When Is Liability Insurance Enough?
For many people, just meeting monthly expenses can be challenging. After you pay the mortgage, utilities, and grocery bills, paying for full coverage car insurance can seem like too much. However, reducing your coverage can be risky. When is carrying only liability insurance enough?
All except one state requires that its drivers carry some sort of liability insurance. A liability policy protects you by paying for the other driver's property damage and medical expenses when you are at fault in a collision. Different states have different requirements concerning how much coverage you must carry. You will face serious penalties if you choose not to carry the required coverage. In some instances, you can lose your driver's license. Your car and medical bills are not covered. As a result, the price of liability insurance is much less than full coverage, although the price you pay will depend on several factors, including your driving record and credit history.
Unfortunately, liability coverage may not adequately cover your financial responsibilities. In some states, the minimum amount of coverage you are required to carry may not actually cover the amount of damage you cause to the other driver and/or their vehicle, meaning you could be on the hook for some serious out-of-pocket costs.
Dropping Full Coverage
If you have a new or late model car, you probably need to keep your full coverage. Some experts say you can drop the full coverage once you have paid off your car and the annual cost of your insurance is 10% of the amount your insurance company will pay to replace your vehicle. If your car insurance costs $400 a year and you will receive $3000 to replace your car, you can consider dropping full coverage and replacing it with liability only. However, you should have cash reserves ready to replace your car if the worst happens to it. You'll need at least a down payment in order to get another vehicle if you get rid of your full coverage policy.
You should check your state's insurance requirements and consult with your insurance agent before you make any decisions regarding your policy. Saving money on your insurance coverage each month is attractive, but going with liability only can be a risky choice. State minimums may be outdated and not enough to protect you if you are responsible for an auto accident. On the other hand, if your car is old and has little value, full coverage may simply not be worth the money.
For more details, visit a website like http://www.dki-ins.com.