Everyone wants to save money on car insurance, but cutting your coverage below what you need will not actually save you money. Your next premium might be cheaper, but the cost of not having insurance when you need it is much higher. Here is what could happen if you do not have enough insurance.
No Collision or Comprehensive Coverage
Collision and comprehensive coverage are all or nothing. You can select one or both coverages, but there are no limits to pick. Instead, the pricing is based on what kind of vehicle you have, so you are always covered for the value of your car.
Some people consider skipping these coverages since they are not required by law. However, say you have a $20,000 car and it is totaled in an accident. Can you afford to spend another $20,000 to replace it? If you still have a car loan, you will also have to immediately repay the loan because you still owe the money but no longer have your car as collateral.
Of course, some people with older cars do find that it makes sense to drop collision and comprehensive coverage. You just may not want to do so unless you can really afford to write off that amount of money and go out and replace your car.
Too High Deductibles
Raising your deductible is also an option to save money, but it comes with the risk of having to pay the deductible. That risk is not just being in debt for the deductible amount. If you bring your car in for repairs, the mechanic can keep it under a mechanic's lien until you pay your deductible. If you take too long, they can also sell your car to cover their bill.
Not Enough Liability Coverage
Liability coverage is one of the harder decisions since you never know how high the property damage and medical bills from an accident will be. You could hit an expensive sports car, but even not too serious injuries can result in tens of thousands of dollars in hospital bills. The important thing to understand is your liability is not limited by your insurance limits.
If you cause someone a financial loss above what your insurance pays, they can sue you for the difference. That could mean giving up your savings or having your future wages garnished.
To make sure you have the right auto insurance coverage, contact an auto insurance provider for more information.