Is cheap car insurance always better?

It seems that people are always out to find cheap car insurance. Companies advertise cheap car insurance with promises of low premiums and all the benefits you can think of. This may sound appealing, but it is important to stop and think about whether cheaper is always better. As the saying goes, if something is too good to be true, it usually is. Consider the following factors before you opt for the cheapest car insurance.

Car insurance is there to suit different needs, depending on lifestyle and how often one drives.  When looking at cheap car insurance, you need to consider whether you are purely looking to pay a lower premium, or whether you would like to ensure a bigger payout should you file for a claim.

If you pay a lower premium for your car insurance, it could mean that in the event of an accident, you have more of an excess to pay. The higher your excess is, the lower your monthly premium will be. There also may be other unpleasant surprises in store so make sure that you know all the details before going for a really cheap car insurance deal.

Before opting for cheap car insurance, you should take a look at the replacement value of your car. What this means, is that your car can be insured for three different values: Retail value, trade value and market value. If you insure your car for its retail value, then you are going to pay higher premiums as this is the price you would pay to buy a similar vehicle.

The trade value refers to the price which a dealer would be willing to pay you if you traded your car in. This is also known as the car’s book value. If you insure your car for its trade value, then your premium will be lower than it would be when trading it in for its retail value.

Market value refers to the average price between your car’s retail value and trade value. You would usually receive the lowest premium if insuring your car for its market value. If you use your car for business, then you will often have to pay a higher premium.

Overall, it is not always the best idea to opt for the cheapest car insurance, but do your research beforehand in order to make sure that you know exactly what to expect.