Disadvantages of Car Insurance for Auto Owners
In spite of the numerous disadvantages of car insurance, people can’t get away without buying it for their cars. It is required by law, to get car insurance, if a person intends to drive in North America (in almost all states and provinces).
Car Insurance is a necessity in today’s times.
It can be a life-saver, in times when a person gets into an accident, or when they are at a risk of incurring losses due to natural calamities.
A comprehensive and collision car insurance protects car owners from financial or personal losses caused due to theft, natural hazards, and damages caused by other cars (car slogans of famour brands) and drivers. It also compensates against any damage claims filed for, by third-parties, and provides monetary benefits in the case of death caused by accidents.
But there are many disadvantages of car insurance and the auto-insurance industry as a whole, that really annoys people, is unfair, and also, confusing.
14 Disadvantages of Car Insurance for Car Owners
Buying insurance for your car could feel like an additional financial burden. Is that a drawback of auto insurance? Maybe to some people. There are also other disadvantages of car insurance that may not seem very obvious at first but have been leading causes of unfairness and stress for a lot of people.
We’ve compiled a comprehensive list of 14 disadvantages of car insurance, that have plagued the auto insurance industry, and led to a negative perception. read through them and let us know what you think in the comments section.
1. You Might Have to Pay a Deductible Amount to Get Your Claim, Despite Paying Insurance Premiums Every Month
Most of the times, car owners are required to pay a deductible amount, a fixed amount that the owner would have to pay out of his/her pocket before the auto-insurance company their damage claims. Depending on the severity of damage incurred in monetary value, this deductible amount can vary from $100 to $1,000.
Usually, this deductible amount is decided at the time when the car owner is buying the car insurance. Hence, the amount of deductible is determined based on the risk the auto-insurance company is expected to assume. The lower the deductible amount, the higher the monthly insurance premium.
Even though, logically it makes sense to have a shared ownership of the risk associated with the damages to avoid careless and distracted driving; but I still feel this is one of the leading disadvantages of car insurance because incurring damages will still cost the owner.
And this deductible amount might be a big sum of money that someone might not have lying around.
2. You Might Never Have to Claim Damages from Your Car Insurance Company
Car insurance gives drivers and third-party’s a safety net if they were to get into an accident. But let’s assume that you are a great, and a safe driver, and you have never got into an accident for the last 15 years that you have been driving for.
In this scenario, you would have paid thousands of dollars to your insurance company over the last 15 years, but never needed to claim any damages. This becomes a disadvantage of car insurance because the insurance company is not liable to give you anything back.
Now imagine, another scenario. You are a great driver, but apart from minor bumps and scratches, you have never incurred damages to your car beyond the deductible amount in the cost of repairs. In this situation too, the auto-insurance company is not liable to even pay you a dime, for your repairs.
This is a major disadvantage of buying car insurance in my opinion. In addition to paying a hefty premium to the insurance company for years, the driver has to cover the cost of minor damages and repairs. to their car. Quite unfair if you ask me.
There have been new policies recently, where insurance companies have started good and accident-free driving behavior, by offering discounts on their premiums. This space is yet to evolve, and we’ll see how this changes in the future.
3. Lengthy Contracts, Fine Print Conditionals, Wavering Credibility and False Promises are Major Disadvantages of Car Insurance for Common People
Many-a-times people sign-up with car-insurance companies without researching anything about their services. And this often leads to a messy outcome. Because there are so many conditional elements in the fine print of an insurance company’s contract, often times it becomes really confusing to decipher for common people to understand the legal nature of the contract.
This gives many fraudulent insurance companies an opportunity to try and not pay the respective damages in times of need. Why? Because these shady companies try to save money by not paying their dues and coming up with possible excuses and the loopholes in the legal contract.
Not everyone is a legal expert, and they might get into these traps. It is recommended to do proper research before buying auto insurance. And also remember, cheap is not always good. In the event of an accident, calamity, or crises, dealing with a bad and unreliable insurance company is probably not who you would want to deal with.
Insurance companies are in the business of making money, not protecting people. That’s something you should remember. Do your research thoroughly.
4. Your Car Insurance Company Might Not Cover All Kinds of Damages
So this is one of those sneaky disadvantages of car insurance. Oftentimes, when you send your cars for repairs and submit a quote from the car repair shop to the insurance company, your insurance company might turn around and say, “hey, we can’t cover this part of your car, because it is not part of our policy.” Or they might not decide to cover a specific part of your damaged car, that needs to be imported from another country.
These are frustrating times and really angers many customers. Experiences like these really tick car insurance customers off, because, at the time of selling the policy, these companies make all kinds of promises.
