Jeffrey Johnson is a legal writer with a focus on personal injury. He has worked on personal injury and sovereign immunity litigation in addition to experience in family, estate, and criminal law. He earned a J.D. from the University of Baltimore and has worked in legal offices and non-profits in Maryland, Texas, and North Carolina. He has also earned an MFA in screenwriting from Chapman Univer...

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Laura Walker graduated college with a BS in Criminal Justice with a minor in Political Science. She married her husband and began working in the family insurance business in 2005. She became a licensed agent and wrote P&C business focusing on personal lines insurance. Laura serviced existing business and wrote new business. She now uses her insurance background to help educate drivers about...

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Reviewed by Laura Walker
Licensed Agent for 10 Years

UPDATED: Jul 10, 2021

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Low price auto insurance is usually a policy that just covers the minimum amount that the state requires to legally drive a car. It doesn’t have any extra riders or coverages. The exact amount will vary according to the state.

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While everyone wants to pay as little as possible for auto insurance, paying the minimum doesn’t usually fully protect you. However, if that’s all you can afford, you will at least be driving legally with that amount.

State Minimum Liability Insurance

Each state sets its own minimum requirement for liability coverage in that state. Liability is the part of the car insurance policy that pays for the damages to the other driver’s car and for any medical bills for the other driver’s injuries if you cause a wreck.

Liability is usually described using three numbers.

For example, Texas’s minimum liability requirement is 30/60/25. This means that the policy will pay for $30,000 worth of medical expenses per person and a total of $60,000 per accident.

The policy will also cover up to $25,000 to repair or replace the other person’s car or other personal property.

While this sounds like a lot of money, if the accident is very serious, this might not be enough at all.

Or, if the other driver has an expensive car–and these days many, many cars cost more than $25,000–you could be left having to pay the difference.

If you plow into a $50,000 BMW and only have $25,000 in coverage, the driver can sue you for the remainder of the money needed to replace his expensive car.

This is why the Insurance Information Institute recommends carrying 100/300/50 liability insurance no matter what your state requires. With this level of coverage, your insurance will be able to pay for the damages in most accidents.

Other Required Policies

In addition to liability, some states require other coverage. In some states, drivers are required to have uninsured/underinsured motorist coverage. This will pay for any damages you or your car incur in a wreck caused by a driver who does not have any liability insurance, or by a hit-and-run driver.

This policy also covers the remaining balance needed if someone doesn’t have enough insurance to cover the damages.

Some states also require some sort of medical coverage for you and your passengers on an auto insurance policy. This is especially true in no-fault states. There are two types of medical coverages: medical payments and PIP, short for personal injury protection.

Different states have different requirements for this, so check with your state’s insurance department or Department of Motor Vehicles for laws in your state.

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State Programs for Low-Income Families

Some states recognize that paying for even the bare, state-minimum-required car insurance can be a financial burden for some families.

Because of this, many states have set up programs with affordable car insurance coverage to help families that meet certain income and other requirements. This way, they can continue to drive legally to work and school and elsewhere.

California has such a program set up for California residents. Not everyone qualifies, however. To be eligible, you must be at least 19 years old and have had a valid driver’s license for at least three years.

You must also have a good driving record, so people with multiple DUIs would not be eligible. Your car must also be worth less than $20,000.

There is an income restriction with this program, depending upon the number of people in the household. Families with four members must bring in less than $57,625 per year. However, if you qualify for the program, you can pay as little as $400 per year for auto insurance.

There are some downsides to these state-sponsored low cost insurance policies, however. In the California system, young men between the ages of 19 and 25 pay an extra 25% because they are far more likely than any other group to be involved in a traffic accident.

This is not that unusual though–many auto insurance policies are more expensive for young drivers, and especially males.

The other drawback is that most of the time, these policies only provide the minimum amount required by law in that state. In California, that’s only 15/30/5 coverage, one of the lowest minimum requirements in the country.

If you want uninsured motorist or medical payment coverage, there’s an extra fee for each.

If you have a car loan, you’ll also be required to carry comp and collision by the bank who issued the loan. You’ll have to have a separate policy for these, though you can usually arrange for this with the same company who handles the liability.

But it will be extra money on top of the liability premium.

Driving without Insurance

If money is extremely tight, like it is for many people during hard economic times, you may be tempted to cancel your insurance and risk driving without it. Not only is this illegal, but it is a very unwise thing to do.

Every state has laws that require drivers to be financially responsible for any damage they cause while driving.

While one or two states allow residents to have a surety bond to show responsibility, that option is financially out of reach for most people because they don’t have the extra money to stick in a bond and leave alone.

Auto insurance is actually the cheapest way to fulfill the state requirement.

If you’re caught driving without insurance, not only could you get a ticket, but in some states you could have your car impounded immediately.

States that use a punitive point system can add up to three points against your driving record. It’s even worse if you cause an accident.

If you cause a wreck and don’t have insurance, the other driver can personally sue you for damages. Legally they have every right to do so, since it is your responsibility to pay for the damages both to the car and to the people in it.

This could put everything you’ve worked for in jeopardy: your home, your savings, your retirement accounts, etc.

The cost of insurance is a much better deal compared to all this. See what the Insurance Information Institute says about driving without coverage.

Shopping for Cars with Insurance in Mind

While paying for only the absolute minimum insurance required in your state may sound like the best way to save money, there are others.

Since auto insurance is there to protect your financial assets in case of an accident, it makes sense to carry enough coverage to do that. You can find ways to save and still carry the recommended amount.

One way to save is to drive an older car that does not require you to pay for comprehensive and collision. If you can afford to replace your older vehicle, especially if it is worth less than $2,000, it doesn’t make much sense to pay for comp and collision.

Some experts use the “ten times” guideline for determining if it makes financial sense to carry comp and collision. If the car is worth less than ten times the yearly premium for comp and collision, then feel free to drop that coverage.

If you are buying a new car, you need to realize that every lender will require you to have comp and collision to protect their investment. If you do buy a new car, check places like the website for Car and Driver to see what are the least expensive vehicles to insure and drive.

Figure in the whole cost of ownership on any car you buy, and you’ll save money while still having all the insurance you need.

Saving Money on Auto Insurance

You can also combine your car insurance with your renters or homeowner’s insurance. When you get both from the same company, you’ll nearly always receive a substantial savings on both.

If you have any other vehicles, like a motorcycle, RV, or boat, put them all on the same policy.

Perhaps the best thing you can do to keep insurance costs down is to be a safe driver.

While you can never completely avoid accidents, you can make sure you are doing everything you can to try. Don’t speed, run red lights, or drive when you’re overly tired or upset, and definitely do not drive when you’ve been drinking.

Another way to lower your auto insurance premium is to raise the deductible. While a $250 deductible sounds like a great deal, you’ll pay for it in higher premiums. Ask the insurance company what your premiums will be at $500 or even $1,000 as a deductible.

Just remember that a deductible is the amount you will have to pay out-of-pocket to get your car repaired if it gets damaged in a wreck. Always have the full amount of the deductible set aside in some sort of savings account, and don’t touch it.

You never know when you might have a wreck, so you’ll need to be able to get a hold of the money instantly if you are in one. Otherwise, you might be without your vehicle for a long time until you can come up with the money to fix it.

Ask for discounts from every company you talk to. There are many available, and it’s a good idea to go over them with an agent to see if you qualify for any.

Of course, shopping around and getting multiple online quotes can help you find the best deal.

Learn more tips for saving money on your car insurance from this article from the National Association of Insurance Commissioners.

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