State Minimum vs. Full Coverage Car Insurance

August 19, 2015

Full coverage auto insurance: It sounds good, but it also sounds expensive. Do you really need full coverage, or can you get away with the state minimum? Let’s find out which choice is best for you.

The Pros and Cons of Full Coverage Car Insurance

State Minimum Car InsuranceFirst, a quick explainer: “full coverage auto insurance” isn’t technically a type of insurance. Generally, it means car insurance that offers enough coverage to protect you and your vehicle in almost every scenario, whether a fender-bender or a major wreck.

Full coverage car insurance includes not only liability coverage — which covers property damage and bodily injury to others in accidents you cause — but also collision and comprehensive. It may also include coverage for medical payments, personal injury protection, uninsured or underinsured motorists and other things, like rental car reimbursement or roadside assistance. Having this full coverage provides peace of mind and financial protection. However, all these premiums do add up, and you may end up paying hundreds for coverage you never use.

The Pros and Cons of State Minimum Car Insurance

State minimum car insurance means a policy that meets the state coverage requirements for you to drive legally. It typically includes liability and property damage coverage, and may also include personal injury protection or uninsured motorist coverage. The most obvious benefit of going for the minimum insurance required by your state? It’s the cheapest option. Some insurers, such as SafeAuto, even specialize in offering state minimum insurance for drivers on a tight budget.

Buying the state minimum insurance is also a lot better than the alternative: driving uninsured. Every state except for New Hampshire requires drivers to carry liability insurance, and there are stiff penalties if you’re caught driving without it. You don’t have to be pulled over to have your insurance status checked. Several states use electronic insurance verification, in which insurance records are checked against motor vehicle registrations.

However, insurance experts warn that having the state minimum car insurance won’t protect you sufficiently in case of an accident. In 2012, the average insurance claim amounts were:

  • $3,073 for property damage
  • $2,950 for collision
  • $1,585 for comprehensive
  • $14,653 for bodily injury

 

Keep in mind that these numbers each represent the amount filed for a single claim. In one accident, multiple claims may be filed for damage to the vehicles and injuries to each passenger. If you cause a serious — or even a minor — accident, you may find yourself responsible for paying several thousands of dollars for the other driver’s vehicle damage and injuries. Don’t think you can simply turn out your pockets and say, “I can’t pay.” The other party can sue you for damages and force you to sell your assets to pay the debt.

Also, state minimum car insurance does not include collision coverage, which pays for damage to your car in an accident, or comprehensive coverage, which protects your car from theft, flooding and other damage not caused by an accident. Without these coverages, you’ll have to pay to fix or replace your car yourself.

Should You Buy Minimum or Full Coverage Car Insurance?

You want to make sure you’re protected, but you don’t have money to waste on extra insurance. How do you know if the state minimum coverage will be enough?

First, check your state’s minimum liability requirements. These vary quite a lot between states and also may change over time. The requirements appear in a format like this: 25/50/25, which means bodily injury coverage up to $25,000 per person in an accident and $50,000 for all people injured, plus $25,000 for property damage.

As of 2015, Florida has the lowest standard insurance requirements: 10/20/10. Low-income drivers in a special California plan can have a 10/20/3 policy. New Jersey’s basic plan for young or low-asset drivers goes even lower: 10/10/5.  That’s not going to go very far if you get into an accident.

Alaska and Maine have the highest minimum insurance requirements: 50/100/25. Maine also requires you to carry at least $2,000 in medical payment coverage. For many drivers in these states, this level of insurance might be enough.

Once you’ve checked your state insurance requirements, figure out how much you’re worth. Add up the value of your home (if you own it), your bank accounts and any other assets. If you don’t own much besides your car and your futon, the state minimum insurance may be enough for you, because you don’t have significant assets to protect.

In the end, the best way to decide is to do a car insurance comparison. Compare lets you get free quotes from multiple insurers for different coverage levels, so you can see how much more you’ll pay for full coverage car insurance.

You might be surprised to find that you can increase your coverage without paying much more. For instance, the Virginia state minimum requirements are 25/50/25. For a single driver with a 10-year-old car and a good driving record, one insurance quote bumped that coverage up to 100/300/100 for just $60 more per year.

Keep in mind that you can raise your coverage limits and then alter other aspects of your insurance policy to save money. If you drive a beater car that would only cost a few grand to replace, you may be able to safely drop collision coverage. Or consider increasing your deductible from $500 to $1,000.

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