YOU ASK:

Should I purchase low-cost car insurance?

WE ANSWER:

This will depend on your personal situation. If you can only afford to buy a basic car insurance policy, low-cost car insurance is the product for you. However, those wanting to get a more substantial coverage should be prepared to pay higher premiums in order to be fully protected.

How Low-Cost Car Insurance Works

Low-cost automobile insurance has been introduced by a number of states in an attempt to curtail the number of uninsured drivers. It is a measure primarily aimed at low-income motorists who don't have many assets to protect. California and New Jersey are two states which have enacted certain low-cost car insurance programs.

  • The California Low Cost Automobile Insurance program allows eligible low-income drivers to purchase basic liability automobile insurance of up to $10,000 for bodily injury liability per person, $20,000 per accident and $3,000 for property damage liability per accident. In order to qualify for the California Low Cost Automobile Insurance program, applicants must have family income within certain limits ($27,075 for a one-person, and $36,425 for a two-people household). In addition to the income requirement, applicants must have held a driving license for the past three years, their auto must be worth a maximum of $20,000 and they must have a spotless driving history.
  • You can choose between three different types of car insurance policies in the state of New Jersey. Standard auto insurance policies are the most common choice among New Jersey drivers, since standard policies allow you to purchase extra coverage. The low-cost car insurance option is basic automobile insurance - a no-fault coverage designed for motorists, such as students, whose earnings and financial responsibilities are meager. The protection provided by the Basic car insurance policy is a maximum of $250,000 for severe bodily injury, $5,000 for physical damage liability and $15,000 for bodily injuries per person.

As you can see, low-cost car insurance gives uninsured motorists the chance to purchase automobile coverage at affordable rates. However, what it does in fact is create more and more underinsured drivers because of the lower coverage limits it offers.

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