Are Bare Bones Cheap Auto Insurance Policies Right for You?

Detroit, Michigan is poised to become a test site for a bare-bones auto insurance program aimed to get the city’s uninsured drivers to carry some kind of coverage. Michigan’s 19% uninsured driver rate is well above the 13% national average, and some estimate that as many as half of Detroit’s drivers are uninsured or illegally using addresses outside the city to obtain cheaper rates. The proposed cheap car insurance policy plan is modeled after a California program that offers reduced minimum policy injury limits of $10,000 per person and $20,000 per accident with qualification restrictions. (Under the California plan, you must be at least 19, have been licensed to drive for at least 3 years, have a household income that is no greater than 2.5 times the poverty level and your vehicles can’t be worth more than $20,000.)

The rationale for these cheap car insurance policies, which often cut premiums by as much as 50%, is that it’s better for drivers to have some kind of car insurance than none at all. But some fear that people injured by holders of the bare-bones car insurance policies will quickly exhaust the policy limits. Opponents point out that most states’ minimum requirements are inadequate as they stand and lowering the requirements for some will only result in more lawsuits or more seriously injured people on Medicaid.

Is Minimum Cheap Auto Insurance Enough?

  • Every state sets its own minimum auto liability insurance. They vary from a low of $15,000 per person and $30,000 per accident for bodily injury and $5,000 for property damage (commonly written 15/30/5) to a high of 50/100/25. As the policy holder, you’re on the hook for any costs that exceed those minimums. And, really, how far will 5 grand go toward repairing that Lexus you rear-ended?
  • Anytime an accident happens and you’re at fault, you could find yourself on the wrong end of a lawsuit. It’s true that many of these cheap auto insurance policies will pay for legal disputes, but only up to the limit of your coverage.
  • Considering that you generally get what you pay for, minimum cheap car insurance may not be a deal. You’re far better off shopping online for the best price on the amount of coverage that will protect you. You’ll get competitive quotes for car insurance from top rated companies and some peace of mind in the bargain.

If you’re driving an old beater, rarely put more than a couple hundred miles a month on your vehicle or are really strapped for cash, then any car insurance is better than none. But review your policy and your situation at least once a year to see if it makes financial sense to increase your coverage. Then shop around for competitive cheap auto insurance quotes.


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