car insuranceCar insurance is like life insurance, it’s one of those things that you need but you don’t ever want to use. Because car insurance often acts as an emergency placeholder, a lot of people feel that it’s ok to pay as little as possible for the absolute minimum coverage required by law.

But minimum coverage is just that, the absolute least amount of insurance you can have and still legally drive. If you never have an accident, that might not be a problem. However, if you ever find yourself making a claim, you just might discover that cut-rate insurance isn’t worth the paper it’s printed on.

Before you sign on the dotted line for that cut rate plan, here are some things you should consider:

What Insurance Covers

There are two major types of car insurance in the US: comprehensive coverage and liability only. You can also get something called gap coverage as part of your comprehensive plan.

  • Comprehensive coverage protects your car in the event of an accident. It also protects it from fire, theft, and other non-collision damage, pays out if you are found liable for damage to someone else’s vehicle, and it covers some medical costs if you or someone else is injured in an accident involving  your car.
  • Liability-only protects your car in the event of an accident, pays out if you are found liable for damage to someone else’s car, and covers some medical costs.
  • Gap coverage fills in the gap between the actual value of your car, and the cost of the loan, if your car is totaled.

You can set the amount of coverage you want, for each type of insurance, and generally the more coverage you get the higher the monthly premium. You can buy as much or as little coverage as you want, as long as it meets the minimums for your state.

Why should you avoid the minimum?

The biggest problem with going with the minimum coverage is it could end up costing you a lot of money if you have an accident. For example, let’s say you have liability-only coverage in the minimum for your state, which is:

  • Bodily Injury: $12,500 per person for a max of $25,000 per accident, and;
  • Property Damage: $7,500.

Let’s say that, the majority of the time, you drive with two other people in the car. If you were to get into an accident with another vehicle, and everyone got injured, the number of injured people could exceed your coverage.

The other person’s insurance could cover it, but if you are found liable for the accident, the other insurance might not pay out.

This one of the reasons it’s important to have more than the minimum. You might save a few dollars a month by going with the lowest rate, but you could end up paying thousands more on the back end.

Learning more.

Personal liability and injury is just one of many reasons you want to avoid going the cheap route, whenever possible. For more information on choosing a plan you can learn about car insurance online or in person, from a reliable broker.

As tempting as it may be to save that cash and skip car insurance altogether, don’t do it. Having no insurance is far worse than not having enough. Depending on your state, if you are caught driving without insurance you could end up in jail, or lose your license. Regardless of the type and amount of coverage you choose, or where you get your insurance, you must definitely have some type of coverage.

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About Robert Farrington

Robert Farrington has written 77 articles on this site..

Robert Farrington is the founder and editor of The College Investor, a personal finance site dedicated to young adult and college student finances.

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