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Purchasing minimum state auto insurance coverage can save drivers a load of monthly premiums. Based on publicly available quote data obtained directly from insurance providers and insurance pricing data from Quadrant Information Services, the average cost of minimum coverage is only $ 764 per year. That’s almost $ 1,900 less than the national average auto insurance premium. But despite these impressive savings, sticking to the minimum coverage is usually not a good idea. In fact, it could cost drivers tens or even hundreds of thousands of dollars in some situations.
Auto Insurance Premium Costs Versus Accident Costs
Buying higher insurance coverage limits will cost more per month, but it could actually save policyholders a ton of money in the event of an accident.
Suppose a driver chose minimum coverage for $ 764 per year instead of more comprehensive coverage, including coverage for their own vehicle, for $ 2,646 per year. In this case, they would save around $ 18,820 in monthly premiums over 10 years. This is the best option for their wallet as long as they don’t need to file an auto insurance claim. But there is no guarantee.
According to the Insurance Information Institute, the average personal injury insurance claim cost $ 18,417 in 2019 – most recent year data was available. This number is likely to be slightly higher now due to inflation. The average property damage liability claim for the same year was $ 4,525.
If a driver causes a car accident that injures someone else and damages their vehicle, they could easily end up with a claim worth $ 23,000 or more. This could be covered by the minimum coverage of some states.
On the hook for costly damage
But there is always the possibility of above average spending. If a driver causes multiple cars to pile up, for example, or kills or disables another motorist, he could easily find himself facing hundreds of thousands of dollars in damages. Their insurance company will pay up to their policy limit, but they’ll likely end up in court and be sued for the rest if they can’t do it on their own.
And we haven’t even talked about what happens to the insured’s own car yet. No state requires its drivers to have collision and comprehensive coverage, which protects an insured’s vehicle against damage. If a driver purchases minimum state coverage and then falls into a wreck, they will have to pay to repair their vehicle.
Even if the policyholder does not cause the accident, he could still be faced with a bill if he is struck by an uninsured or underinsured motorist. It is possible to buy other car insurance coverage that comes into effect after the at-fault driver’s coverage ends, but if a driver does not have it, they must pay the supplement themselves.
In the end, it only takes one serious accident to wipe out a decade of premium savings. Drivers could even find themselves in debt or face legal action. This is why it is a good idea for most people to pay a little more for car insurance up front.
Better Ways to Save on Auto Insurance
Drivers looking to score cheap car insurance better try some of these tips.
Compare the prices
Compare the rates of several companies before purchasing a policy. Each insurer weighs the elements of a driver’s claim a little differently. Some penalize drivers for accidents more than others, and some charge more for certain vehicles or postal codes. The only way to know who will offer the best rate is to compare multiple quotes side by side.
Take advantage of all available discounts
Insurers will automatically apply most of the discounts policies for eligible drivers, but there are some that motorists may need to adhere to. Companies that offer driver monitoring programs, for example, typically require the driver to agree to participate. Those who do usually get a discount.
Increase the deductible
A deductible is the cost paid by an insured in the event of a loss. Most insurers let drivers choose from a variety of deductible options, and a higher deductible generally lowers premiums. This should not affect the driver’s financial security as long as they have emergency savings to cover their deductible.
Once a motorist finds a policy they like, they need to purchase adequate coverage. This means thinking about protections for their vehicle as well as minimum state coverage. They should also choose police limits above the state minimum when they can afford it. And it’s a good idea to shop around every insurance period or two to see if they can find a better deal elsewhere. This is especially true for drivers who have a history of accidents. Over time, their rates should go down as long as they don’t file any more claims.
It’s not always easy to know what the right balance is between coverage and cost. But it’s always best to err on the side of caution. This way, if an accident occurs, the policyholder does not have to worry about how he is going to pay it.
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