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Last updated: July 7, 2023

When Not to Skimp on Car Insurance

Don’t get caught without enough coverage when you have a loss.

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While insurance is a requirement in most states, the type and amount of coverage you are legally required to have is usually pretty low. Most states don’t require much more than basic liability coverage, and the amount required is typically barely enough to cover a minor accident. But what happens if you have a major accident, someone without insurance hits you, or those in your car sustain injuries?

These are all instances where you’ll want to make sure that you didn’t skimp on your car insurance. Skimping usually means that you’ll be out of pocket for certain costs that you wouldn’t pay otherwise, if you had the right amount of coverage, that is.

When Not to Skimp on Car Insurance

When you have a new car, you want to make sure that you protect that asset with the right coverage options and levels. Additionally, if you have other assets that you want to protect, you should not skimp on insurance. Even if you don’t have assets to cover major losses, you want to have enough coverage because you could end up paying claims via wage garnishments for years to come.

Let’s dive into some specific scenarios where you may find yourself needing more coverage than you might have thought originally.

Understanding Car Insurance

Skimping on car insurance can mean more than one thing. It could mean that you don’t have enough liability coverage to pay an at-fault claim, or it could mean that you are deficient in other coverages that the insurance company offers. Let’s look at the components that insurance companies offer to you when you buy a policy.

  • Liability coverage: One of the most important areas of car insurance is liability coverage, which includes bodily injury and property damage coverage. Liability coverage pays for the damage and medical expenses to other parties when you are in an at-fault accident. A major accident would need to pay out more than a minor accident, and you are responsible for this amount even if you don’t have enough insurance to cover it.
  • Collision insurance: Collision coverage is an optional coverage that pays to repair your car if an at-fault accident damages it. When you have this coverage option, you pay a deductible to the repair facility, and the insurance company pays the remainder of the bill to get your car back to its original condition.
  • Comprehensive coverage: Another optional coverage is comprehensive coverage. This coverage pays to repair or replace your vehicle in instances that don’t involve a collision. For example, if a tree falls on your vehicle and damages it, this incident would be covered through comprehensive. As with collision coverage, you pay your deductible to the repair facility, and the insurance company pays the rest to restore the vehicle to its prior condition. If the car is totaled, this coverage pays to replace it.
  • Uninsured/underinsured motorist coverage: The last major section of an insurance policy is uninsured/underinsured motorist coverage. While most states require drivers to maintain car insurance, there are those who don’t have coverage or resources to pay claims. In this case, having uninsured motorist coverage means that you can fix your car without paying a deductible, even if the at-fault party doesn’t have insurance or high enough limits to cover your losses.

These coverages don’t represent all the coverage options available to you in your insurance policy. Take a closer look at the following scenarios to understand why you don’t want to skimp on coverage.

You Hit Another Car Without Enough Liability Coverage

Hitting another car when you don’t have enough liability coverage is probably one of the riskiest scenarios to run into. Cars are expensive. When you hit another vehicle, you are responsible not just for the repairs to the car, but also for the injuries to the parties within the vehicle that you hit. Injuries can be major or minor, but major injuries could cost hundreds of thousands of dollars.

When you hit another car, the liability coverage of your policy kicks in. Many state law requirements for this coverage are low. For example, California’s minimum car insurance is only $15,000, $30,000, and $5,000.1

In this scenario, you have $15,000 to pay for injuries to any one party in the vehicle that you hit. If there is more than one person in the vehicle, you have only $30,000 to pay for injuries to all parties; that’s the aggregate amount. And to fix the car, you have only $5,000 in coverage. That barely covers a fender bender on most newer vehicles.

In other words, while you may have met the legal requirement, you are grossly underinsured to pay for an accident properly. Raise limits to at least $100,000, $300,000, and $100,000 to ensure that you have enough to cover potential losses.

You Can’t Cover Your Own Repairs

Another scenario where you don’t want to skimp on car insurance is if your car needs repairs after an at-fault accident. Think about the value of your car. Can you pay to fix it if there are thousands of dollars in repair costs?

