Five reasons you shouldn't skimp on car insurance
By Andrew Evans | Automobile.com | 10/08/2013
These days, it is all about saving money. From couponing shows to daily deals waiting for you in your inbox each morning, our society is obsessed with savings. It shouldn't come as a surprise since the economy continues to be volatile and the cost of living stubbornly increases at a staggering pace. Thrift is in. Overpaying for items or services is out. Although when it comes to car insurance, is skimping smart? The following are five ways cutting corners on your policy can end up costing you dearly down the road.
#1 Your high deductible could come back to haunt you
Chances are you have some sort of idea what a deductible is and how it comes into play after you make a claim. The problem is that we often minimize the importance of the deducible when there is an opportunity to save a little money during the policy application process. It is some number that can be hard to conceptualize without thinking carefully about what would happen if you were involved in an accident. Maybe instead of having a $500 deductible, you could save a significant amount if it suddenly became a $2,000 or $3,000 deductible? That is money that could be poured into a better data plan for your smartphone, but is it really a smart idea? Only you can answer this question, and only after you check your bank accounts to make sure you could indeed put up the money if you had to file a claim. We suggest picking a deductible that is low, but doesn't make the policy prohibitively expensive.
#2 Your loved ones could be in danger
Some discount insurers tout the cheapest rates available, hoping consumers won't look too closely at the inadequacies (or gaping holes) in the policy. Liability coverage is great because it can shelter you from lawsuits and financial disaster, but it won't protect you or your loved ones traveling with you in the vehicle. Make sure you consider your passengers when choosing a plan so you can enjoy peace of mind knowing they are covered as well at all times on the road.
#3 You get what you pay for when it comes to the insurer
Cheap, barebones coverage is great - until you have to use it. Once you file a claim, you are at the mercy of the insurer you belong to. This is when customer service reviews and the financial strength rating of the company matter when choosing a policy. Make sure you are dealing with a provider that has a strong history and is well rated by watchdog companies such as A.M. Best Company and Standard and Poors. It can mean the difference between a smooth and pain free claims process and a nightmare. Using a comparison tool such as the one we provide for free will allow you to view offerings from several insurers at once so you aren't pressured to purchase a certain option without seeing some competition.
#4 You will likely end up paying more later for the little stuff
Let's face it. It is really easy to glance over the list of coverage add-ons such as rental car reimbursement, gap insurance, medical payments, personal injury protection and refrain from adding them to your policy in order to keep the costs down. This is a pretty significant gamble in itself when you think about it. Will you have the extra money to rent a car if yours is in the body shop (or totaled) after a crash? Think of the lost revenue if you are unable to get to your job. If you owe more on your vehicle than it is worth, you will have to cover this amount to satisfy your lender if the vehicle you are financing is damaged. What happens if your health insurance policy won't cover your injuries after an accident, or even worse, what if you don't have a health insurance plan? Sure, these are all hypothetical situations right now, but all too many policyholders find themselves dealing with these tough questions after they are involved in an accident. The time to think about these things is now. Consider which additions to your policy would be valuable and which ones you could live without - just don't shortchange yourself in order to save a couple bucks each month.
#5 Your rates could skyrocket after a claim
When you belong to a reputable insurer that offers premium coverage and quality service, you are often treated better. It goes back to the basic premise of getting what you pay for. This is also true when it comes time to file a claim. If you have a cut-rate plan with a discount insurer, you might pay dearly for coverage after filing a claim. On the other hand, some companies such as Allstate, Nationwide and Liberty Mutual offer an incentive called accident forgiveness where you are not penalized after your first accident. This will give you more peace of mind, but it might mean that you will have to pay a little more for your coverage. It all comes down to what you can afford now versus later. If you have a lot of money saved up that can be used at your disposal, it might serve you well to choose the discount offering. On the other hand, most consumers should err on the side of more coverage as a vital safety net when involved in an accident.
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