No one ever wants to buy insurance, but we all need it. It’s a necessary evil. And due to the latest shopping trends of low price discounters like Wal-mart, Aldi, Old Navy, etc. everyone’s trying to find the lowest price possible. It’s not about quality, it’s about price. This can become a problem when it comes to insurance. When people come into or call my office and ask me for the lowest possible price, I give it to them, while still ensuring they have quality coverage. I want to give them the quality at a price that they can afford. When buying auto insurance, if your focus is on the cheapest bare minimum coverage, I caution you! You may lose out. It may cost you in the long run and here are some reasons why:
1. Not enough liability to cover your assets
Most of the time the cheapest auto policies will give you the lowest possible liability limits allowed by law. That means you are probably getting the state minimum liability coverage of $20,000 per person and $40,000 per accident. More than likely, this can be a problem if you own a home, have a job, have investments and/or have accumulated some wealth. If you are sued due to an auto accident $20,000 isn’t going to go very far and the next place to look to recoup the money is with your assets. Meaning, you could lose your home, investments, income, etc. When discussing your liability limits with your agent don’t go with the lowest, but rather tally up the value of your assets (home, auto, income, investments, etc) and use that figure. You’d be surprised by how inexpensive it can be to have higher liability limits.
2. More expensive insurance in the future
Cutting costs to have lower limits can actually make your insurance more expensive in the future. When shopping for new insurance, some companies will give you a discount based on the amount of your liability limits. The higher the limits, the higher the discount. For example, if your prior insurance’s liability limit is 20/40 you will pay a higher premium with the new carrier than if your limit is 100/300 or higher.
3. No towing or rental reimbursement
Another thing that comes with cheapest auto insurance is that you probably won’t have coverage that you may actually need, like towing or rental reimbursement. You may think that you are doing yourself a favor but in my experience when something happens people usually don’t want to pay for a tow themselves or in the case of an accident, pay for a rental car. Think about it this way: if you are in an accident and your car is in the shop for a week, how are you going to get to work? How are you going to get the kids to school? A rental may be needed to get back and forth until your vehicle is fixed.
4. No personal service
Cheap auto insurance is usually purchased online by the consumer. When doing it this way, you are buying it as an individual without the help of an agent. Without an agent you lose your personal service; who are you going to talk to if you have a question, or you need to make a change? What do you do if you need to file a claim? More than likely you will have to deal with a call center at a 1-800 number. When you have a problem with your personal belongings the last thing you want is to be just another account number to these internet insurance companies.
5. Not enough coverage for you and your passengers
Some people will try to cut costs by skipping out on uninsured or underinsured motorist coverage. Don’t do it. This coverage is for you, and is only cost about $10.00. Uninsured motorist covers you in the event that you are injured by an uninsured driver or are injured due to a hit and run. And there are more and more people out there that are driving without auto insurance so the likelihood of this is higher than it has ever been before. Underinsured motorist covers you if the other driver doesn’t have enough insurance to pay out on the claim.
6. No rental car coverage
If you ever rent a car for vacation, work or any other reasons, make sure that your current carriers’ coverage will carry over to the rental vehicle. Most do, but if you have the bare minimum, cheapest policy then chances are it doesn’t and then you will not need to purchase the expensive additional auto insurance from the rental company.
7. No glass repair waiver
Most insurance companies will waive your comprehensive deductible if you are in need a windshield chip repair but some of the cheap companies will require you to pay your deductible first, which is usually $100-$250.
Your cheap insurance quote may look good today, but remember when it comes to your insurance you get what you pay for. Don't find yourself short changed when you need it most.
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Matthew Perry is an agent and partner at EW Smith Insurance Agency in Wyandotte, Mi. They are an independent agency offering home, auto, life and business insurance. EW Smith Agency is the the leading provider of personal lines property and casualty insurance in the state of Michigan for Auto-owners Insurance Company. He can be reach at 734.284.4141 / mperry@ewsmith.com