The answer to this question starts with your state's mandatory insurance laws. All but one state has set minimum requirements as a precondition of you driving on the public roads. No matter whether this is an at-fault or a no-fault state, you are expected to be able to pay a minimum amount towards the cost of making good the losses flowing from an accident. It's possible this minimum amount may be enough cover.
The most common form of law applied to traffic accidents is
negligence. It identifies the driver who is the most immediate cause of
the damage and orders him or her to pay damages. It's quite expensive to
start a court case and fees are payable at each procedural step on the
way to a judgment. Because of these costs, it's uneconomic to sue
someone who has no assets, no savings, and no pay worth garnishing. If
you do not have assets to protect, there is less pressure to buy more
than the minimum liability insurance. You may, however, think it worth protecting the value of your own vehicle.
But if you have assets and those injured in an accident might think it
worth suing you, you should definitely buy more than the minimum cover.
At the very least, you should buy enough to protect the value of the
assets you already have. The more pessimistic you are about the risk of a
claim, the more liability cover you should buy.
To keep the cost as low as possible, you need to think about the
amount of the deductible you agree to autory. The idea is for you to pay
for all the smaller repairs to your own vehicle out of your own pocket.
That gives the best value for money if you are really unlucky and cause
a great deal of loss and damage.
Remember that getting cheaper auto insurance
is all about balancing risks against what you can afford. The higher
your net worth, the greater the need for a high amount of liability
cover. So look honestly at your financial situation and decide how much
you are at risk of losing should there be a claim. A deductible of, say,
$1,000 may give you more affordable annual premium rates. Remember the
auto insurance policy will not pay out until you have paid up the amount
of the deductible. So always ensure you have access to enough money to
cover the deductible. Follow these simple tips and you should find the
right level of cover for your cheap auto insurance.