Coverage Types

• Liability is required in most states, but you may drop comprehensive or collision insurance. A liability policy covers the damage you cause to other property or people if you have an accident. A comprehensive policy, which you can add to liability coverage, covers the same as liability but also damage to your car for damage caused by "other than collision," such as from hail, fire, theft or hitting a deer. A full-coverage policy, which is the most expensive, offers complete coverage, including damage caused to your vehicle, even if you were at fault.
  
  

Benefits

• It is cheaper to maintain only a liability policy, especially if you purchase only the state-minimum required coverage. This insurance alone allows you to keep your vehicle registered and on the road, but you do need to pay for extra coverage. You can also add or remove additional coverage to a liability policy, such as a comprehensive policy. Usually, the price to add on comprehensive coverage is minimal, often around $10 per month.
  
  

Considerations

• If you decide to drop full-coverage insurance to save money, check with your insurance agent to find out about raising your property damage and bodily injury coverage. Some states do not require much coverage at all, but you become liable for damage and money owed beyond your insurance's payout amount. As with a comprehensive policy, increasing limits does not cost a significant amount of money. Even if you raise your limits, you are likely to pay very little to protect your finances in the event of an accident.
  
  

Warnings

• If you have a loan on your vehicle, do not assume you can drop extra coverage. Banks often require you to keep a full-coverage policy in place during your loan. If you do not, some will enforce an expensive insurance policy to cover your loan amount, which is more expensive than you can purchase privately. Your car payment will rise, causing problems with your credit if you do not pay the new payment amount. Also, carrying low limits on your policy can put your finances in danger. Carefully consider your finances and insurance options; if you do not have the money to pay for damages in a serious accident, you put your savings, assets and future income in danger.