The 7 Costly Mistakes People Make When Buying "Cheap" Insurance
Last Updated: January 2026
Reading Time: 8 minutes
Everyone wants to save money on insurance. That's smart. But there's a difference between finding good value and buying cheap insurance that costs you more in the long run.
We see the same mistakes repeatedly: people chase the lowest premium without understanding what they're giving up. Then when they have a claim, they discover the "savings" cost them thousands.
This article breaks down the seven most expensive mistakes people make when buying cheap insurance—and how to avoid them while still getting a fair price.
Mistake #1: Buying State Minimum Liability Coverage
The Trap:
Alabama requires only 25/50/25 liability coverage:
- $25,000 per person for bodily injury
- $50,000 per accident for bodily injury
- $25,000 for property damage
This is dirt cheap—often $350-500 per six months. So people buy it thinking they're being financially smart.
Why It's Expensive:
Modern accidents are expensive. A serious crash can easily result in:
- $100,000+ in medical bills
- $40,000+ in vehicle damage
- $200,000+ in injury settlements
If you cause an accident that exceeds your $25,000/$50,000 limits, you're personally liable for the difference.
That means:
- Wage garnishment
- Liens on your home
- Seizure of assets
- Bankruptcy
Real Example:
Birmingham driver with state minimums rear-ended an SUV at a red light. Three passengers injured. Medical bills totaled $180,000. His insurance paid $50,000 (his limit). He was sued for the remaining $130,000. Lost his house.
The Fix:
Carry at least 100/300/100 liability coverage. It typically costs only $15-30 more per month than state minimums—but protects you from financial ruin.
Mistake #2: Skipping Uninsured/Underinsured Motorist Coverage
The Trap:
Uninsured motorist (UM) coverage is optional in Alabama. Many people skip it to save $10-15/month.
Why It's Expensive:
13-15% of Alabama drivers are uninsured. That's roughly 1 in 7 cars on the road.
If an uninsured driver hits you and causes $50,000 in medical bills and lost wages, their insurance pays... nothing. Because they don't have insurance.
Without UM coverage, you're paying out of pocket or suing someone who probably has no assets.
Real Example:
Pelham driver was T-boned by an uninsured driver running a red light. $80,000 in medical bills, three months off work. The at-fault driver had no insurance and no assets. Without UM coverage, she paid everything herself.
The Fix:
Always carry UM/UIM coverage matching your liability limits. If you have 100/300/100 liability, get 100/300/100 UM/UIM. It's cheap protection against a very real risk.
Mistake #3: Choosing High Deductibles to Lower Premiums
The Trap:
Raising your deductible from $500 to $2,500 can save you $300-500/year on premiums. Sounds like a no-brainer.
Why It's Expensive:
If you can't afford to pay $2,500 out of pocket when you have a claim, you're gambling.
Most people who choose high deductibles to save money don't have $2,500 in savings. So when they have a claim:
- They can't afford the deductible
- They can't get their car fixed
- They drive an unsafe vehicle or go without transportation
- The "savings" cost them far more in the long run
Real Example:
Cullman driver chose a $2,500 deductible to save $400/year. Hit a deer two years later. Damage: $4,200. He had $800 in savings. Couldn't afford the $2,500 deductible. Drove a damaged car for eight months until he saved enough.
The Fix:
Choose a deductible you can actually afford to pay tomorrow. If you don't have $2,500 in savings, don't choose a $2,500 deductible. The premium savings aren't worth the financial stress when you have a claim.
Mistake #4: Dropping Comprehensive and Collision on Older Cars
The Trap:
"My car is only worth $5,000. Why pay $600/year for comp and collision? I'll just go liability-only."
Why It's Expensive:
If your car is totaled or stolen, you're out $5,000. Can you afford to replace it out of pocket?
Most people who drop comp/collision on older cars can't actually afford to replace them. So when the car is totaled:
- They have no transportation
- They can't get to work
- They take out a high-interest loan to buy another car
- The "savings" cost them thousands in loan interest and lost wages
Real Example:
Birmingham driver dropped comp/collision on his 2012 Honda Accord (worth $6,500) to save $550/year. Car was stolen six months later. He had $1,200 in savings. Took out a $5,000 loan at 18% APR to buy another car. Paid $1,800 in interest over three years.
The Fix:
Keep comp/collision if you can't afford to replace the car out of pocket. Once you have enough savings to replace the car comfortably, then consider dropping coverage.
Mistake #5: Not Bundling When It Actually Saves Money
The Trap:
Some people avoid bundling because they think it's a gimmick or they prefer "keeping things separate."
Why It's Expensive:
Bundling home and auto insurance often saves 15-25%. For many people, that's $300-600/year in real savings.
Refusing to bundle out of principle means paying more for the same coverage.
