Is Cheap Auto Insurance Good Auto Insurance?
Cheap can mean “inexpensive” as well as “low quality,” and sometimes both; when it comes to your auto insurance, which applies?
If cheap auto insurance is providing you with sufficient coverage for your situation at the lowest cost, then why overpay? On the other hand, if cheap is too little coverage for your car, then you are leaving yourself financially vulnerable.
If you are renewing your auto insurance or considering a new policy, let’s look at the critical components of auto insurance and whether buying cheap insurance can provide you sufficient coverage for your car and your financial liability.
Auto Insurance Liability Coverage
Auto insurance liability coverage helps you pay for damage or injuries you caused to another driver, passengers, or property (which usually means another vehicle) while driving your car.
There are three components to car insurance liability coverage:
- Bodily injury coverage per person
- Bodily injury coverage per accident
- Property damage coverage per accident
There are limits to the amount of liability coverage in each component. Together, these limits are expressed as a series of numbers. For example, 15/30/10 indicates coverage per accident up to:
- $15,000 per person for bodily injuries
- $30,000 for total bodily injuries
- $10,000 for property damage
You are held responsible for any damages above these limits. Most states require a specific minimum liability coverage well above 15/30/10. Michigan’s minimum auto insurance liability requirements, for example, are 50/100/10:
- $50,000 bodily injury liability per person
- $100,000 bodily injury liability per accident
- $10,000 property damage liability per accident outside Michigan ($1 million property protection within Michigan)
Note also that some states require Personal Injury Protection (PIP), which covers medical expenses for the insured and their passengers if they’re in an accident, regardless of fault. Michigan, for example, requires a minimum PIP of $250,000, with lower limits available for certain Medicare and Medicaid recipients.
You can get comparatively cheap auto insurance that provides only the bare minimum state liability requirements. You put yourself at financial risk if you cause an accident and are sued for damages exceeding your liability coverage. The minor fender benders can run up to thousands of dollars, and more extensive damage will likely exceed $10,000.
A full coverage liability policy recommended by many insurance experts is 100/300/50. That is not going to be cheap auto insurance, but it is good recommended coverage for many people. As a general rule, you want enough auto insurance liability coverage to cover your net worth. If you have a low net worth, meaning not a lot of assets to attach if you couldn’t pay the judgment of a lawsuit, there’s less incentive to go through the time and expense of suing you. In this case, cheap auto insurance with low liability coverage is possibly an excellent option to save you money on insurance premiums.
Auto Insurance Collision & Comprehensive Coverage
Collision auto insurance coverage pays for damages to your car in the following situations:
- In an accident you cause with another car
- In an accident caused by someone driving another car
- Accidents caused by hitting an object other than another car, such as a fence, wall, or pole
Comprehensive auto insurance coverage pays for the actual cash value of your car it is:
- Crashes with deer and other animals
- Other damages resulting from weather (e.g., hail storms, floods, tornadoes), fire, explosions, falling objects, riots, and civil disturbances.
Collision and comprehensive coverages are often packaged together, while other auto insurance carriers allow you to purchase them separately. Both are optional if you own the car outright; comprehensive and collision coverage is required if you finance or lease. However, you can save money by opting for higher deductibles. Cheap auto insurance, for example, might have a comprehensive and collision deductible of $1,000 compared to a more expensive auto insurance, where the deductible is $250. While the cheap auto insurance policy carries a comparatively lower premium due to the higher deductible, it does have greater financial risk as you need to pay more out of pocket in the event of an accident.
Other Auto Insurance Coverages
You can also opt for additional insurance to cover windshield and window damages, towing charges, and additional medical payments. Cheap auto insurance won’t include these coverages or have as extensive coverage as other policies. Again, the risk of cheap should you incur any of the damages not covered; you are liable to pay out of pocket. But there are also situations in which such coverage is overkill. For example, if you are leasing a new car that has a roadside assistance package, there’s no need to pay extra for towing insurance.
Let’s go back to the idea of cheap auto insurance, meaning “less expensive” and not “insufficient. So it pays to shop around. Not only to get the best rate but to get the coverage that fits your needs, vehicle, and financial situation.
This is how your local Kentwood and Byron Center, MI insurance agent can help. As independent insurance brokers, we work for you, not the insurance companies. We compare apples to apples with 20+ insurance providers to get you better rates, better customer service, and better coverage.
We can save Kentwood and Byron Center drivers, on average, nearly $800 a year on your insurance!