June 22nd, 2010
There's no question that no one wants to pay more for car insurance than they have to but it's important to note that there's a big difference between cheap car insurance and car insurance that's the best value for a given person. Here we'll define cheap car insurance in the same way as someone may describe a cheap car – that is, a car that gets your from point A to point B but offers few luxuries and may not be as reliable as more expensive cars.
While every state is different, they all require you to carry a minimum amount of car insurance. That's because no matter how safe you drive, there's always the possibility that you will be involved (or cause) an accident that could do damage to other people's property or, worse, to other people. Car insurance is thus required to ensure that every driver can cover costs that they may incur on other people.
Since insurance companies are not allowed to offer cheap car insurance policies that do not meet your state's minimum requirements even the cheapest car insurance policy will keep you legal.
But when considering buying cheap car insurance though there's a lot more that worth considering beyond just staying legal:
−Will it cover damage to your vehicle?
−Will you still be exposed to more damages?
−Will the car insurance company be around to pay in a few years if you need them?
Cheap car insurance often does not cover damages to your property that result in an accident that you cause or that another uninsured driver causes to you. This car insurance is typically called “liability-only”. For someone who owns a very cheap car it's probably not worth buying car insurance that covers damage to your car so cheap car insurance may make sense. However, if your car is worth more than a few thousand dollars, you could be on the hook for a lot of money if you damage your car in an accident.
Each state set's their own minimum car insurance limits that everyone who drives a car is required to buy but that doesn't mean that that's the most that you could ever have to pay in you cause an accident. For instance, if you happen to rear end a Bugatti Veyron (a $1 million car) the damages you cause will almost certainly exceed the minimum liability coverage that your state requires you to carry. That means that cheap car insurance could leave you on the hook for the difference and that could mean a lot of money.
Cheap car insurance, like cheap cars, often comes with trade-offs. It's important to do your research before buying cheap car insurance. There are a lot of resources on CoverHound to help and you can find any car insurance company's AM Best rating (like a credit score but for car insurance companies on their web site at www.ambest.com.
Everyone is different, so inexpensive car insurance might be right for you - but it's important to consider your own circumstances. Talking to a local insurance agent is always a good idea as they can help assess your situation to determine what the best car insurance option is best for you.