Nobody wants to spend money on auto insurance that they don’t need. However, if you are not adequately insured, it can lead to devastating financial losses in the event of an accident.
Before deciding which auto insurance to avoid, you need to determine which ones you are legally required to comply with and which ones will adequately protect you and your family.
Is it legal to drive without car insurance?
Almost every state in the country requires drivers to maintain liability insurance – it’s the law. Some states also require it for Medical Payments or Personal Protection (PIP) and uninsured / underinsured motorists.
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For the most up-to-date information on where you live, please contact your state’s insurance department.
What are mandatory minimum insurance requirements?
In addition to mandates that dictate the type of coverage you must have, states also have laws that regulate the amount of coverage you need. Minimum compulsory insurance is the lowest insurance limit that you can legally drive in your state.
If you adhere to your state’s minimum insurance requirements, you can save money when you take out insurance. However, in many states, the minimum required levels are low. If you only carry the minimum with you, you may not have adequate insurance cover in the event of a serious accident. And you may need to tap into your savings or other investments to cover accident-related bills.
The U.S. Department of Transportation’s National Highway Traffic Safety Administration released data showing that an estimated 38,680 people were killed in car accidents in 2020. Despite the pandemic, that represents an estimated increase of around 7% from 36,096 deaths in 2019.
According to the NHTSA analysis, the main causes of the increase are driving disruptions, exceeding speed limits and not wearing seat belts.
You cannot control what others are doing on the streets. But you can control your driving behavior and the type of coverage you buy to prepare for the unexpected.
What if i drive without car insurance?
Penalties for driving a car without proper insurance vary depending on the state you live in and can include:
- Confiscation of your license plates
- Time in jail
- Locked license and registration
- Vehicle seizure
- You will need an SR-22 form as proof of insurance to continue driving
This is how you decide which auto insurance coverage to avoid
Before deciding which auto insurance policies to avoid, you need to know what types are legal to drive in your state. And you need to understand how any available coverage will protect you. Remember, just because a cover is optional doesn’t mean it isn’t a good idea not to have it.
Let’s look at the main types of coverage of standard auto insurance so you can decide which ones you need and which ones to skip.
Main types of motor insurance coverage
Since almost every state requires liability, it is unlikely that you will decide whether or not to wear it. Instead, you need to determine what policy limits are appropriate. It is important to choose an amount high enough to protect your assets if you are responsible for an accident.
If you have liability insurance, you have three separate limits, which are listed in your policy as follows: 15.15.10.
The first number stands for the personal liability limit per person. The second corresponds to the personal liability limit per accident. And the third represents the liability limit for property damage per accident.
Let’s say you have your state’s minimum liability limits of 15/30/10. Your insurer pays up to $ 15,000 in medical bills per person. The company will pay a maximum of $ 30,000 in medical bills for the entire accident, regardless of how many people were injured. And they pay up to $ 10,000 in property damage from the accident.
Remember that the purpose of liability insurance is to protect people you have injured in an accident. It does not cover your medical bills or damage to your vehicle.
Medical payments and personal injury protection
Some states require medical payments or personal injury protection. In others it is optional. However, it is risky to skip it if you live in a state that does not require it. This type of coverage will help cover any injuries you or your passengers may suffer in an accident. Loss of wages and funeral expenses can also be covered.
When deciding whether to buy it and what your coverage should be, consider whether you can afford hospitalization, physical therapy, surgery, and any other medical treatment you might need after an accident.
Uninsured and uninsured motorist protection
If you live in a state that requires drivers to maintain this type of coverage, you must buy 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 driver’s liability insurance should cover personal injury and property damage in the event of an accident. However, if the culpable driver is uninsured or underinsured, you could be liable for costs related to the accident. Uninsured / underinsured motorist insurance will protect you if you are hit by a driver who is not insured or has insufficient coverage to pay for your expenses.
Collision and comprehensive
No state currently requires drivers to maintain collisions or full coverage. However, when you take out a car loan or lease on a new or used car, collisions and fully comprehensive insurance may be required.
Collision helps pay for vehicle repairs if you get into an accident. And comprehensive covers damage caused by non-accident incidents such as storms, vandalism, theft, animals and more.
To decide whether maintaining full coverage or collision coverage is in your best interests, you need to do some math. If you don’t know the current market value of your vehicle, you need to find out. The Kelley Blue Book Auto Value Tool can help with that. It shows the current market value of your own vehicle (additional bonus: when buying a car, you can check every new or used car value if necessary).
Knowing the value of your car is important as this is the maximum amount that insurance will reimburse you if an insured event damages your vehicle. For example, if your car is worth $ 2,500 but has damage worth $ 5,000, the insurance company will write you a check for $ 2,500 minus your excess.
Compare the amount that the insurance company may reimburse you for your vehicle with your fully comprehensive and collision premiums to decide whether it is worth paying for the insurance cover.
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In addition to the five main types of coverage available in a standard auto insurance policy, there are many add-ons such as: Add-ons are optional, but can provide security.
Choosing the right coverage and policy restrictions
There’s no doubt that insurance costs can add up quickly. But don’t be too quick to skip a particular coverage just because it’s optional. While it could save you a few dollars today, it could cost you in the end.
When choosing coverage and policy limits, you need to weigh the cost of paying for your policy against the benefit of having adequate coverage if necessary.