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The Hidden Costs of Cheap Car Insurance

By April 6, 2015April 15th, 2018Personal Protection
The Hidden Costs of Cheap Car Insurance

Given the high cost of living in the state of New York, many residents seek alternative ways to save money. One of the more popular cost-cutting methods is purchasing discount auto insurance coverage. Many New York residents take advantage of cut rate insurance company offers that, on the surface, offer savings upwards of 40 percent on auto insurance coverage premiums annually. But saving on annual premiums today can sometimes end up costing more when the unexpected happens – a lot more.

What You Need to Know

This approach to auto insurance coverage is deceptive. In fact, you will likely spend more in the long-run in the case of an accident with these forms of cut-rate coverage.


Because these policies typically provide inadequate liability coverage, mediocre claims and customer service, exorbitant deductibles and no towing coverage in the case of a serious accident.

After adding up all of the costs, it becomes pretty clear that one would have saved more money by purchasing a more comprehensive coverage plan that likely would have cost more in monthly premiums, but would have reduced long-term aggregate costs significantly.

A few other “hidden costs”

Many of these discount insurance plans fail to provide drivers with comprehensive coverage for their driving needs. If you incur a great deal of mileage monthly, you especially should consider the value provided to you by these cut-rate plans. These policies often feature step-down provisions that only meet the minimum levels required by the state of New York.

These plans tend to only cover the name of the primary insurance holder as well, whereby if your spouse, family member or friend borrow your vehicle and have an accident, you may well have less protection and coverage for any damage incurred. In contrast, comprehensive insurance policies provide you with full coverage for any repairs needed during an accident for collision, regardless if you or someone close to you is behind the wheel of your vehicle.

Moreover, cut-rate insurance plans are less generous in terms of covering your costs. Some policies may even calculate depreciation into the amount they are willing to allocate toward your claim. In other words, if you drive an older vehicle, the policy may only pay a percentage of the amount required based on the depreciation calculation.

In addition to these challenges, many providers of discounted auto insurance will require more consistent checks of your driving record, leaving you susceptible to rate hikes throughout the tenure of your policy. Not to mention, you likely will not receive many of the perks and benefits that standard policy holders receive, such as vanishing deductibles or accident forgiveness.

Choosing an Insurance Plan

Ultimately, before deciding on an insurance plan, be sure to scrutinize the fine print of the policy, especially the components that are being sold as discounted coverage.

Cost should not be the only factor you evaluate when deciding on a policy.

Be sure to weigh other components, such as the coverage provided, service records as well as the suitability of the policy given your driving needs.

For example, if you don’t accumulate a great deal of mileage annually, you may consider pay-as-you-go coverage plans that provide you with comprehensive insurance at flexible rates.

In the end, it’s not to say that cut-rate auto insurance plans universally provide substandard coverage and service, but that you should thoroughly research your options before committing to a policy so that you fully understand what the coverage entails.

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