Do I Have Too Much Car Insurance Coverage?
Last Updated on January 30, 2020
Car insurance is essential if you’re going to be out on the road. Not only is it legally required, but it will prevent you from experiencing a serious financial loss if you get into an accident. However, it is possible to have too much car insurance. If you have more car insurance than you need, you’ll end up overpaying on your monthly insurance bill. Here’s what you need to know about overpaying for car insurance in New York.
New York State Car Insurance Requirements
In order to determine whether or not you have too much insurance, you’ll first need to understand the legal requirements for car insurance in New York State. If you’re caught driving without the mandatory car insurance, you could face significant financial penalties and even lose your license. New York requires that you have at least $10,000 of liability coverage for property damage, $25,000 for bodily injury of one person, $50,000 for bodily injury of two people, $50,000 for the death of one person, and $100,000 for the death of two people. Many people also opt for personal injury protection, collision, and comprehensive insurance, although it is not mandatory. It’s also common to purchase more than the required minimum amount of liability insurance. However, if you purchase too much additional insurance, you’ll end up with high monthly bills, and it’s unlikely you’ll ever use all of the insurance. Many car insurance companies will also sell you on other types of insurance, like gap insurance, uninsured motorist coverage, and more. While these types of insurance have their perks, they can also be very expensive, and they’re not necessary for everyone.
Do You Really Need Collision and Comprehensive Insurance?
The first thing to think about is whether you really need collision or comprehensive insurance, and how much of it you need. Both are good investments because they will ensure that you’re covered in an accident, regardless of whether or not you are at fault. New York is a no-fault state, which means your insurance will pay for your medical bills regardless of who is found at fault in the accident. However, when it comes to paying for property damage, traditional liability rules will still be in play, which means that the party found at fault and their insurance company will be responsible for the property damage. In these cases, collision and comprehensive insurance could save you from having to pay thousands of dollars.
However, there are some instances in which it may not make sense to invest in these policies, or at least not invest in a particularly high-value policy. The first instance of this is if you keep your car in a secure garage. If you keep your car in a garage, your chances of it being damaged by harsh weather or vandalized are much lower. In this case, it doesn’t make much sense to purchase comprehensive insurance, because the chance that you’ll need to use it is very low. You also may not want to purchase collision insurance if you don’t drive regularly. Many people who live in New York’s bigger cities only use their cars occasionally for long trips and rely on public transit for their daily commute. If this sounds like your situation, you may want to skip collision and comprehensive insurance and only opt for liability insurance or purchase a very low-value comprehensive plan. Drivers in this situation can also take advantage of pay-per-mile insurance, which is becoming more popular. With these types of insurance plans, you’re given a tracker for your car, and you only pay for the miles you actually drive. This is a great option for people who don’t drive often and don’t want to overpay for insurance.
Another instance where you might want to skip out on collision insurance is if you have an old or low-value car. If you were to get into an accident with this car, chances are you’d rather replace it than try to repair it, which makes collision insurance somewhat pointless. In this situation, it’s better to budget some extra money into a savings account for a new car instead of paying for collision insurance. However, if you owe money on your car, you may want to consider gap insurance. This insurance will pay for the outstanding amount owed to your lender or leaseholder if your car is totaled and is no longer driveable.
Do I Have Too Much Liability Coverage?
It’s often prudent to pay for slightly more than the minimum amount of liability coverage. You don’t want to be stuck owing thousands of dollars after a particularly bad crash. However, if you have too much liability coverage, you could end up a target for lawsuits, in addition to overpaying on your monthly bill. Insurance agents will often try to upsell you on coverage, so be sure to do your own research on the types of coverage available and whether or not you really need them.
It’s also important that your monthly insurance payments fit into your budget. If your car insurance payments are inhibiting your ability to pay your other bills or live comfortably, then you may want to downgrade to less coverage in order to afford your monthly bills. Another solution to this is to raise your deductible. Your deductible is the amount you’ll have to pay out of pocket before your insurance kicks in. When you have a low deductible, you can end up paying significantly more on a monthly basis, because car insurance companies see you as more of a risk. Raising your deductible will help you save on your monthly payments. Just make sure you have money put away in savings to cover the deductible if you do get into an accident.
You’ll never want to go without car insurance, but if you have too much car insurance, it can cause financial issues and make you a target for lawsuit. When looking at your car insurance policy, consider what coverage you’ll realistically need and what might be unnecessary.
