These Hidden Car Insurance Costs Could Hurt Your Wallet

Ever wonder why some car insurance is ridiculously cheap? Turns out, you get what you pay for.

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So, you did your car insurance homework. You shopped around, you compared rates, and you found a crazy awesome deal on some super-cheap insurance. But, little did you know that there were hidden fees lurking beneath that premium, just waiting to get into your wallet and make off with all your precious pocket change. As the old saying goes: If it sounds too good to be true, it probably is. Sometimes cheapie auto insurance will nickel-and-dime you for things other insurance would cover, or skimp on coverage altogether. Keeping this adage in mind, let’s look at some cheap auto insurance pitfalls to keep an eye out for.

You Get What You Pay For

Cheaper-than-average insurance (often referred to as “non-standard” carriers) offer fantastic rates…with sometimes not-so-fantastic deliverables. For example, let’s talk coverage. Standard insurance companies usually give you an upfront cost (sometimes pricey, if you don’t comparison shop) with an upfront coverage plan. Generally, this policy covers you and everyone in your household. Non-standard carriers, however, have that tricky fine print that explains coverage doesn’t necessarily extend.

Often, drivers under 21 are not covered by these types of premiums, which means if your new teen driver gets himself in a fender-bender, you may just end up paying a pretty penny (without the help of your insurance provider) to get things fixed. And, while you do still pay a higher standard-insurance premium with a teen driver, you can rest assured that they are covered—and probably for less than adding another cheapie premium.

Have super-cheap auto insurance? Make sure you're getting the coverage you think you are.

Check On It

Another unsettling hidden cost comes with record checks. While standard insurance providers generally do annual driver’s record checks (or maybe even every two years), non-standard providers often perform checks every six months. What does this mean for you and your wallet? While your initial rate may have been ridiculously low, those premiums can climb quickly with frequent record checks.

And what about repair checks? Cheap carriers often take depreciation into account when calculating how much they give you to cover cost of repairs. So, if you have an older set of wheels with some hail damage, only count on a fraction of coverage for those costs.

Opportunity Costs

There are also some things you will miss out on with a cheap carrier. For example, forget about perks. Roadside assistance, extended benefits and diminishing deductibles just aren’t an options for most non-standard providers. Though these perks aren’t always free and generally do in fact come with a higher premium—at least they’re an option for you and your family.

You may also be missing out on coverage for punitive or exemplary damages. Many non-standard carriers exclude this coverage, which means that if you get in an accident that’s your fault, you will be stuck with the vast majority of the cost.

Last but certainly not least, you could be missing out on business opportunities. That’s right, pizza delivery boys. With non-standard insurance, business purposes like newspaper delivery, Favor, and Uber are not usually covered.

Standard Rates May Apply

Unfortunately, hidden costs don’t only exist in nonstandard premiums. Many standard providers charge for things you wouldn’t expect:

  • Installment fees: Want to break your payments up into installments? Sometimes, it will cost you. Sometimes called “convenience fees”, some providers charge a fee for paying in chunks. This means you may just want to consider paying in full, if possible, to avoid fees like these.
  • Brand Loyalty costs: This won’t be a cost your provider actually charges you for, but statistics show that choosing auto insurance and sticking with it can cause your rates to be higher than they should. Be sure to pick a day to shop around at least once a year to make sure your premium is where it should be.

Like all other insurance, these fees and others can be avoided with some earnest research. Don’t be afraid to ask questions, and be sure to read that blasted fine print before taking on a less-than-perfect for you premium.