Hidden costs of cheap car insurance

An Independent Agent Explains:
This post is part of a series of insurance blogs on Safeco.com showcasing the expertise of local independent agents and aimed at helping you understand important insurance coverage and issues.

We all have a lot of demands on our wallets: Mortgages or rents, car payments, lessons for the kids, phone bills – and on and on. So, when it comes time to buy car insurance, it's little wonder why so many people want to keep their costs down.

However, buying cheap car insurance – or minimal car insurance – today can set you up for a big financial hit tomorrow. Here are three hidden costs of cheap car insurance you'll want to avoid:

1. Paying out of pocket to cover your own injuries and vehicle repairs.
   Most states require you to carry liability insurance for property damage and bodily injury you may cause to others. The coverage is for other people's repair bills and medical expenses, not your own. If you're at fault for an accident, and you have chosen a liability-only policy, none of your own expenses related to the accident will be covered. You'll have to cover them on your own. So, think twice before buying only enough car insurance to meet your state's requirements. Yes, it will be cheaper than buying a more robust policy, but you'll lack any coverage for yourself.
2. Having your wages garnished to make up for inadequate liability coverage.
   Imagine you hit another car and the driver sustains a pretty bad head injury from the crash. She has to stay in the hospital for a week, and it looks like she is going to have some long term medical needs. A judge awards her a settlement of $150,000 for medical bills, mental and emotional anguish, and loss of quality of life. Your auto liability limits, however, are exhausted at $50,000, so the judge garnishes your wages. You'll have to hand over 40 percent of your income until the remaining $100,000 is paid. All of a sudden you don't have enough money to meet your regular expenses, and you still have to address the damage to her vehicle and yours, too.
3. Being denied coverage when you lend your car to a friend.
   Most carriers provide coverage for you, any listed household members who have access to your vehicle, and any relatives or friends you allow to borrow your vehicle(s) occasionally. But, your discount auto policy may not. Such a policy may limit coverage only to you, the person named on the policy. If someone else is driving your car and causes an accident, you won't receive any coverage for the incident. No coverage to help repair your vehicle, and no coverage to help pay for any damage or injuries that others involved in the accident sustain. You'll have to pay it all out-of-pocket.

I know it's tempting to determine what you can afford to pay for car insurance and then find a policy to match. But, as these examples illustrate, saving in the short term may actually cost you more in the long run. So, talk to your local independent agent before you settle for an auto policy that leaves you open to risk. Your independent agent can help you balance coverage and price to a point that feels comfortable to you.

As I always say: I'd rather have the coverage and not need it, than to need it and not have it. You just never know when that day will come when your insurance policy helps save you from severe financial loss.