Hidden Costs of Cheap Car Insurance

July 30, 2018

Why Discount Car Insurance Can Be a Lot More Expensive Than You Think

When buying car insurance, most people are looking for any way to keep their costs down. There are safe ways to do this by taking advantage of driving discounts and taking precautions to lowering your teen’s car insurance rates.

When shopping for car insurance it is important to research more than just the costs. One company may offer a cheaper price but it may lack coverage that other includes at the same or similar price. It is always important to know what you insurance covers. Here is a quick look at some hidden costs in cheap nonstandard policies that you’ll want to avoid.

Higher Deductibles

Make sure you pay attention to your deductible. Yes, a higher deductible means a lower premium, but can you afford to pay the deductible out of your pocket? If you aren’t willing to take that risk, you might want to consider paying more for your premium so you can pay a lower deductible if you get into an accident.

No Coverage or Reduced Coverage for Other Drivers

Generally, a standard policy covers you, the listed members of your household, and friends or relatives you allow to borrow the car occasionally. However, a nonstandard policy may have some restrictions. It may exclude coverage for permissive drivers (friends who use you car occasionally with your permission) or for risky drivers (for example, a teenager with a speeding ticket). The policy may also have restrictions based on age and exclude coverage for permissive drivers under the age of 25 or 21. Some discount policies limit coverage to only you, the person named on the policy. This means that if anyone but you uses your car and gets into an accident, you will have to pay all the associated costs out-of-pocket.

Reduced Coverage for Repairs

Under collision or comprehensive coverage, a standard auto insurance policy will generally pay for the full cost of repairs unless the vehicle is declared a total loss. The policy will pay the depreciated value of the car if it is totaled. However, some nonstandard policies take depreciation into account even for repairs. This means that instead of paying the full cost of repairs, they would only pay a percentage of the cost.

Paying out of Pocket: Injuries and Vehicle Repairs

Most states require you to carry liability insurance for property damage and bodily injury to others. This coverage takes care of other people’s repair bills and medical expenses but does not extend to your own. This means if you have a liability-only policy and you get into an accident, you are responsible for covering your own medical expenses and vehicle damages.

Other Limitations

Nonstandard policies may have other limitations such as low mileage caps and exclusions for liability and damage for business purposes. For example, some policies may have a low cap such as 2,000 miles for year. Even if you don’t use the car daily, the policy may not include enough mileage to cover it. In addition, nonstandard policies may exclude liability and physical damage coverage while the vehicle is used for any type of business services. If you are using your vehicle for a delivery or ride-sharing service, for example, it would lack this coverage.

At Jessica Liu Insurance Services, we want to make sure you have the coverage you need to protect you financially in case of an emergency or accident. Don’t hesitate to contact us today to review your vehicle insurance coverage options – just give us a call at 415-386-2283 or send us a message at [email protected]!