Auto insurance is the law. You must have car insurance if you want to drive, however, there are varying degrees of insurance and it is not necessary to carry the maximum. Each state sets its own minimum, but the minimum may not necessarily be the right choice for you. There are certain factors that mandate your level of insurance and there is room for some personal choice as well. You must arm yourself with knowledge on the subject to help you decide how much insurance you should purchase.
What is Liability Only Insurance?
Liability only auto insurance is a cheap option for some people. If you fit the criteria and are willing to assume the risk, this option has the potential to save you a significant amount of money. On the other hand, it could leave you short. Liability only insurance generally covers just the state minimum required to drive in your state. It usually only covers damage that you cause to someone else’s property or person. Your vehicle is not covered under this type of policy.
Can I Have Liability Only on my Car?
To qualify for liability only insurance, your vehicle must meet a few criteria. Banks have a tendency to want to protect their investments. For this reason, you cannot carry liability only insurance on a vehicle that you have financed and still owe money on. If you do not insure the car, the bank may take out a policy on the car and charge the premiums to you. This is their prerogative because they write it into the contract that you sign when you take out the loan. For similar reasons, you cannot have liability only insurance on a car that you lease.
The Risks
If you own your car and have no liens against it, then it is your choice whether to take the risk or not. Remember, the car will not be covered under a liability only policy. If you wreck the car, it is your responsibility to fix it. The insurance company will not help you.
Full Coverage Insurance
If you still have a lien on your car or it is leased, you are going to need to purchase full coverage insurance. Full coverage insurance protects your car by adding two more types of insurance to the liability insurance. These are comprehensive coverage and collision coverage. Comprehensive coverage covers your car for things like vandalism, theft and fire. It is designed to pay for the things that are not under your control. Collision coverage is designed to cover your car in the event of an accident or collision. Full coverage is mandatory for a car with a lien on it, but it is a good idea for a newer car even if the car is paid off. It is as important for you to protect your investment as it is for the bank to protect theirs.