Who doesn't want to save money on auto insurance? One way to do that is by cutting back on coverage. But while it may be tempting to carry only the minimum amount of auto insurance to save on your insurance premiums, you could open yourself up to a host of financial risks.
Here are four reasons to reconsider getting more than the bare minimum when it comes to auto insurance.
1. Medical Bills From an Accident
If you're injured in a crash, your treatment could result in thousands or tens of thousands of dollars in medical bills. The overall financial toll of car-accident-related injuries in the U.S. is staggering. In a report published in 2023, the National Highway Traffic Safety Administration put the total medical costs associated with car accidents at $31 billion in 2019.
If you stick with the minimum amount of coverage required in your state, you may be stuck with a pile of medical debt.
State Requirements for Liability and Medical Coverage
In practically every state, motorists must purchase a minimum amount of bodily injury liability and property damage liability insurance. This coverage pays to repair or replace the other driver's car and pays other people's medical bills if you're at fault in an accident. But liability insurance doesn't cover your medical bills or those of your passengers.
However, a dozen states mandate that drivers carry personal injury protection (PIP) coverage. In these no-fault states, each motorist must cover medical bills for themselves and their passengers. That's no matter who caused the accident.
How to protect yourself: To help ease the blow of accident-related medical bills, consider purchasing medical payments (MedPay) coverage. Most states offer MedPay insurance as optional coverage. In states without optional MedPay coverage, PIP may be available as extra coverage.
2. Car Repair Bills From an Accident
The cost to repair a car damaged in an accident could run into the thousands of dollars. For example, fixing a damaged car frame might run as high as $10,000.
That's where comprehensive and collision coverage can help. Both types of coverage are optional, not mandatory. If you have an auto loan or lease, however, you may be required to carry comprehensive and collision coverage until the end of your loan or lease term.
Comprehensive coverage pays for damage that's not caused in a collision. For example, comprehensive coverage can cover damage done by a fire, flood, tornado or fallen tree limb. It can even cover the theft of your entire car or car parts. The Insurance Information Institute estimates this coverage averages a little over $134 per year.
As its name suggests, collision coverage pays for damage to your car that's caused when it collides with an object like a guardrail or telephone pole, or when you're involved in a rollover accident. The Insurance Information Institute estimates this coverage costs $290 per year.
How to protect yourself: You can add comprehensive and collision coverage even if your auto loan or leasing company doesn't require it. This expense could be far less than the cost of repair bills if you lack comprehensive and collision coverage.
3. High Deductibles
Along with reducing your coverage limits, you may think you're saving money by raising your deductible. Doing so could reduce your premium costs, but it will also increase what you'll pay out of pocket before your insurance kicks in.
If, for instance, you pick a $1,000 deductible for comprehensive or collision coverage instead of a $500 deductible, your premium likely will go down. (Liability insurance doesn't come with deductibles.)
The Effect of a $1,000 Deductible vs. a $500 Deductible
So, let's say you settled on a $1,000 deductible for your collision coverage and your car is damaged in an accident. Collision coverage would help pay to repair your car, regardless of who was at fault.
If the repair bill adds up to $5,000, you'd be responsible for $1,000 (the amount of your deductible) and your insurer would pick up the remaining $4,000 of the tab. However, if you had selected a $500 deductible, you'd be responsible for $500 and your insurer would kick in $4,500.
Worse yet, if the damage to your car is minor and the repair bill winds up being only $900—$100 less than the $1,000 deductible—then you'd have to pay the entire bill out of your own pocket.
How to protect yourself: If you don't want to be hit with out-of-pocket repair expenses, consider lowering your deductible—even though it might result in paying a higher premium. And if you stay with a higher deductible, you might want to maintain an emergency fund with enough cash to cover your portion of a car repair bill. When you're looking to save money on insurance, shopping around can result in big savings. Compare rates by using Experian's free quote comparison tool.
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4. Car Repair Bills Tied to an Uninsured or Underinsured Motorist
In 2022, an estimated 1 in 7 U.S. motorists (14%) drove without auto insurance, according to the Insurance Research Council. Even more drivers might be underinsured, which means the coverage they do have isn't likely to cover the cost of their claims.
Therefore, the chances are great that you regularly share the roads with motorists who have inadequate auto insurance or no auto insurance at all. If you happen to get into an accident with an uninsured or underinsured driver, you could be left with hefty medical bills or repair bills.
A handful of states mandate uninsured motorist coverage or underinsured motorist coverage. However, some places might require only bodily injury coverage and not property damage coverage as part of uninsured or underinsured motorist coverage.
If you have uninsured motorist coverage, your insurer may be able to cover at least some of your financial losses stemming from a run-in with an uninsured or underinsured driver.
How to protect yourself: If you live in a state that doesn't require uninsured or underinsured motorist coverage, you may want to look into buying it. You might never need the coverage, but when you do, it could save you a bundle of money. And if you do carry this type of insurance, be sure your coverage limits are high enough so that you're adequately compensated following a run-in with an uninsured or underinsured driver.
The Bottom Line
Given that car repair bills and medical bills can set you back financially—to the tune of thousands of dollars—it might pay to consider buying more coverage than your state requires. Or you may want to think twice before raising your deductible. Otherwise, you could end up paying more than you can afford to fix your car.