be less forgiving with minor traffic violations or accidents resulting in high rate increases or your policy being non-renewed by the insurance company.

Tip: Ask the insurance company or agent presenting your quotes about their practices when customers have small infractions.

5. Bad customer service

Take a look online and talk to neighbors and friends about the reputation of the insurance company you are thinking of purchasing your policy through.  While the premiums may be cheaper, you could suffer when it comes to customer service or a claim.  You can also check with your state’s Division of Insurance to find out what types of complaints have been filed against the insurance company.

Tip: Try to only work with companies that have an ‘A’ rating from an agency like A.M. Best and that you have verified have a good, solid reputation.

6. No extras when you need them

Cheap auto insurance policies may skip on additional policy options that can really come in handy at a later time.   For example, rental car reimbursement (pays for a rental car while your vehicle is being repaired for a covered claim) and emergency roadside assistance (provides services like towing or tire replacement) cost less than $20, but may be left of off your policy for the savings.

Tip: Make sure your insurance quotes show the optional coverages and price breakdown so you can make an informed decision on their purchase.

7. Not enough protection for you and your passengers

In an effort to save money, many consumers will forego necessary insurance coverages like uninsured and underinsured motorists coverage.   These two insurance coverages are vital, especially if you are involved in an accident where the other driver does not carry enough coverage or it is a hit-and-run accident.

Tip: Purchase uninsured/underinsured motorists coverage with limits that at a minimum mirror your current liability limits.

The key to saving money

The real key to saving money on your insurance is to thoroughly evaluate all of your available options and make an educated decision.   The easiest way to do that is to work with an independent insurance agent.   An independent insurance agent can provide you with multiple insurance quotes from a variety of top-rated insurance carriers.   This allows you to save money on your premiums without falling victim to any of the pitfalls above.

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