Even the best of us often blanch in the face of shopping for car insurance. With different levels of coverage based on where and how often we drive, the age and model of our car, and even our jobs, finding the best policy at an affordable rate can be challenging. Those people with leased or financed cars have it easy in this regard: as long as there’s a lender involved full coverage (that means liability, personal injury protection, uninsured motorist coverage, comprehensive coverage and collision coverage) is required. Nothing else will do.
For people with older cars (and by “older” we really mean “the loan has been paid off”), however, many of the options a lender considers necessary are actually optional. Every insurance expert will tell you, for example, that you can reduce your auto insurance expenses by skipping the comprehensive and collision coverage on cars with a lot of mileage or low Blue Book value. Other money-saving options include an array of discounts given for everything from completion of a defensive driving course to racking up fewer than 10,000 (or, in some places 14,000) miles in a calendar year.
But, what do you do if you’ve already scaled back? If you have every discount you could possibly qualify for? If you’ve already done the research and chosen the company with the lowest premiums for covering the car you have, with you as the driver?
This is when it’s time to visit the website for your state’s government, specifically to check out either the Department of Motor Vehicles or the Department of Insurance, and find out exactly what the minimum requirements for coverage are. In most states, this will be a combination of liability coverage with breakdowns for injury to a single individual, injuries to a group of people, and damage to property, should you be at-fault in an accident. In some states, the mandatory liability coverage is augmented with PIP, or personal injury protection, insurance, and/or un(der)-insured motorist coverage. In all cases, however, sticking with these minimum coverage amounts is likely to be the most basic option, at the lowest price available.
What Is Liability Insurance?
On its own, liability insurance is the most basic auto insurance around. This is the coverage that pays for injuries to other people and damage to their cars, when an accident is your fault. In every state except New Hampshire, some amount of liability insurance is required by law. If you’ve ever seen those ads talking about how you have to have “proof of financial responsibility” in order to register your car or renew your driver’s license, this is the coverage they mean.
You should be aware however, that those mandatory minimum coverage amounts may not be enough to protect your financial assets. If you’re at-fault in an accident, and the damages exceed your liability coverage, the injured party may sue for more. It is for this reason that most insurance agents recommend increasing your coverage if you own a home or have a business.
The bottom line? It’s fine to cut the comprehensive and collision coverage on an older car, but even when you want to keep your auto insurance coverage as basic as possible, consider buying a bit more than the mandatory minimum amount of liability protection required by your state, and even then, spend some time comparison shopping before you commit to any policy.