Choosing the car insurance that is best for you means considering how much it will cost you to maintain your policy. Often, you might feel tempted to choose the cheapest policy available to you, but is this really the right choice in the end?
The auto insurance policies with the lowest costs are often those that only offer minimum amounts of coverage. While they might cost you less in the short term, you might find that you will be without critical benefits when you need to file a claim.
Why You Need Expanded Benefits
Car insurance premiums vary widely from driver to driver. However, on average, a full-coverage auto policy costs about $1,674 per year, based on the nationwide average. A minimum coverage policy, on the other hand, only costs about $565 per year. However, by buying only a minimum policy, you will only be getting a minimum amount of coverage.
A minimum-coverage auto policy is defined only as the coverage that is required of you by your state of residence. Though mandatory auto insurance laws vary by state, most require registered drivers to carry liability insurance. It is this coverage that will pay for third-party bodily injuries or property damage when the insured driver is at fault for an accident.
While the minimum liability insurance required of you is enough to let you drive legally, it often leaves a lot to be desired in terms of coverage itself. With a liability-only policy:
- There is no coverage for damage to your vehicle. If you cause an accident, you could suffer significant loss to your car. You would have to pay for repairs on your own.
- If someone steals your car, you have no financial support available to replace it. Keep in mind that the most stolen vehicles are everyday cars.
- You have no help if lightning strikes your car and causes a significant fire. In this case, you may have no way to pay for the damage.
- You have no protection against uninsured drivers. Perhaps someone strikes your car with their vehicle, but they do not have insurance. You may be able to pay to sue them, but it will take a long time to recoup a damage settlement through this process.
Additionally, with only the minimum liability coverage, you have limited coverage for injuries or property damage to others. There is no guarantee that the coverage limits within your policy will pay for 100% of the costs of a third party’s losses. Therefore, even by having coverage, you could still be on the line to pay for someone else’s costs.
As a result, it’s more responsible of you to pay for higher levels of auto insurance, rather than to face damage costs for which you don’t have coverage. On one hand, yes, you will pay more. On the other hand, however, you will pay a lot less for coverage than you would pay for an underinsured claim. Therefore, it’s much more budget-friendly to invest in balanced coverage overall.