Jessica Sautter is a Content Writer for CarInsuranceCompanies.com with a Bachelor’s Degree from Eastern Michigan University in Elementary Education with a Major in Reading and a Minor in Mathematics.

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Chris Harrigan has an economic degree from Limestone College and an MBA from Clemson University. He previously managed auto insurance claims for Enterprise Rent-A-Car. Currently, he is using his business and insurance expertise to provide insurance data analysis and visualizations to enhance the user experience.

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Reviewed by Chris Harrigan
Former Auto Insurance Claims Manager

UPDATED: Oct 18, 2020

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Key takeaways...

  • Purchasing full coverage car insurance at a discount rate is not always worth the risk
  • Full coverage also includes coverage to pay for damage to your own car, whether the damage is from a collision or from some other cause such as fire, theft, hail, or wind
  • Red flags that often point to this are very cheap rates and agents or company representatives that are hard to get a hold of. The best way to find out if an insurance company is real and trustworthy is to contact your state insurance department
  • The biggest reason you want to be cautious when it comes to discount car insurance companies is the claims process

Purchasing full coverage car insurance at a discount rate is not always worth the risk. There are a few dangers of which you should be aware of getting too excited about a cheap rate quote.

In reality, it is difficult to find full coverage that is cheap, unless your driving history is squeaky clean, you fall in the right age category, and other factors line up perfectly. This does not happen that often.

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A so-called discount car insurance rate is usually that way for a reason, and often it is not a good one. Before you sign up for any cheap policy, make sure that you do due diligence and research the company and policy thoroughly.

You may discover that they are legit and you are getting a good deal, or you may find that they are not and you should search for a different policy.

Table of Contents

Full Coverage Features

When it comes to car insurance, there are multiple options for coverage. Full coverage refers to coverage that will help to protect you the most, although it doesn’t necessarily mean that every expense will be covered by the insurance company.

The basics for full coverage are outlined by the Insurance Information Institute. This includes minimum coverage, which is liability insurance.

This covers you for causing an accident and will help pay for the other vehicle’s damage and bodily injury to the other driver’s party.

Full coverage also includes coverage to pay for damage to your own car, whether the damage is from a collision or from some other cause such as fire, theft, hail, or wind.

A full coverage policy will also have coverage for medical injuries and to help cover you if you are hit by a driver who is not covered by an insurance policy.

Other options that you can tack onto a full coverage policy are roadside assistance, windshield coverage, and rental car insurance. These give you another layer of protection.

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Discount Policy Options

When you do an online search for cheap car insurance, you may get a few results. The issue with many of them is that they are not full coverage policies. That is why you need to look closely at what kind of coverage is included in the quote.

Almost every state in the country requires that all drivers carry liability insurance. Each state also outlines the amount of liability that needs to exist.

This type of coverage is the cheapest, which is why some of the cheapest rate quotes contain liability coverage only. If full coverage is what you want, expect the rate to be quite a bit higher.

Even if the policy is comprised of full coverage, look at the liability limits that are stated in the policy. In order to keep rates low, the limits may be low as well, which will often result in higher expenses for you.

If the discount policy only has the minimum limits, they usually are not enough to pay for all of the damages that might be caused in an accident.

It is usually worth it to pay a little more for higher limits.

Also look at your deductible amounts. With coverage such as comprehensive and collision, deductibles exist. The higher the amount, the lower the policy rate is.

Financially, however, you may not be in the position to pay for the deductible, which needs to be met before the insurance provider will pay a dime.

Lowering the deductible will result in higher rates but will help you if you are in an accident, and especially if you happen to be in multiple crashes.

In most instances, if a friend or neighbor borrows your car and crashes it, your insurance will cover the damages because the insurance usually follows the vehicle, not the driver.

However, with some cheap policies, there are exclusions for drivers not listed on the policy. Check with the company to see what their policy is regarding other people driving your car.

Steer Clear of Scams

One thing to be aware of in regards to discount full coverage insurance is that some companies are running a scam and are actually fake companies.

Others are not able to sell car insurance in your state. Red flags that often point to this are very cheap rates and agents or company representatives that are hard to get a hold of. Scams are considered to be insurance fraud.

According to the Coalition Against Insurance Fraud, fraud can be committed by consumers as well as the insurance companies and agents themselves.

A company may be fake and sell you a policy that turns out to be bogus when you go to file a claim and get reimbursed.

There are also stories of agents taking your premiums and not actually spending them on the coverage you were promised. Sometimes claim checks are stolen by an insurance employee and the insurance company will not make it right.

The best way to find out if an insurance company is real and trustworthy is to contact your state insurance department. Each company and agent needs to be licensed and registered in any state where they offer an insurance policy.

Your state department can quickly find that information. You can also ask if there are any complaints made against the company or agent.

Financial Rating of the Car Insurance Company

You want to choose an insurance company that is stable financially and will be around for a long period of time. One source for that is a company that rates insurance companies according to their financial story.

There are a number of companies that do this, such as A.M. Best and Standard and Poor’s.

If a company has a poor rating, that is not a good sign. It often means that there is a lower chance of the company paying for claims.

If the outlook is negative, the company may not be stable enough to stay in business, which can have devastating consequences for policyholders.

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Bad Customer Service

A car insurance company that offers discounted cheap prices may have terrible customer service. If your concerns and questions are not answered promptly and courteously, you will be very frustrated.

Sometimes asking friends and family members about their experience with the companies they use is a good idea.

Referrals are often the best way to choose a good company.

You can also contact your local Better Business Bureau if you are wondering about a specific insurance office in your area. Any complaint and how it was handled will be listed, whether it is about customer service or another issue.

Some insurance companies save money by dealing only online or by telephone. They are able to pass on some of the savings to you because of the lack of agents to deal with your policy issues.

If your insurance needs are uncomplicated and you are accident-free, the lack of personal service may not be an issue and it is worth saving the extra premium amount.

Poor Claims Process

The biggest reason you want to be cautious when it comes to discount car insurance companies is the claims process. The key reason you pay insurance premiums every month is to be covered if you are ever in an accident and need to file a claim.

One way that some insurance providers save money is to skimp on claim payments. Some companies will deny a claim outright, while others will fight and argue over some of the expenses. You may be offered a settlement that is much lower than you think is fair and right.

Some companies will make you feel like you have to use a particular repair shop for your vehicle repairs.

Sometimes these shops will cut corners, such as using used or low-quality parts or skimp on other aspects of repair in order to save the insurance company money.

You have a right to get estimates from multiple repair shops and use one of your own choosing, so don’t feel bullied.

If you are having a difficult time getting your claim settled, there are a few steps that you can take to get it resolved.

The first is to contact the insurance provider and explain the situation. Some insurance companies have an actual complaint department that you can contact.

Make sure to support your argument with any documents and figures. Make a copy of everything and keep the originals. Along with a phone call, mail everything in with an accompanying letter.

If you get nowhere with the company, which may be the case with a discount provider, contact the insurance department in your state. You will be given directions as to how to proceed with your case.

The next avenue would be to use an arbitrator who is independent of the company. You can find one through the American Arbitration Association. An arbitrator can help decide if you were offered a fair settlement.

In extreme cases when there still is no resolution, you may choose to hire an attorney. Keep in mind that this will cost you money, and often more money than you are trying to get from the insurance company.

Weigh the attorney’s fees carefully against what you want from the insurance provider so you are not wasting money.

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