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Is Discount Auto Insurance Really Worth the Savings?

Can one call truly save a person 15% or more on auto insurance? If hundreds of dollars in savings are just a click away, what is the catch? Buying discount auto insurance can drop monthly premiums dramatically, but customers must watch out for potential pitfalls.

By reviewing the pros and cons below, a driver can determine whether choosing one of the cheap auto insurance companies is the right choice.

Certain companies have been highlighted for informational purposes. To find auto insurance policies from multiple companies, simply enter your ZIP code into the FREE comparison tool above now!

Discount-Auto-Insurance-SavingsPitfalls of Discount Auto Insurance

Discount insurance companies must make a profit, so the money saved in cheap premiums may cause headaches in other areas. Some of the most common problems are high fees and penalties, minimum coverage limits, a small selection of policy options, poor customer service, and frequent consumer complaints.

1. High Fees and Penalties

Companies that issue cheap auto insurance policies often recoup some of their costs on the back end. As an example, Esurance is just one of the car insurance companies that charges for paper statements. Examples of other back-end fees are:

  • fee for paying in installments
  • fee for credit card payments instead of bank drafts
  • fee for returned checks and insufficient funds
  • fee for express payments after a cutoff date
  • fee for account reviews, instead of periodically reviewing policies for potential life changes and discounts
  • fee for cancelling a policy before the renewal date, as permitted by state law

2. Minimal Coverage

Many insurance companies attract customers by advertising low, affordable premiums. At the same time, these great rates may be based on unrealistically low coverage limits and high deductibles. Customers discover that the quoted rates are based on minimum coverage. If they want a greater level of protection, they must pay more. High deductibles mean that policyowners must pay more out of pocket to file a claim for accidents, hail damage, or theft.

Depending on the state of residence, drivers must carry between $5,000 and $25,000 worth of property damage liability protection. This coverage pays for the repairs to another vehicle when involved in a collision.

As an example:

  • Californians are permitted to drive with at little as $5,000 in property damage liability coverage.
  • If a person hits an Infiniti G35, the repair costs can be as much as $9,000 at low speeds and even more at high speeds.
  • Consequently, the Californian who chooses only $5,000 in coverage must pay $4,000 out of pocket, not including any deductibles. auto insurance

These crash test repair estimates are provided by the Insurance Institute for Highway Safety, or IIHS.

3. Few Offerings

Many discount insurers target drivers who want only the minimum coverage to meet state financial liability laws. These companies may work on a “no frills” basis, thereby avoiding expensive extras such as medical expense benefits, rental car reimbursement, or towing coverage.

Most do not offer multiple-policy discounts unless they collaborate with a third-party homeowners, renters, or life insurance provider. Switching auto insurance providers means that a person loses any loyalty discounts that have accumulated with the existing insurance company.

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4. Poor Customer Service

Some cheap insurance companies transfer operations to the Internet in order to keep costs low. The downside is that customers may not be able to talk to a company representative when they have questions. Some common customer service disappointments include:

  • long hold times on the telephone
  • slow response times via email
  • no local agents
  • limited service hours outside of the automated phone system or website

Geico, The General, and Safe Auto are just a few of the companies that have been criticized on Internet forums for slow response times and poor service.

5. Frequent Complaints

Reviewing customer complaints is one way to determine whether a lower monthly payment is worth the hassle of working with a certain insurer. Complaints are often about low monetary settlements, policy terminations, and delayed claims

discount auto insurance

payments. Customers may wait months for claims to be approved. They may then be forced to work with only a select number of repair shops to rectify the damage.

Research is critical when comparing auto insurance companies. Some states rate insurers based on the percentage of upheld consumer complaints versus the total dollar amount of policies issued in the state. This procedure puts small organizations on the same level as large corporations. For example, in 2011, the New York Department of Financial Services had ranked 21st Century and SAFECO as two of the state’s worst auto insurance companies.

Benefits of Paying Less for Car Insurance

Fortunately not all discount auto insurance companies have bad reputations. In many cases, the trade-offs are worth the reduced price tag. Consumers may even receive the same level of service as they would from a “premium” insurer, without paying for the brand name.

Cheap car insurance companies offer numerous benefits. For instance, they

  • meet the state-required minimums to start or continue driving
  • satisfy the legal liability requirements for high-risk drivers
  • issue policies that comply with bank guidelines for leasing or financing
  • offer financial savings during times of economic hardship
  • promote paying only for policy options that a driver needs or will use
  • offer low premiums to people who rarely drive or drive only short distances
  • provide low-cost alternatives for motorists who possess older automobiles that do not warrant expensive insurance
  • use online account management and mobile apps to make the insurance-buying process more convenient. Customers can get the coverage amounts they need without waiting on hold or standing in line to speak with a representative.

Many discount insurance companies receive top ratings from A.M. Best, which means that they are regarded as financial stable. They have demonstrated the ability to pay out claims now and in the future. Many companies stand alone, while other subsidiaries are backed by the strength of a larger entity.

The Final Decision

In short, with discount auto insurers, buyers get what they pay for. The question is whether a company’s services meet the buyer’s individual needs. Drivers are encouraged to review complaints and industry reports before committing to work with a particular auto insurer.

The policy contract is also a critical source of information.

Many states mandate a free look period for terminating an agreement without any penalty.

If a company does not live up to its advertisements, policyowners can compare quotes and try a different vendor.

Getting new insurance or switching car insurance companies can be complicated. Low rates and positive experiences can make the process worth the extra effort. Make sure you check out our auto insurance comparison tool that gives you FREE auto insurance quotes!

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