Is Cheap Car Insurance Worth It? | NNINS

You're shopping for car insurance. You want the best price. You see "cheap car insurance" online.

A lot.

Your newsfeed says, "I just saved $600 on my car insurance," and "15 minutes can save 15%".

Sounds great!  What does that get you? 

What's a good price for car insurance?

Will you have the right coverage when you need it?

What happens if you have an accident? 

Let's break it down.

Minimum Car Insurance Requirements in Virginia

If you're shopping for car insurance in Virginia, you may wonder what is required. For one, your insurance carrier must be authorized to sell in VA and can not offer below the state's minimum coverage. This mandatory coverage includes liability (pays for other's damage when you cause the crash) as follows:

  • $25,000 in bodily injury/death for one person
  • $50,000 in bodily injury/death for two or more people
  • $20,000 in property damage 

The state minimum does not include coverage for damage to your car. If you do not opt to get this liability-only coverage, you're required to pay the Virginia Department of Motor Vehicles (DMV) a $500 Uninsured Motor Vehicle Fee when obtaining a license plate, and each time your registration is annually renewed. This fee does not provide insurance coverage. 

 

Car Crash with Airbags

The reality is the state minimum insurance requirement does not provide adequate financial protection for most Virginians. According to the National Safety Council, the average costs associated with a 2019 car crash when factoring in property damage, driver and passenger injuries, and liability were sobering, especially for serious accidents: 

  • Property damage $4,600
  • Nondisabling injury with property damage $8,900
  • Nonfatal crash with disabling injury $78,900 
  • Fatal car crash $1,410,000

You can do the math. Virginia's liability coverage can leave you on the hook for medical bills above $25,000 for someone injured in an accident when you're at fault. Add in your own property damage and injuries and you could end up with a hefty financial burden in an instant.    

Full Coverage Car Insurance

While the minimum state-required insurance is limited, you can add more robust car insurance products for a wider financial safety net. In addition to higher liability coverage, you can purchase collision coverage (repairs or replaces your car after an accident, regardless of who is at fault) and comprehensive coverage (pays for damage caused by other things like theft, wind, flooding, and animal collisions). While leasing a car, you are often required to carry these types of full coverage car insurance and higher liability limits to satisfy your lease agreement. 

 

Couple reading online

What's a good price?

Shopping for insurance can be complicated and confusing. Rates for car insurance depend on things like the cost of your car, your location, driving record, credit history, years of driving experience, and annual mileage. With all of these variances, it's almost impossible to standardize pricing.

Besides, every insurer is different. Some insurers cater to drivers with good driving records. Most offer extras like roadside assistance, windshield glass coverage, and rental car reimbursement. Large companies tend to spend a lot to entice new customers through advertising and discounted rates only to increase rates later.  Small insurers tend to focus on delivering consistent value over time, believing that a customer's peace of mind is earned through reliable coverage, great service, and competitive rates. More on that later!

It really helps to have a local licensed insurance advisor who can help you navigate rates and the value each insurance carrier brings to the table. A lower price may not indicate a good price or the best fit for you.

There can be trade-offs with buying cheap car insurance.

 

hands holding quality vs price

 

These trade-offs can impact not only your rate but also more important things down the road. It's human nature to discount the what-ifs when you're shopping due to optimism bias. You might think that won't happen to me. But it's essential to consider the potential impacts that can affect you at any given time. Check this out:


 

In 2019, 180 PEOPLE were INJURED every

day in the commonwealth

from TRAFFIC CRASHES. 

~Data from the 2019 Virginia DMV Annual Crash Facts publication

 


Statistics like this bring to mind the potential for out-of-pocket insurance costs with a claim. You also want to consider how well a carrier will step up in your hour of need. That's a hard thing to determine from a fifteen-minute online quote.

Out-of-pocket Costs

Coverage Limits

One way to reduce your rate when shopping for car insurance is to reduce your coverage limits. When selecting your liability policy, you will choose specific dollar amount limits of how much it will cover. Keep in mind, your financial responsibility does not end with these coverage limits when you are at fault in a crash. If your car insurance doesn't pay for all the property damage and medical expenses, you are still responsible for what is left. This is not something you want to scrimp on. In other words, avoid trying to save money on your car insurance rate now to compromise yourself financially later possibly. Choose the highest liability coverage limits you can afford. 

Deductibles

Another way to reduce your insurance rate is by increasing your deductibles. Deductibles are the amount of money you pay on a claim when there is damage to your property. These out-of-pocket costs can be a selected dollar amount or a percentage of the total amount of insurance on the policy. Some people don't realize that cheaper car insurance quotes can be partly due to higher deductibles, which can be financially risky in a claim scenario. Think of it this way; a higher deductible is a higher risk. The lower your deductible, the more coverage and security you have. 

Girl on phone with hand on head

Claims and Customer Service

Claims are stressful and inconvenient. We know because we work through them for our members every day. We also know that when it's your claim, it can feel like your life is turned upside-down. You may be dealing with painful injuries and loss. You may be out of a car for an extended period of time. It's the one time you really need your insurance to deliver, and the last thing you need to deal with is lousy or inefficient service.

Cheap car insurance may mean a subpar service experience. When you're shopping, do your homework. Pay special attention to an insurer's service promises and check them against their online reviews.  Weigh responses to customer feedback with the insurer's AM Best ratings (like credit scores for insurance carriers). You want to know your insurance company will be there for years down the road and deliver the most seamless and helpful claims experience possible.

 

couplewithinsuranceagent

Better Ways to Save Money

Your local insurance advisor can help ensure what coverage limits and deductibles are right for you. They have access to a whole network of insurance carriers and can get multiple quotes. Independent agents work for you, not the insurer. They listen and search for the best options tailored to your needs and budget and are familiar with the level of service you will receive from a carrier. Working with an independent agent is like having a personal shopper helping you find smart ways to save money. 

Bundling your home and car insurance is one of the best ways to save money on car insurance. Things like keeping a good driver's record, avoiding lapses in coverage, choosing cars with important safety features, and taking a defensive driving course can also help you save on your rate.

The bottom line is price should be one of several factors to choosing the right fit.

Shopping for car insurance to save money is a good idea. Understanding what you're actually getting is an even better one. So give it due diligence. Talk to your local insurance agent. They'll make sure you don't sacrifice big on coverage and service to save a little cash.