4 ways cheap insurance prices may bamboozle you

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Everyone wants to save money on insurance, whether it's home, life or car insurance. But sometimes, shaving a few bucks off insurance premiums now can lead to big problems down the road.

Here are four situations where a decision to pinch pennies can end in financial chaos, and how you can avoid these setbacks.

1. Getting hit by a driver who has no car insurance

If you skimp on uninsured motorist coverage, it can be like not having any coverage at all, says Brian Allred, a sales rep with Liberty Mutual Insurance in Ontario, Calif.

That's because if an uninsured driver hits you in an accident, you'll probably have to pay for your damages.

"In my county, 17 percent of the cars on the road do not have car insurance, and that equates to thousands of cars," Allred says.

Uninsured motorists coverage often costs less than $100 a year, Allred says. But it could save you thousands if you are involved in a wreck with a driver who does not have auto insurance.

You also should purchase underinsured motorist coverage. This type of car insurance kicks in when your damages exceed the limits of the other driver's liability policy.

2. Being sued by someone hurt on your property

You may cut corners by purchasing only the required minimum amount of liability insurance on your homeowners policy.

But if someone is hurt on your property even if they're on the property without your permission he or she could sue you, says Mark Carrasquillo, an account executive with E.G. Bowman and Co., an insurance broker in New York.

Without adequate liability insurance, you could one the hook for tens of thousands of dollars or even more.

As a general rule, the more property you own, the more liability homeowners insurance protection you should have. Carrasquillo suggests speaking with your agent and a financial expert to help determine how much coverage you need.

3. Dying unexpectedly

Dying without a life insurance policy could leave your dependents without a financial safety net.

Procrastinating before deciding to buy life insurance also can be costly, Carrasquillo says.

"The younger you are when you buy life insurance, the cheaper it is."

Waiting several years or longer before taking out a policy means the insurance will be more expensive when you finally do buy than it would have been if purchased earlier, Carrasquillo says. Every birthday brings a life insurance price increase.

4. Getting into a crash and having to rent a car

You may need access to transportation usually in the form of a rental car, if your car is being repaired after an accident, Allred says.

Auto insurance policies often offer optional loss-of-use coverage that will reimburse you for the cost of car rentals while you wait for your car to be repaired after an accident. Because this insurance is often optional, many people choose not to get it.

However, Allred says the rental coverage option is relatively cheap and could be important to maintaining your schedule while waiting for your vehicle to be fixed. It could take days or even weeks for the parts to arrive and the repairs to be completed on the insured car, he says.

"Basic rental car coverage could be around $30 a year, which would give you at least 30 days of rental car use," Allred says.

If you don't have this policy, expect to pay normal car rental rates if you need a car after an accident.

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