Is Cheapest Car Insurance a Good or Bad Thing?

Renewal of a motor car insurance policy is an annual process rather than a one-time event. A car owner must purchase adequate coverage at all times.

This is critical because insurance provides a financial safety net in the event of unforeseen circumstances. Some car owners opt for the cheapest option.

Is this method of choosing a car insurance plan advantageous or disadvantageous in the event of an accident or natural disaster? Let’s take a closer look at this.

Is Having the Cheapest Car Insurance A Good Thing Or A Bad Thing?

The goal of automobile insurance is to provide financial protection for you and others in the event of damage or injury. It is for this reason that car insurance is required.

To be more explicit, if you want to drive lawfully on Indian roads, you must purchase a Third-Party Liability Car Insurance plan. You could face fines if you don’t have a legitimate policy. And, as a result of the new rule change, these fines have skyrocketed.

If you are caught driving without a car insurance policy, you could face a fine of at least PHP 2,000. Purchasing the cheapest auto insurance is not the best way to avoid paying fines.

Read also: Financial Consequences of Driving Without Insurance

In reality, if you only have the basic coverage, you will wind up paying a lot more money for repairs and medical treatment in the event of an accident, theft, total loss, fire damage, and so on.

As an example,

• Consider Mr. A’s Mercedes-Benz S-Class, which he purchased the basic Third-Party Car Insurance coverage for. This basic policy would cost around PHP 10,000, while the Comprehensive Plan would cost around PHP 30,000. This premium car’s repair costs are considerable, and it is not covered by insurance under a Third-Party Liability Plan.
• He was involved in a car collision with a third party one day, injuring two individuals. He attempted to control the vehicle but collided with a traffic light pole.
• The insurance company reimbursed the costs of treating third-party injuries in this case. Each person’s cost was approximately PHP 2,000.
• Mr. A’s car required PHP 85,000 in repairs, which were not covered by his insurance coverage. As a result, Mr. A had to shoulder the entire cost on his own.

3 Reasons to Stay Away from the Lowest Car Insurance Plans

Comparing auto insurance plans side by side and buying the one you think is the best thanks to internet insurance. Car owners frequently choose the cheapest plan without evaluating the features or perks provided by the insurance provider.

As previously stated, this may be quite damaging to your budget, and you may find yourself paying a considerable amount of money for relatively insignificant situations. The following list of factors will explain why buying the lowest vehicle insurance policy is problematic in the long term.

Reason 1: Insufficient coverage

The services you receive in a time of crisis, such as an unexpected catastrophe, are governed by your automobile insurance policy’s coverage. If your policy’s coverages are insufficient, you will be exposed to financial liabilities.

Problem:

Consider the case when you chose the most basic Comprehensive Car Insurance coverage. You went for a drive and the car came to a complete stop in the middle of the highway.

You have no notion what the problem is with the vehicle. You go online and call an unidentified mechanic who takes a long time to arrive at the location.

You’re now stranded on the side of the road with a broken car. When the mechanic arrives, he requests that you have the car towed to his garage, which is inconvenient because you now have to arrange and pay for towing as well.

Solution:

Consider purchasing the Roadside Assistance Add-on with your Comprehensive policy instead of the cheapest available vehicle insurance plan. It will come in handy in the event of a breakdown.

A flat tire, fuel refill, towing assistance, on-the-spot repairs, and other services are included with this add-on. In the event of a car breakdown, simply contact your insurer, and the rest will be taken care of.

Reason 2: Limited Features

Cheap auto insurance plans offer fewer features, you may find yourself in situations where you need to organize or pay for items more frequently for example, setting the appropriate IDV (Insured Declared Value) while purchasing a policy.

The IDV may be set by the insurance company at a preset sum that you cannot adjust. Another example is the lack of add-on coverages for car insurance.

Problem:

IDV is one of the most important elements in determining the cost of automobile insurance. The higher the IDV, the more expensive your coverage will be. Because they want to sell cheap auto insurance coverage, insurers will sometimes reduce the IDV or refuse to let you specify the appropriate amount.

Let’s say your car’s IDV is Rs. 5 but your insurer has set a limit of Rs. 3. If your car is totaled (damaged beyond repair), your claim will be settled for Rs. 3 (excluding deductibles).

You’ve lost more than Rs. 2 in this case.

Solution:

When obtaining an auto insurance policy, make sure to enter the exact amount of IDV. It aids you in the event of theft or total loss, as the insurance provider will pay out an amount that is roughly equal to the IDV.

Although purchasing such a coverage may raise your premium, you will profit financially in the event of severe damage or theft.

Reason 3: High Financial Liability

Purchasing the cheapest vehicle insurance plan can provide the impression of receiving a bargain. However, compared to purchasing a feature-rich plan at a somewhat higher price, the price you pay in the event of an unexpected incident can result in far bigger losses.

Problem:

Consider how good friends Mr. B and Mr. C are. They always purchase low-cost automobile insurance because they believe they drive safely and never file a claim. Mr. B purchased a simple Third-Party Liability Car Insurance policy, while Mr. C purchased a low-cost Comprehensive policy with a high voluntary deductible*.

*A voluntary deductible is a portion of the claim amount that the policyholder bears. It lowers the claim amount, forcing the policyholder to pay for the remaining repair costs.

Mr. B and Mr. C decided to take a vacation and were regrettably involved in a collision with a third party, resulting in damage to their own vehicles. According to the standard Third-party Liability coverage, Mr B was responsible for the entire cost of fixing his car, while Mr C was responsible for a large deductible.

Solution:

Avoid choosing the cheapest vehicle insurance plan and instead opt for a comprehensive car insurance plan with no voluntary deductible. This can be used to cover third-party compensation as well as the cost of your car’s repairs.

5 Pointers for Choosing the Best Car Insurance Policy

Investing in the best auto insurance policy can provide you with a substantial financial cushion if you are involved in an accident involving your vehicle.

This will relieve your financial tension and assist you in obtaining the top vehicle insurance services. The following are the top five recommendations for finding the best vehicle insurance policy.

Tip 1: Make a list of your criteria before choosing a car insurance policy.

Tip 2: Look at the insurance company’s social media handles for online reviews and feedback.

Tip 3: Purchase a comprehensive plan and add-ons that are appropriate for your needs.

Tip 4: Determine your car’s current market value and set the IDV within that range.

Tip 5: When purchasing or renewing a car insurance coverage, don’t wait until the last minute. If at all feasible, purchase the plan a week ahead of time and schedule the start date accordingly.

Read also: Before Buying Car Insurance

Bottomline

The issue with low-cost vehicle insurance is the same issue that plagues all insurance. You have no idea how much protection you’re getting because insurance isn’t transparent.

“That’s not true,” you could say. “I know exactly how much insurance I have.” After all, you know your coverage limits. Unfortunately, coverage limits do not provide you with all of the information you require when purchasing insurance.

Even if your policy specifies a dollar number for damages that may be covered, you have no way of knowing whether or not the insurance provider will pay that amount.

Cheap auto insurance frequently does not cover property damage caused by an accident that you cause or that is caused to you by an uninsured driver. This type of car insurance is commonly referred to as “liability-only.

Automobile insurance that covers damage to your car is generally not worth it for someone who owns a very cheap car, therefore cheap car insurance may make sense. If your car is worth more than a few thousand dollars, though, you could be liable for a large sum of money if it is damaged in an accident.