What are the pros and cons of basic car insurance?

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Joel Ohman
Founder, CFP®https://res.cloudinary.com/quotellc/image/upload/insurance-site-images/ciccom-live/41b5e36b-joel-ohman.jpg

UPDATED: Mar 2, 2020

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Here's what you need to know...
  • Basic car insurance is the minimum amount of insurance to legally register and operate a vehicle in the United States
  • The minimum amount of insurance required will vary according to the state that you live in
  • Some amount of liability insurance to is always necessary to protect drivers from lawsuits should they cause damage in an accident

Purchasing only basic car insurance will help you to meet your legal obligations and is less expensive than other policy options, but you may find that it does not adequately protect your assets.

Taking your chances and driving without insurance could not only cause you trouble with the law but could lead to serious financial trouble should you cause an accident.

Purchasing basic car insurance is better than taking your chances and driving an uninsured vehicle. Still, if you can afford to do so, you may want to consider an insurance policy with additional coverage.

Compare rates for basic car insurance now by simply entering your ZIP code into our FREE car insurance quote tool on this page!

Types of Car Insurance

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There are several common types of car insurance you can opt to include in your policy. The Insurance Information Institute describes

The Insurance Information Institute describes the standard types of insurance and extras you can choose to purchase.

These types include:

  • Property Damage Liability – Covers damage to other vehicles should you cause an accident
  • Bodily Injury Liability – Covers injuries sustained by individuals involved in an accident for which you were at fault
  • Personal Injury Protection (PIP) – Covers any injuries you and your passengers sustain due to an accident
  • Collision Coverage – Covers damages to your vehicle
  • Comprehensive Coverage – Protects your vehicle from damages or loss due to events other than an accident such as theft or storms
  • Uninsured Motorist Protection – Protects you in the event you are involved in an accident caused by a driver without proper insurance

State Insurance Requirements

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All states require some level of Bodily Injury Liability and Property Damage Liability. Some states also require Personal Injury Protection.

State requirements for auto insurance are listed as 10/30/10:

  • $10,000 bodily injury protection for each person injured
  • $30,000 bodily injury protection for each accident
  • $10,000 towards property damage

To find out the requirements for basic car insurance in your state, contact your state department of insurance.

The National Association of Insurance Commissioners (NAIC) lists all insurance departments by state.

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Pros of Basic Car Insurance

For those struggling financially just to meet the state legal requirements for car insurance, there are some pros to purchasing simply basic car insurance that meets state regulations.

  • The more coverage and types of insurance you add to your policy, the more you will pay in terms of your annual premium
  • You could protect yourself from a costly lawsuit in the event you cause an accident by carrying basic car insurance
  • If your car is worth very little, purchasing only basic car insurance may be the most financially smart decision for you

Cons of Basic Car Insurance

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Despite its meeting the state minimum legal requirements, there are several reasons why you should purchase more than the basic car insurance if you are financially able to do so.

  • Basic car insurance will not cover damages to your car or the replacement cost if your car is totaled. This could add up to a lot of money out-of-pocket for you, especially if your car is worth a lot of money
  • Even if you do not cause the accident you will not be protected if you are hit by an uninsured motorist.  You may have to pay for your own repairs or a new vehicle despite the fact you were not at fault
  • You will not be covered with basic car insurance in the event of a loss by means other than an accident, including theft, damage due to a falling tree, fire damage, or flood damage
  • If you do not own your car yet and continue to make payments to a bank for a car loan, you most likely will be required to carry collision coverage above the basic coverage

Many states’ minimum requirements are very low and would only cover costs in a minor accident.

The Insurance Information Institute gives specific information as to the recommended amount of liability insurance.

The Best Option for You

Prior to purchasing car insurance, you need to do your research and determine the best option for you.

If finances are very tight and you drive an older vehicle with a low replacement value, then basic car insurance may be an option for you.

You may want to consider a higher liability amount than your state’s minimum or you could face extra expenses if you are involved in an accident.

In most cases, the best option is to purchase a more comprehensive policy that will cover you, your passengers, your vehicle, and protect your assets if you cause an auto accident with other drivers involved.

Carrying the proper amount of insurance while taking advantage of available discounts could save you a lot of money in the long run.

Begin your search for car insurance entering your ZIP code into our quote tool!

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