What type of coverage is the most affordable auto insurance?
If your driving record is spotty, opting for minimum coverage can lower your auto insurance bill. Liability-only costs $36.55/mo less on average than full coverage.
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UPDATED: Oct 19, 2021
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- Each state sets its own minimum auto insurance coverage, however one bad accident can leave a person financially destitute without sufficient insurance protection
- Coverage options that a standard auto insurance company offers, such as collision and comprehensive protection provide for repair and replacement costs
- Having sufficient coverage to ensure a family member’s medical needs are provided for requires insurance coverage that goes above the bare minimum requirements
- By selecting the highest deductible amount, policyholders end up paying less in premium payments for the year, which reduces their overall insurance costs
As every state requires drivers to carry auto insurance coverage, finding an affordable plan can go a long way towards helping to reduce yearly living expenses.
The broad range of insurance plans available can make it difficult to determine which type of coverage will produce the most savings. Find the right coverage for you when you enter your ZIP code into our FREE car insurance comparison tool.
Each state sets its own minimum auto insurance coverage; however, one bad accident can leave a person financially destitute without sufficient insurance protection. In this regard, affordable can take on a whole different meaning in terms of what a person’s actual coverage needs may be.
Types of Auto Insurance Coverage
An auto insurance policy can include any number of different coverage types. The types of auto insurance coverage included can vary depending on a person’s individual circumstances and needs.
Some of the coverage types available include:
- Collision protection
- Comprehensive protection
- Uninsured motorist coverage
- Personal injury protection
- Liability coverage
As state laws dictate minimum coverage requirements, policies must include whatever coverages these requirements demand. Other factors affecting a person’s coverage needs have to do with the type of car used, whether the car is paid off or financed and the amount of risk a person is willing to take.
Coverage options that a standard auto insurance company offers, such as collision and comprehensive protection provide for repair and replacement costs.
In cases where a person is financing a car, collision and/or comprehensive coverage may be required by the financing company.
In some cases, comprehensive protection may also cover drivers in any vehicle they may be operating. On the other hand, someone who drives an older car and owes nothing on it can go without collision and comprehensive protection since coverage limits are limited to the actual cash value of the car.
When considering the wide array of conditions that can affect a policyholder’s situation, finding the most affordable auto insurance coverage boils down to finding the best rates that provide for whatever coverage needs exist.
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Minimum Coverage Requirements
When considering auto insurance coverage costs alone, the most affordable type of coverage matches whatever minimum requirements exist within each individual state. The majority of states in the U.S. require drivers to carry Property Damage and Bodily Injury Liability coverage.
In general, liability insurance coverage only pays for damages or injuries to those affected by a driver’s actions.
This means any damages or injuries suffered by the driver or any passengers are not covered by insurance.
And while these coverage types are the most affordable, drivers should consider any potential out-of-pocket costs in the event of serious bodily injury to themselves and any passengers in the car.
A few states, such as Florida and Michigan have a no-fault provision meaning each driver is responsible for their own damages and costs.
In these states, a Personal Injury Protection (PIP) policy meets the minimum insurance requirement.
Basically, a PIP policy covers hospital, medical and funeral expenses for the driver, any passengers and any pedestrians who suffer bodily harm.
Something else to consider with liability coverage is the potential loss of income drivers may experience should an accident cause them serious bodily harm. The PIP minimum coverage requirement can also leave drivers unable to earn an income in the event of serious bodily harm.
Affordable Risk Factors
Affordable risk factors have to do with the areas in a person’s life where potential taking risks can have a significant impact on quality of life. Depending on the person, significant areas of risk may include:
- Financial net worth
- Family members
- Type of vehicle used
These factors can have a considerable bearing on what passes as affordable auto insurance coverage, especially when a person has a lot to lose.
Someone with considerable financial assets may view affordability in terms of what it will cost if insurance protection doesn’t cover potential losses. In this case, opting for state minimum requirements can leave a person’s net assets wide open to out-of-pocket costs in the event of a serious accident.
People with families typically transport loved ones on a daily basis, which creates a whole different set of risk factors that may or may not be affordable should the unexpected occur.
Having sufficient coverage to ensure a family member’s medical needs are provided for requires insurance coverage that goes above the bare minimum requirements.
The type of vehicle used and the area where a person lives can also have a bearing on what a person’s actual auto insurance needs are.
Someone with a brand new car might consider increasing insurance coverage limits to ensure any losses can be recouped if the car is totaled or badly damaged.
People who live in areas where fender benders are the norm may also consider maintaining adequate coverages on their auto insurance plan.
Cost Reduction Alternatives
Most car insurance policies include a deductible provision that requires policyholders to pay a certain amount of money upfront before insurance coverage kicks in. Policyholders have the option of choosing which deductible level they want.
Auto insurance needs may vary from person to person, but there are still ways to make insurance protection affordable regardless of the types of needs involved.
Deductible amounts make it possible for insurers to share the financial risk of insuring drivers with their policyholders. So, auto insurance companies can base a policy’s monthly, quarterly or yearly premium rates on the deductible amount a policyholder decides on.
By selecting the highest deductible amount, policyholders end up paying less in premium payments for the year, which reduces their overall insurance costs.
Other areas to target for cost reductions include maintaining a clean driving record and taking advantage of discount offers available through an insurance provider.
Maintaining a clean driving record means avoiding speeding tickets and driving defensively at all times to reduce the likelihood of accidents.
This reduces the number of claims filed on a policy, which helps keep insurance premiums from increasing.
Some companies also offer discount rates to policyholders who purchase homeowner or renters insurance in addition to their auto insurance plan. Customers who purchase multiple plans through an insurer may be eligible for reduced auto insurance rates.
No matter what discounts are available, our FREE car insurance search tool will get you the best deals when you enter your ZIP code.