On the surface, liability-only insurance sounds great to a driver who wants to save money. It provides the legal minimum state-required coverage at an affordable price. Unfortunately, those financial savings may not offset the ultimate cost that a liability-only policy may impose on an underinsured driver.
Liability insurance is auto insurance that covers a limited amount of bodily and property damage that you are at fault for while operating your vehicle. For example, if you experience a collision with another vehicle due to your own negligence while driving, liability insurance pays for a portion of the other driver’s losses, such as vehicle repairs and medical bills. It does not, however, pay for repairs to your own vehicle or medical expenses that you incur due to the collision. This could leave you with a significant bill, and in some cases, without transportation altogether.
Carrying the minimum amount of auto insurance can cost you even more than your own repairs and medical bills too. If your coverage maximums don’t cover all of the expenses that another driver incurs due to a collision, you could face a lawsuit. In most U.S. states, you are ultimately responsible for the bodily and property damages you cause while driving, so a judge could force you to liquidate some of your cash and assets in order to pay for the damages your insurance does not cover.
It’s always a good idea to be prepared. Rather than skimp on your auto insurance coverage to save money, try achieving an affordable full-coverage premium by maintaining a good driving record, raising your policy deductible and combining your auto and homeowner’s insurance policies with the same insurer. You’ll still save money without risking your financial security every time you get behind the wheel of your car.