5. Buying Car Insurance is a Very Costly
Car insurance premiums are an additional cost and the existing costs of maintaining a car, and it does make the decision to buy a car difficult for many people. For many cities and suburban areas, having a car is a necessity. And in that situation, if a person is not able to afford a car due to expensive insurance premiums – that’s quite unfortunate, and another disadvantage of car insurance.
In Canada, for example, if you are a new driver with a G2 license (which is a mid-tier license in Ontario’s graduated driving system) insurance can cost over $6,000 to $8,000 dollars a year. This is discouraging because many new drivers will not be able to practice driving in Ontario to get a G License if they can’t afford a car.
This amount is more than the cost of buying a used car in Ontario in most cases.
6. Hidden Costs for Extra Services that You Might Not Need
The quote that you receive from your car insurance company often includes extra services like road-side assistance, insurance for riders, vehicle break-downs and a lot of different services. These services and coverages come at a cost, and it is recommended to really understand what you may or may not need.
Removing coverage for line items you don’t need will help you bring down the cost of your premiums considerably.
Also, if you are looking to cover just basic damages, you might not need the over-marketed comprehensive coverage. You may be just as good with basic collision coverage.
7. Insurance Companies Take their Sweet Time to Pay the Claims
Because insurance companies take their time in verifying, processing and paying the claims, this process usually causes a delay in releasing and transferring payments to your bank account. This is more of an inconvenience than a disadvantage of car insurance.
8. Payment Terms Could Be a Disadvantage of Your Car Insurance Company
I’ve heard stories, where some insurance companies deny to pay the claim until the repairs are complete. This can cause delays or deadlocks between repair shops and your delivery timelines primarily due to a conflict.
Make sure you read reviews and read the fine print around payment terms for claims before signing the agreement with your auto insurance company. In some cases, it may take months for the insurance company to pay out someone’s claim(s).
9. The Insurance Company Might Not Consider a Quote from a Mechanic or a Repair Shop You Trust
This is rare but could turn out to be one of the major disadvantages of car insurance for drivers. Sometimes, an insurance company might turn around and reject a quote from a repair shop that you would want to get your car repaired at. This usually happens when the insurance company tries to manage a network of repair partners and disregards any repair shop that is not part of their network.
This can be due to business relationships or trusted networks to ensure that they keep their payouts under control.
10. If You Live in a Busy Area, You Might Have to Pay a Higher Premium
Since insurance companies calculate premiums on assumed risk, someone living in downtown would have to pay a higher premium, than a driver living in a suburban area. That’s because the person living in downtown has a higher risk of getting into a collision, due to a large number of cars and pedestrians in that area.
This can be unfair and one of the many disadvantages of car insurance for someone who likes to live in a busy area.
11. An Older Car Might Come Cheap, But will cost More to Insure
Older cars have a higher risk of breaking down or going to a repair shop. Due to this reason, it is usually expensive to insure an older car vs a newer model. Think about this scenario from an insurance company’s perspective as a business. The more chances of your car breaking down, the higher the premium an insurance company will charge.
12. Stay Away from Insurance Policies that Tie You to a Dealer
These days many auto dealers are trying to club insurance policies as a package with the cars they sell. They are also selling car repair insurance policies at prices that seem to be reasonable in comparison. Be very careful when signing up for deals because they want to tie you up with their own repair services. You might save a few hundred dollars in your premium, but they might charge you an arm and a leg when your car is in need of repairs.
Also, because these are small companies, you never know when they can go down with bankruptcy, and take your premiums with them without giving you anything in return.
And again, make sure to read the fine print before signing any auto insurance policy.
13. Car Insurance Does Not Cover Wear and Tear
Just to be clear, a car insurance only protects a car owner from some kind of damage. But paying such high premiums and not getting into an accident for a long period of time, should have had some allocation to wear and tear of your car? Right? But sadly, we don’t live in an ideal world.
This is not really a disadvantage, but an opportunity that an insurance company may start offering in a highly competitive insurance market.
14. Inherent Mistrust and Lack of Credibility on Car Insurance Companies
People just don’t trust insurance companies. And this is primarily due to the experiences they have had, and the stories they have heard. There is a major lack of mistrust on insurance companies in a sea of hundreds of companies. This lack of credibility and mistrust are the most disappointing disadvantages of car insurance.
Conclusion: Are There Only Disadvantages to Having Car Insurance?
Not at all. Disadvantages of car insurance are subjective. To some people, paying high premiums gives them a sense of security. But to someone else, who can’t afford it, it becomes unreasonable.
Car insurance is important, and in today’s world, we certainly cannot live without it. There are numerous advantages to having and insurance, and it’s not all evil. However, the way the insurance industry has conducted their business over the years has painted a very negative picture and created this, sense of mistrust.
I due to that, they have lost the credibility. Unless insurance startups and new companies bring transparency back, with the rising digital demands of consumers, it will be difficult for insurance companies to gain consumers’ trust back.