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To switch to liability only car insurance, you must have a vehicle that is completely paid off and, ideally, has a low Kelly Blue Book value.
You should also only opt for liability only coverage as a last resort because you simply cannot afford other coverage.
Knowing when you should switch to liability only policy may seem rather complicated. You need to be well aware of the risks you are taking by only carrying liability insurance coverage.
You need to have investigated other options to help you save money. In addition, your car must be paid for because lien holders will not let you drop full coverage.
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What are the different parts of an insurance policy?
There are two primary parts of an auto insurance policy and several secondary, and usually optional, coverages available.
Liability pays for the repair or replacement of the other driver’s car if you cause an automobile accident.
This portion also pays the medical bills and lost wages for all the occupants of the other car.
Comprehensive and collision are actually two separate entities but are usually sold together. Collision covers the costs to repair or replace your car if you cause an accident.
If the other driver is at fault, his liability would cover the damage. Comprehensive covers damage caused by events other than a traffic accident, like fire, flood, hail, etc. These carry a deductible.
The secondary coverages are things like uninsured motorist and medical payments.
Uninsured motorist insurance pays for your damages if an uninsured motorist causes an accident with your car. Since he doesn’t have insurance, the likelihood of getting money from him is slim. Secondary coverage covers this circumstance.
Medical payments and PIP, or personal injury protection, both cover the medical expenses for everyone in your car if you cause an accident. PIP covers a bit more, like lost wages and funeral expenses. Usually, you cannot have both on a policy; it’s an either/or choice.
You can also choose extras for your policy like towing and rental car reimbursement. These optional riders usually tack on only a few extra dollars a year.
Risks of Switching To Liability Only Policy
Switching to liability only car insurance is a big decision. It means that you will be taking on more of the financial risk associated with accidents.
If you were to have an at-fault accident you would have to pay for repairs or replacement of your car out of pocket.
Even worse, if you have an accident where you are not at fault but it is a hit and run or the driver has no insurance, you would still be stuck taking care of the damages yourself.
In addition, with liability coverage only, any medical problems relating to a car accident are yours to take care of. If you are struggling to afford car insurance rates then you may find that the cost of dealing with an accident is out of your budget too.
Things to Do Before Switching
Before switching to liability only car insurance, take the time to check out all the options for lowering the cost of your annual premiums. Car insurance companies take a variety of factors into consideration when setting rates.
Rates can be further reduced with certain discounts that you may be eligible for depending on the insurance company you check with.
You will be eligible for lower insurance premiums if:
- You have a good driving record
- You have taken driver training courses
- You have home and car insurance with the same company
- You drive your car a limited number of miles annually
- You have factory installed anti-theft and safety devices on your car
- All drivers are over a certain age
- You live in a certain area
Discounts can be earned simply because you are a member of a certain group. Ask insurers directly to be sure you have all the applicable discounts.
You may also want to look at the cost of keeping your full coverage but increasing the deductibles on your collision and comprehensive coverage.
This is a good method of saving money on insurance when your vehicle is still financed and you can’t drop full coverage. Therefore if your vehicle’s value is worth it, investigate this option.
Consider retaining more than liability coverage on your car.
Even if you are a great driver, there is always the risk that you can be the victim of an accident at the hands of an uninsured or underinsured driver.
If you carry uninsured/underinsured motorist coverage, it gives you protection if you are the victim of hit and run or an accident with an uninsured/underinsured driver.
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How much insurance do I have to have?
Every state requires that you are financially responsible for damage you cause to another driver and his vehicle. In 49 states, this means you must carry liability insurance. The minimum amount varies by state.
To check what your state’s minimum liability requirement is, see Edmund’s article.
In addition to liability, some states require that every driver also to buy uninsured motorist protection.
A few states require that drivers also carry PIP as part of their car insurance. Those states are: Colorado, Delaware, Florida, Hawaii, Kansas, Kentucky, Maryland, Massachusetts, Michigan, Minnesota, New Jersey, New York, North Dakota, Oregon, and Utah.
If you are still paying off an automobile loan, the lending institution will require you to carry comprehensive and collision throughout the lifetime of the loan. Failure to do so is cause for the car to be repossessed.
Purchasing Liability Only Car Insurance
If you decide to opt for car insurance with liability only, be sure that you have enough coverage. Many people choose to just carry the state-mandated limits, which are always very low.
Instead choose at least $100,000 bodily injury coverage per person, $300,000 per person and $100,000 property damage coverage. These are the suggested realistic limits that most insurance professionals advise you to carry.
By shopping around, you should be able to find very affordable car insurance options. In fact, everyone with car insurance should make it a habit of shopping around periodically and comparing and contrasting the available options for them in car insurance.
You can make your shopping around easy and quick by the free online auto insurance quotes tool on this page that practically does the shopping for you.
By simply inputting your zip code, the tool will ask you a variety of questions about the type of car you drive, your driving record and that of those who live with you, your needed coverage and how you use your car.
Before you know it you will have a variety of insurance quotes from top insurers serving your area. Compare them carefully for the price, as well as company reputation and stability, before making a decision.
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