Car insurance can be an annoying monthly expense. It's price is adjustable though. Each state has a minimum required amount of car insurance which is far cheaper than opting for "full coverage" car insurance. If you have ever felt pressed by your monthly car insurance bills, then you have perhaps considered getting cheaper, basic coverage. There's also the opposite situation where you may have always opted for minimum insurance, but don't feel adequately covered. In this article we'll discuss the benefits and detriments of opting for the minimum.
The Pros of Going with Minimum Car Insurance
The biggest upside to going with the minimum is that it is far cheaper than any other coverage. For a clean driver, it is usually at least twice as cheap as "full coverage", and can be closer to three times in certain states. Considering the average cost of car insurance for a 30 year old male driver is $1,521, you could be potentially saving over $700 a year by going with the minimum.
The Cons of Going with Minimum Car Insurance
The downside is obviously not being adequately insured. For people unfamiliar to insurance, that may be harder to gauge than just price. What does it mean to be adequately covered? In some states, you are only required to carry enough insurance to help pay for another driver's injuries and property damage. In other states, you will be required to carry that, as well as insurance to use in the event of crashing into an uninsured driver. Lastly, there's a handful of states that also require you to carry around insurance to cover your own injuries. The first two groups will not pay for any injuries you sustain during a car accident, while all three groups will not cover damages to your vehicle. This may not necessarily be a bad thing though.
When You Can Opt for the Minimum
There are groups of people who can get away with driving with the minimum. The first are those who cannot afford more coverage. Full coverage is very expensive, and its mandatory nature should make it one of the first expenses to be cut in order to help pay for mandatory expenses. You should never drive uninsured though, as the penalties from doing so can result in a far worse outcome than having to pay every month. The next group of people who can get away with having the minimum are people with good health insurance. In the event you are injured in an accident, and do not have personal injury protection insurance, you may use your health insurance to cover your medical bills. There are parts of PIP coverage however that you will not get with just a health insurance plan. Finally, you can opt for the minimum if you have a car of low value. When you opt for the minimum, you are forgoing collision and comprehensive coverage, which are meant to cover vehicle damage. If your car is worth less than a couple thousand dollars, the insurance won't be worth it.
If you are a part of groups 2 and 3, and come from a state with mandated PIP like Massachusetts, then you may be adequately covered by going with the minimum. You just need to make sure that together, your PIP and health insurance, will be able to cover the medical costs of a car accident, which can tip over $60,000.
When You Should Not Opt for the Minimum
People who drive others, have a valuable car or have a high net worth should all opt for higher limits and/or full coverage. If you drive other passengers frequently, such as in a car pool you may want to consider higher limits, as well as PIP if you are not in a mandated state. The more people in an accident, the higher medical cost it will be. If your limits are low, there may not be enough coverage to compensate everyone injured in the accident. That brings us to the next group of people, high net worth individuals. If your limits are low, and people are seeking a higher amount for compensation, they can sue against your assets to get that money. If you have money stored in a bank account, 401k, savings account, or even your future earnings, a plaintiff can sue against those assets to pay for the injuries sustained in an accident you caused. There is a steadfast rule in insurance; have enough to cover your net worth. If after debts that number is $50,000, then you need $50,000 worth of protection, if that number is $300,000 then you need $300,000 worth of protection.
Finally, if you have a valuable car, you should get collision and comprehensive coverage. Valuable cars will cost a lot to repair, and will cost even more to replace if they are totalled or stolen. Without those two coverages, you will have to foot that bill out of pocket. Collision and comprehensive together usually double your monthly bill, but may be well worth it if you have a valuable car.