In terms of the premiums that you pay for your car insurance, a liability only car insurance policy can save you money. However, it is important to note that if you have an accident, you could end up paying far more than you would if you had maintained a more complex car insurance policy.
You see, liability insurance only covers the cost of the damages to the other vehicle involved in an accident that you cause. This type of policy will also cover medical care for people in your car (excluding yourself) and the driver and passengers of other vehicles involved.
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What you may have noticed here is that you are excluded from any coverage when it comes to a liability only policy. That means if you cause an accident, you will be responsible for the damages to your vehicle all by yourself–the insurance company owes you nothing!
Will my car be repaired if someone else with a liability only policy causes an accident?
Yes! If someone else causes an accident that damages your vehicle or causes you physical harm, their liability policy will cover your damages. If, however, their insurance coverage isn’t enough to cover all of the costs, then you could be in a bind.
You see, in most states you do have the right to sue an individual who causes an accident but doesn’t have adequate insurance to cover those damages.
The problem is that collecting after you have won a case can be a significant issue.
Even if the judge rules in your favor, if the defendant doesn’t have any assets, then you have no way of getting the money. The government does not garnish wages for these types of lawsuits. In fact, it is extremely rare for anyone to have their wages garnished for any situations other than owing the IRS or child support.
If you have liability only insurance, then your insurance will not be of any help to you either. In order to get protection for your car in this type of circumstance, you will need to have uninsured/underinsured coverage in addition to your liability coverage.
What insurance do I need other than liability?
Whether you need additional insurance really depends on the type of car that you have. Comprehensive and collision coverage is recommended for any late model cars. If, however, you drive a beater, these coverage options may not be right for you.
If you are financing your vehicle, then it is almost guaranteed that your lender will require you to purchase both collision and comprehensive coverage to ensure that, if you have an accident, the insurance is in place to repair the vehicle. If you cancel this coverage after you buy the vehicle, the insurance company will inform your lender!
Comprehensive coverage is insurance that provides you with protection in case of car theft; theft of parts of your car, such as tires and rims; and repairs if your car is damaged by fire, hail, wind, etc. Essentially, this covers everything but theft of personal possessions in your vehicle and a collision.
Collision coverage comes into force if you have an accident. This doesn’t necessarily mean that another car has to be involved. If you strike a tree, sign, pedestrian, etc., that is when collision coverage pays up.
How much more can I expect to pay for car insurance if I add comprehensive and collision coverage?
The truth is that how much you pay depends on a number of factors. These include:
- The value of your car
- The type of driver you are
- What safety features you have on the car
- Where you live
- How large of a deductible you choose
- The insurance carrier
- Your credit score
- Your age
- Who else is driving your vehicle
- Your driving record
The fact is that comprehensive and collision insurance is going to cost quite a bit more than liability insurance alone.
The Insurance Information Institute, does warn against buying your car insurance based on price alone.
It recommends that you use rating companies such as J.D. Power & Associates to check out any potential companies for other concerns, such as customer service, increasing rates, and financial stability.
Should I buy comprehensive and/or collision insurance?
According to the NAIC, with some exceptions, the answer is “yes.” Their primary reason for saying yes is that this is the best way to protect your assets, which in this case is your car.
If you are driving a car with no cash value that would cost more to fix than it would to put in a junkyard after an accident, then there is no benefit to maintaining more insurance. You should simply ensure you have enough liability to cover a serious accident.
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