How To Invest and Save Money
The Risks of Cheap Auto Insurance
By Britt Erica Tunick
Nobody likes paying for car insurance, so it can be extremely tempting to jump on the cheapest quote you find. But the cheapest option is rarely best, particularly when it comes to insuring your vehicle. Let’s examine all aspects of your car insurance policy.
Cheap car insurance almost always means low liability coverage, which is without a doubt the most important coverage related to your vehicle. Liability insurance is the portion of your coverage that safeguards you against the possibility major financial loss should you get into an accident that is determined to be your fault and where another party is injured. Though most states require liability coverage, the required coverage is often insufficient. Taking the minimum required could lead to an individual going after assets such as your home to cover medical costs.
Similarly, it is important to make sure you have adequate personal injury protection and uninsured motorist coverage. This safeguards you against crazy medical bills should you or your family be injured in an accident that you cause, or in the event that you are hit by an uninsured driver or one with insufficient coverage to cover your bills.
The remaining parts of car insurance include collision, comprehensive, and transportation expense coverage. These things are not mandatory and this is the part of your insurance that is a bit more objective. While it may be tempting to take the policy or coverage that provides the lowest deductible for any damage to your car, it may not be your best bet. Remember, any claim made on your insurance will likely raise your premium. Nowadays many people choose to forego making insurance claims for minor accidents and pay for the damage to their own car or the one they are in an accident with if the repairs run $1,000 to $2,000. Therefore, it may make sense to have a higher deductible, which usually means significant savings on your premium.
Because of many variables, it is important to sit down with a financial advisor or a qualified insurance agent to determine what your real needs are. But don’t just assume that the first quote you are given is the best, or that your agent is thinking about all of the issues above. Be sure to ask about different coverage possibilities and how much you really need in coverage to safeguard your home and family assets against a worst case scenario such as a lawsuit against you for causing an accident.
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Britt Erica Tunick is an award winning financial journalist who has spent the past 17 years writing about virtually every aspect of finance. She has mastered the art of boiling down complicated financial topics for readers to understand.