Real Example:
Hoover couple kept auto with Geico ($1,400/year) and home with a local agent ($2,200/year) because they "didn't want all their eggs in one basket."
We quoted them bundled with Safeco: $1,100 auto + $1,850 home = $2,950 total. They were paying $3,600. Saved $650/year by bundling.
The Fix:
Get quotes both ways—bundled and split. Choose whichever is actually cheaper. Don't avoid bundling on principle; let the math decide.
Mistake #6: Ignoring Coverage Gaps to Save Money
The Trap:
People decline optional coverages to reduce premiums:
- Rental car reimbursement
- Roadside assistance
- Gap insurance (for financed cars)
- Umbrella liability
Why It's Expensive:
When you need these coverages and don't have them, you pay full price out of pocket.
Examples:
-
No rental coverage: Your car is in the shop for two weeks after an accident. You rent a car for $50/day = $700. Rental coverage costs $30/year.
-
No roadside assistance: You get a flat tire on I-65. Tow truck charges $150. Roadside coverage costs $15/year.
-
No gap insurance: You total your financed car. You owe $22,000. Insurance pays $18,000 (actual value). You're stuck paying $4,000 out of pocket. Gap coverage costs $60/year.
The Fix:
Evaluate optional coverages based on your situation:
- If you can't afford a rental car out of pocket, buy rental coverage
- If you don't have AAA, buy roadside assistance
- If you're financing a car, buy gap insurance
- If you have significant assets, buy umbrella coverage
Mistake #7: Switching Carriers Every Year for Small Savings
The Trap:
You get a quote that's $150/year cheaper. You switch. Next year, another carrier is $100 cheaper. You switch again.
Why It's Expensive:
Constant switching costs you:
-
Loyalty discounts: Many carriers offer 5-10% discounts after 3-5 years. You never get them if you switch annually.
-
Claims relationship: When you've been with a carrier for years and have a claim, they're more likely to work with you. New customers get less flexibility.
-
Administrative hassle: Switching carriers means new paperwork, new auto-pay setups, new agent relationships. Your time has value.
-
Coverage gaps: Switching mid-term can create coverage gaps if not timed perfectly.
Real Example:
Client switched carriers four times in five years chasing small savings. Then had a house fire. New carrier (six months old relationship) fought the claim aggressively. Took 18 months to settle. Previous carrier (where he'd been for eight years) had always handled claims smoothly.
The Fix:
Switch when the savings are significant (20%+ or $500+/year). Don't switch for $100-200 savings. Stability and relationship value matter.
How to Save Money the Right Way
Avoiding these mistakes doesn't mean overpaying. Here's how to get good value:
1. Compare Coverage, Not Just Price
When comparing quotes, make sure you're comparing:
- Same liability limits
- Same deductibles
- Same optional coverages
A $900 quote with 50/100/50 limits isn't cheaper than a $1,000 quote with 100/300/100 limits—it's just less coverage.
2. Ask About Discounts You Qualify For
Common discounts people miss:
- Multi-policy (bundle)
- Multi-car
- Good student (for teen drivers)
- Defensive driving course
- Paperless/auto-pay
- Homeowner (even if you don't bundle home insurance)
- Professional affiliation
- Good credit
- Safe driver (5+ years claim-free)
3. Work With an Independent Agent
Independent agents quote 10+ carriers simultaneously. You get the best price available in the market without having to visit 10 different websites.
We do the comparison shopping for you—and we know which carriers offer the best value for your specific profile.
4. Review Coverage Annually
Your situation changes: you pay off your car, your teen driver graduates college, you improve your credit score. Review your coverage annually to make sure you're not overpaying for coverage you no longer need—or underinsured for new risks.
5. Prioritize Value Over Price
The cheapest policy is rarely the best value. Look for:
- Adequate coverage limits
- Reasonable deductibles you can afford
- Good claims reputation
- Responsive service
- Financial stability of the carrier
The Bottom Line
Cheap insurance is expensive when you have a claim and discover what you didn't buy.
The goal isn't to pay the least—it's to get proper coverage at a fair price. That means:
- Adequate liability limits (100/300/100 minimum)
- UM/UIM coverage
- Deductibles you can actually afford
- Comp/collision if you can't replace the car out of pocket
- Optional coverages that match your financial situation
Ready to Get It Right?
We'll quote you with 10+ carriers and show you the best value—not just the cheapest price.
You'll get proper coverage at a fair rate, with no gaps, no surprises, and no regrets when you have a claim.
Get Your Value-Focused Quote → [blocked]
About TCDS Insurance Agency: We're an independent insurance agency serving Birmingham, Pelham, and Cullman, Alabama. We focus on value over price—finding you proper coverage at fair rates. We'd rather lose a sale than sell you inadequate coverage that fails you when you need it most.