A lot of us are strapped for cash right now and want to minimize the cost of our auto insurance in any way we can. But if you strip out your coverage to the legal minimum (something that differs widely from state to state), beware of the long-term consequences of having an accident.
If you have poor or no health insurance, consider adding Personal Injury Protection to your policy. This will cover your own medical bills (up to about 80% of costs) and a death benefit (life insurance) in case of an accident. It’s a grim thought, but if you’re in an accident and get injured, you’ll be happy you paid a few extra bucks a month to not be buried under medical bills. You’ll also want to consider bumping up the limits on your Bodily Injury Liability, which is the auto coverage to others injured in an accident you cause, to $100,000/$300,000 (first number is per person injured, second number the total for all injured).
If you stick to the low state minimums ($25,000/$50,000 in most states), you raise the very real possibility of a lawsuit – one that could take your house or more. If you don’t have any real assets to take, that may not be a big deal, but if you’ve been struggling to pay your mortgage and keep your home, having it taken from you to pay for a car accident would be tragic.
On the opposite end of the spectrum, you might be carrying comprehensive and collision coverage when you don’t need it. Collision coverage will pay for damage to your car resulting from a driving incident, like backing into a telephone pole, while comprehensive will pay for things like theft or fire. If you lease your car, changes are it will be required in your lease contract.
If you own an expensive car, you’ll want to have comprehensive and collision coverage in order to not have to pay out-of-pocket for any accident damage (which adds up very quickly these days). That said, if you own an older car that isn’t worth much more than the cost of the insurance and deductible, you’re paying for something that you don’t really need – and that’s just silly.
A small increase in coverage will often result in extremely small price increases, but huge benefits in case of an accident. It’s worth a review of your car insurance policy to determine if you have the right coverage for you.