Cutting insurance coverage is becoming a popular way to save. In this tight economy, people are looking everywhere to save money. This begs the question, “How much insurance do I really need?” This question does not have a simple answer. While there are mandated minimums in many states, scraping coverage down to the bone could leave you exposed to losing a lot of money from an accident. In the end, you may save more money by paying for full coverage.
New Hampshire and Wisconsin are the only states that do not require liability insurance. How much liability coverage you need varies by state. Some states also require you buy coverage for the potential medical expenses of passengers in the form of Personal Injury Protection (PIP) coverage.
Now just because these states do not mandate higher limits, it does not mean you shouldn’t carry them. If you have assets that could be attached in a settlement, you do really need Bodily Injury coverage. Most companies recommend limits of $100,000 per person and $300,000 per accident.
Even if you have no assets, what about your own financial well being? If you were badly injured in an accident with an uninsured or underinsured motorist, can you afford to miss months of work without compensation for your injuries or lost wages? A combination of PIP, Medical Payments and Uninsured/Underinsured motorist coverage will ensure you are not left holding the bag should you be seriously injured.
If you need to cut car insurance expenses, collision and comprehensive are the best targets. Understand that if your car is leased or if you have a loan on the vehicle, you cannot cut either coverage. But if the car is all yours, you can tuck away enough money to cover the total loss value of your car in the bank. You’ll earn interest on the money and have what you need if there is an accident. Whether it will cost more for insurance or a total loss claim will depend on your car.
Look at it this way. A car worth $10,000 that costs $500 to insure for collision and comprehensive is probably worth insuring. This is because it’s hard to set aside $10,000. In addition, you can expect at least one accident in five years. If that accident is a total loss, you would have paid in $2,500 and gotten back the full market value of your car. As the value of your car drops, you should re-evaluate whether you still need collision and comprehensive. If after five years, your car is worth only $5,000, you may then be better off eliminating collision and comprehensive coverage. You can also consider eliminating towing coverage and other extras that may be covered by other types of insurance.
You can enter your zip code in the box at the top of this page to get quotes on dropping collision and comprehensive on your older car. If your car has a high value, it’s worth your time to get a few quotes and see if another insurance company can save you money on your insurance.