What Auto Insurance Coverages Can I Avoid?
No one wants to spend money on auto insurance they don’t need. But not having sufficient coverage can lead to devastating financial losses if you are involved in an accident.
Before deciding which auto insurance coverage to avoid, you need to determine which ones you must comply with under the law and which ones will adequately protect you and your family.
Is It Legal To Drive Without Auto Insurance?
Almost every state in the country requires drivers to maintain liability coverage – it’s the law. Some states also require it for medical payments or injury protection (PIP) and coverage for uninsured / underinsured motorists.
RELATED STORIES: Penalties for Driving Without Auto Insurance by State
For the most recent information on the requirements for your place of residence, check with your state’s insurance department.
What are the minimum mandatory insurance requirements?
In addition to the mandates that dictate the types of coverage you need to purchase, states also make laws governing the amount of coverage you need. The minimum mandatory insurance requirement is the lowest policy limit you can have to legally drive in your state.
Sticking to your state’s minimum insurance requirements will help save you money when purchasing insurance. But the mandatory minimums in many states are low. If you carry only the minimum, you may end up without sufficient coverage in the event of a serious accident. And you may need to dip into your savings or other investments to cover accident-related bills.
The National Highway Traffic Safety Administration of the United States Department of Transportation has released data showing that approximately 38,680 people died in car crashes in 2020. Despite the pandemic, this represents an estimated increase of about 7% by compared to 36,096 deaths in 2019.
According to the NHTSA analysis, the main causes of this increase are impaired driving, speeding and not wearing a seat belt.
You cannot control what others are doing on the roads. But you can control your driving behaviors and the types of insurance coverage you buy to prepare for the unexpected.
What if I drive without auto insurance?
The penalties for driving a car without the proper insurance coverages vary depending on the state you live in and can include:
- Confiscation of your license plates
- Prison time
- License and registration suspended
- Impoundment of vehicles
- Need a SR-22 form as proof of insurance to continue driving
How to decide which auto insurance coverage to avoid
Before deciding which auto insurance coverages you can avoid, you should know what types are required to legally drive in your state. And you need to understand how each available coverage protects you. Remember, just because coverage is optional doesn’t mean not having it is a good idea.
Let’s take a look at the main types of coverage available on a standard auto insurance policy to help you decide which ones you need and which ones you cannot ignore.
Main Types of Auto Insurance Coverage
Because responsibility is required in almost all states, you are unlikely to decide whether or not to carry it. Instead, you will need to determine which policy limits are adequate. It is important to choose an amount high enough to protect your assets if you are at fault for an accident.
If you have liability coverage, you will have three separate limits, which you will see written like this in your policy: 15/30/10.
The first number represents the limit of liability for bodily injury per person. The second represents the limit of liability for bodily injury by accident. And the third is the limit of liability for accidental property damage.
Let’s say you carry your state’s minimum liability limits of 15/30/10. Your insurer will pay up to $ 15,000 in medical expenses per person. The company will pay a maximum of $ 30,000 in medical expenses for the entire accident, regardless of the number of people injured. And they will pay up to $ 10,000 in property damage from the accident.
Remember that the purpose of liability coverage is to protect the people you injure in an accident. It does not cover any of your medical bills or damage to your vehicle.
Medical payments and personal injury protection
Some states require medical payments or protection against injuries. In others, it is optional. But skipping it is risky if you live in a condition that doesn’t require it. This type of coverage helps cover injuries sustained by you or your passengers in an accident. It can also cover lost wages and funeral costs.
When deciding to buy it and what your coverage limit should be, consider whether you could afford to pay for a hospital stay, physical therapy, surgery, and any other medical treatment you might need. after an accident.
Coverage for uninsured and underinsured motorists
If you live in a state that requires drivers to maintain this type of coverage, you will need to purchase it to drive legally. If you live in a state where it’s optional, you’ll need to decide if it’s worth it.
The responsible driver’s insurance company should pay for injuries and property damage when you are involved in an accident. But if the responsible driver is uninsured or underinsured, you could have to pay costs related to an accident. Uninsured / Underinsured Motorist Coverage protects you if you are struck by a driver who does not have insurance or sufficient coverage to pay your expenses.
Collision and Complete
No state currently requires drivers to maintain collision or comprehensive coverage. But a collision and a complete could be necessary if you take out a loan or car rental for a new or used car.
Collision helps pay for vehicle repairs if you are involved in an accident. And comprehensive coverage for damage caused by non-accident incidents such as inclement weather, vandalism, theft, animals, etc.
To decide whether maintaining full or collision coverage is in your best interest, you will need to do some math. If you don’t already know the current market value of your vehicle, you need to find out. Kelley Blue Book’s Car Value Tool can help. It shows the current market value of your own vehicle (added bonus: you can check the value of any new or used car if necessary if you are buying a car).
Knowing the value of your car is important because it is the maximum amount that the insurance company will reimburse you if a covered event damages your vehicle. For example, if your car is worth $ 2,500 but suffered damage of $ 5,000, the insurance company will issue you a check for $ 2,500 less your deductible.
Comparing the amount the insurance company could reimburse you for your vehicle with your all perils and collision premiums can help you decide whether paying for coverage is worth it.
RELATED STORIES: Do I Need Collision Insurance If My Car Is Covered?
In addition to the five main types of coverage available on a standard auto insurance policy, there are many add-ons, such as Gap Coverage, Rental Car Reimbursement, and Custom Equipment Coverage, which you can provide. can include to protect a specific need. Add-ons are optional but can provide peace of mind.
Choosing the right coverage and policy limits
There is no doubt that the cost of insurance can add up quickly. But don’t skip specific coverage too quickly just because it’s optional. While it might save you a few dollars today, it could end up costing you dearly.
When selecting coverage and policy limits, you will need to balance the cost you have to pay for your policy with the benefit of having adequate coverage when you need it.