When should you switch to liability only car insurance

For drivers with extremely tight budgets, liability-only car insurance can seem like the smartest option. While the potential to pinch your pennies is there, liability coverage can end up costing WAY more in the long run. So, what’s the right insurance coverage for you?

At Unruh Insurance, we’re the insurance agency that tells you the truth — even about the times when liability insurance is enough for you. We want you to know how to make the best decision for your unique situation, so here are some guidelines for when it is okay to have liability-only car insurance — and when you NEED more complete coverage.

Car Insurance Explored

Since auto insurance is a legal requirement to drive on public roads in PA, you need to have car insurance to cover any damages that may result from an accident. Liability insurance is the term for car insurance that covers the damage you’d cause to other vehicles or injuries you may incur in an accident. This coverage keeps you from getting fined or ticketed, but does nothing to protect your vehicle in a variety of different circumstances.

Learn more about the penalties for driving without insurance.

While every driver and every situation differs, these are the general cases in which liability-only coverage is enough and when you need to upgrade to a plan that includes comprehensive and collision coverage.

When It’s Okay to Have Liability-Only Coverage

• Your Car Is Inexpensive and You Own It Outright — If the blue book value on your car is so low you couldn’t trade it in if you tried, you can feel safe driving with liability-only insurance. Put those extra monthly savings toward a down payment for a better car!
• You are a Young Driver with an Inexpensive Car — Young drivers are more expensive to insure and that can make them good candidates for this car insurance coverage. This only applies if they own the car outright and it doesn’t hold much residual value.
• You Wouldn’t Repair the Car if It Was Damaged — If you know your car is on its last legs and you’re a few months away from an upgrade, you can feel safe to temporarily carry liability-only car insurance coverage. This strategy often comes into play when drivers know the car won’t pass the state inspection without paying more than the car is worth.

When You Shouldn’t Have Liability-Only Coverage

• When You Still Owe Money on the Car — Even if you are a safe driver, you still need to carry collision insurance if you owe money on your car. Whether you make a mistake and hit something or are struck by an uninsured motorist or by a hit-and-run, having liability-only car insurance in those situations will be catastrophic.
• You Couldn’t Afford to Replace the Vehicle — If your finances couldn’t take the all-at-once hit from needing to dump thousands into repairing your car, then you need to pay the added monthly premium to ensure you NEVER will. As safe as you may be, there are always hit-and-runs and uninsured drivers out there that could cause serious damage to your car.

Either way, when you’re shopping around for insurance, make sure you understand the insurance coverage you’re actually getting. It is crucial to understand your deductibles, liability limits, and full tort vs. limited tort.

Comprehensive Coverage from Unruh Insurance

If you’re still deciding on the type of insurance coverage you want, the first step should be to have a conversation with an experienced insurance agent. At Unruh Insurance, there is never a cost to talk to us to review your current insurance plans. We can make recommendations and help you understand your options going forward. As always, in addition to offering great service (before you’re even a customer), we offer competitive car insurance quotes on insurance coverage of all kinds. Contact us for your free quote today.

Insuring all of your family’s vehicles can get expensive. Switching to liability only coverage on one or more of your vehicles is one way to save money, but you should weigh the benefits of having full coverage against the benefits of saving money before you make this decision.

Here’s some information about the different parts of your auto insurance policy and some helpful tips to keep in mind.

Understanding the different types of coverage

Full coverage insurance contains comprehensive, collision and liability insurance on one policy. If you are still paying off your car then you are usually required to keep full coverage on your vehicle and wouldn’t be able to opt for liability only.

Liability insurance is the bare minimum that all states require by law that you carry in some form or another. This is what protects you if you were to injure someone else or damage someone’s car in an accident while driving.

The amount of insurance you are required to carry varies state to state. Take Arizona for example. Drivers are required to hold coverage up to $15,000 for each person injured in an accident up to a maximum of $30,000 for the entire accident, and $10,000 worth of coverage for property damage.

Comprehensive insurance is what protects your car from damage that isn’t caused by collision with another car or single car collision, like fire, theft, falling objects, explosions, floods and vandalism.

Collision insurance covers both accidents that happen with another vehicle and damage that your car would sustain if you hit another object that wasn’t a car, like a light pole or a fire hydrant.

Consider how much your car is worth

Before you drop coverage to liability only, you should consider how much your car is worth. You can check out sites like Kelley Blue Book to help you come up with an estimate.

Let’s say your car is worth $2500 and your premiums for full coverage insurance are $100 per month, or $1200 per year. Your deductible is $500. If you were to drive your car into a pole and cause major damage, would it be worth it to you to pay the $500 deductible? Or would that money be better spent going toward a new vehicle?

If you are paying more in premiums in a year or two than your car is worth then it may be time to drop your insurance down to liability only.

Keep in mind that if you are in an accident caused by someone else, his or her liability insurance will cover you and your vehicle. Another reason to focus on the road at all times and to be a safe driver!

What’s in your emergency fund?

Do you have enough in your emergency fund to replace your car if you were to back into a tree the day after you drop your car’s full coverage insurance? Is your car worth enough that you would want to pay for those repairs in full?

If your emergency fund doesn’t contain enough money to replace or repair your car if an accident happens and you don’t have another vehicle to drive, then you shouldn’t drop your coverage.

Dropping collision only

If you consider yourself a safe driver, but you aren’t ready to drop full coverage completely, you can try dropping collision first and continue paying for comprehensive and liability. That way you will still be covered if your car gets vandalized or that tree does fall on it.

This is a good idea as long as you are keeping enough money in your emergency fund to pay for the deductible.

Want more tips about whether or not to drop your insurance to liability only? At Gebhardt Insurance Group we are independent Insurance specialists, so we shop the nation’s top insurance carriers to find you the absolute lowest insurance rate for your home, automobile or business. Call us a call today at 520-836-3244. We’re here to help!

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