If you can’t, collision coverage pays to fix it. Remember that the state doesn’t concern itself with making the at-fault party whole in a loss, which is why you have to elect the coverage.

Collision coverage can be one of the costlier line items in an insurance policy (next to liability coverage), and it’s easy to dismiss it when you’re choosing coverages. But if you still need your vehicle working after an accident, this is a coverage option you don’t want to skimp on.

Someone Steals Your Car

If someone steals your car, you’ll want the insurance company to replace it, but many people don’t get the necessary coverage: comprehensive insurance. This is a truly frustrating scenario,  because you have no fault in the situation and no longer have your car.

Someone Hit You Who Doesn’t Have Car Insurance

If someone hits you, you want them to pay for the damages to your car and any injuries you incur. However, if someone doesn’t have any or enough insurance, you could be left suing them for damages that they may or may not be able to pay. This scenario is where you want to make sure that you have uninsured and underinsured motorist coverage.

Nearly 13 percent of drivers in the U.S. don’t have car insurance, even though most states require it.2 To protect yourself, you can opt for uninsured and underinsured motorist coverage. This optional coverage is less expensive than liability coverage and is a must if you have concerns about someone hitting your car who doesn’t have the right coverage in place.

For example, the difference in premiums for car insurance in Massachusetts between uninsured motorist coverage of $25,000/$50,000 and $100,000/$300,000 is about $10 per policy period, a negligible dollar amount that could end up saving you thousands.

You Get Hurt in an At-Fault Accident

When you hit another vehicle or object, there is no guarantee that you or your passengers will walk away from the accident without injuries. You will want medical payments or personal injury protection (available in no-fault insurance states) to pay for those injuries.

Many drivers make the mistake of skimping on medical coverage because they have health insurance already. What they don’t understand is that the health insurance company will require a certain amount the driver pays before it kicks in. This amount may be $1,000 or more, depending on the insurance. Having medical payments or personal injury protection will ensure that this money doesn’t come out of pocket.

You’re Stuck on the Side of the Road

If you don’t already have emergency roadside assistance through a third party, you want to get it with your insurance policy. For just a few dollars per policy period, you can get the help you need if you are stuck on the side of the road, such as a tire change, battery jump-start, or locksmith services.

Your Car Is at the Repair Shop, but You Still Need Wheels

When your car goes into the shop for a covered insurance claim, you probably still need a car to get around. This scenario is where rental car coverage comes into play, which pays for you to rent a car while yours is in the shop for repairs. Rental car coverage is an optional coverage that people often skimp on, even though it is just a few dollars per month. If you need a rental car after an auto accident, it will save you money.


Auto insurance exists to pay for losses associated with accidents and other incidents. Skimping on coverage means that certain common incidents do not have coverage and you must pay for losses out of pocket. To avoid paying costs yourself, get the right (and enough) coverage in the first place.

Frequently Asked Questions

What is a good rule of thumb for car insurance?

Generally, you want to have at least $100,000, $300,000, and $100,000 in liability coverage with a $500 deductible for both comprehensive and collision claims. You should also have $100,000/$300,000 for uninsured motorist coverage.

What is the best way to reduce your car insurance premium?

  1. Choose a higher deductible.
  2. Ensure the insurance company applies all discounts.
  3. Remain accident- and ticket-free.
  4. Improve your credit score.
  5. Drop coverages you don’t need. For example, keep liability insurance, but ask your insurance agent to drop rental car coverage or roadside assistance.
  6. Lower your limits.

Is it OK to have a gap in car insurance?

It is not OK to have a gap in car insurance. A gap can put you at risk of being financially responsible for losses and may lead to higher rates when you get a new policy.

Is it better to pay insurance every six months?

If you have a good driving record, paying insurance every six months can be better than paying it every 12 months. A six-month policy means that the insurance company reviews your policy semi-annually, and you could get more discounts applied at renewals. However, having your account reviewed more often could lead to higher rates if you have accidents or tickets.


  1. INSURANCE REQUIREMENTS. State of California DMV. (2023).

  2. One in Eight Drivers Uninsured. Insurance Research Council. (2021, Mar 22).