Can You Have Too Much Auto Insurance?
by Christy Bieber | Published on Sept. 27, 2021
Drivers could end up paying for coverage they don't need.
Having a sufficient amount of auto insurance coverage is essential for every motorist. At a minimum, every driver should have the required car insurance for their state. This is crucial to avoid facing potential criminal consequences for failing to have the mandatory minimum insurance.
Many drivers should also buy optional coverages as well in order to get the protection they need for their vehicle and their personal assets. However, the more coverage a driver buys, the higher their auto insurance premiums will be. As a result, while drivers want enough protection, they don't want to buy too much coverage.
When would a driver have too much auto insurance?
Drivers are in danger of buying too much insurance coverage in two specific situations:
- If they purchase redundant coverage
- If they purchase coverage they don't really need
A driver might end up with redundant coverage if they buy a type of auto insurance protection they are already getting from another source. For example, if a motorist is a AAA member, they may get free roadside assistance from their AAA membership. If they pay added premiums for roadside assistance from their car insurance company as well, they are paying for coverage they already have. This redundant coverage is increasing their policy premiums for no added benefit.
And a driver could end up purchasing coverage they don't really need if they are buying insurance that wouldn't pay off in the event of a loss. For example, say a motorist has a very old, inexpensive car that's only worth around $1,000. If that driver bought collision insurance or comprehensive insurance with a $1,000 deductible, they'd be paying for protection they couldn't use.
That's because the collision or comprehensive coverage would pay the market value of their car in the event of a covered loss, such as a car accident they caused or a tree falling on the vehicle.
That means the policy would only pay a maximum of $1,000 if that was all the car was worth. And the insured policyholder would have to cover their insurance deductible -- which is $1,000 -- before the insurer would pay anything at all. So they'd be paying premiums, and the insurer would end up paying out $0 even if a covered loss happened.
How can a driver avoid ending up with too much auto insurance?
The best way for motorists to avoid buying redundant or unnecessary auto insurance coverage is to review their policies regularly and to read the fine print carefully.
Every motorist should know what their insurance policy covers and should compare that to their actual needs for protection. This process should be done at least once a year, as coverage needs can change, especially as vehicles get older. While motorists are reviewing their policy, it can also pay to get several car insurance quotes in order to make sure their coverage is still the best deal, as the right insurer can change from year-to-year depending on circumstances as well.
By regularly reviewing coverage and shopping around for a policy, drivers can ensure they have only the protection they need and aren't overpaying for coverage.
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