Why cheap car insurance hurts you in the long run

Each month, we take stock of the most popular posts on our blog. Invariably, one is more popular than all the others: “Here’s why your car insurance is going up in 2016.”

Granted we’re not living in 2016 anymore, but based on the evidence we can assume that people remain interested because the cost of auto insurance continues to rise each year.

Unfortunately, that means consumers make short-term decisions to save money, and that’s what brings us to the issue of substandard insurance policies.

We’ve written quite a bit about state mandates, which requires all drivers in Illinois to carry minimum liability coverage of $25,000. Substandard insurance is primarily defined as a policy that offers the bare minimum at relatively low premiums. The problem with that, however, is that substandard policies are designed to make you believe the minimum is enough to protect you when it isn’t.

One reason is bodily injury, which is practically impossible to predict. Depending on the severity of the injury, you could be looking at hundreds of thousands of dollars in medical bills, where $25,000 is barely a drop in the bucket. We’re talking the cost of an ambulance, emergency surgery, a long hospital stay to recover from injuries. Those costs can be significant and financially paralyzing.

Another reason is related to your long-term health, such as your ability to perform a job, whether you’ve lost work, whether you actively participate in the community, and whether you suffer from a terminal injury.

In situations like the one above, insurance is about the only thing protecting you and others from dire situations, both health-wise and financially. You’re also making it easy for insurance companies to simply walk away from the situation when it’s no longer a legal responsibility.

Take this example. A man with a substandard policy crashes into a minivan hauling three kids. Two of them become seriously injured. As the at-fault driver with the substandard policy, your insurance is responsible for picking up the medical bills. But based on your policy, only $25,000 is collectable. Now let’s imagine that the kids’ medical bills cost upwards of $200,000. If attorneys get involved, you could be responsible for the $175,000 difference (and possibly much more) depending on the circumstances of the crash.

Let’s say you lose that lawsuit. Then it’s a matter of duking it out with your insurance company to make up for the difference, which means you’re fighting two battles, both of which you could end up losing. Badly. The above is just one example of the pitfalls of opting for substandard insurance policy.

People often ask us what types of insurance policies we recommend and whether it’s enough to protect them in times of crisis. It’s hard to give a good answer because every person is working under different circumstances. But what we often recommend is that drivers take time to look at their policy, understand it and ask questions. Discovering where you might be vulnerable is worth the effort, as is the protection that comes with a quality insurance policy.