Arizona’s financial responsibility act requires that motorist purchase coverage from a licensed insurer for no less than the following amounts: (1) $15,000 bodily injury or death to a single person; (2) $30,000 bodily injury or death of two or more persons; and (3) $10,000 for injury or destruction of property of others in any single accident. A.R.S. § 28-4009. No other insurance coverages are required. This is the minimum amount of insurance a driver may purchase, but it does not need or address critical issues that can and often do arise in an automobile accident such as (1) which insurance companies to purchase from or (2) what other damages could occur; and (3) are the amounts adequate to protect you in a real-world situation.
Cheap insurance is an opinion based concept, but it implies a less expensive monthly, bimonthly or annual premium. It also means insurance coverage from a company not widely known and/or a policy that complies strictly with only the minimum coverages required by Arizona law. This blog will not address which insurance company is “best” as many of them are similar and offer varying degrees of benefits and detriments, often having little to do with how they handle or pay a claim. Instead, this blog will address the types of coverages and policies that are “cheap” and why you should avoid such policies.
A “cheap” policy is one that adheres only to the minimum requirements of the law. In other words, one that protects the driver (insured) just if the driver is at-fault for an accident, and only covers the property or injuries caused to an innocent driver, and only up to a certain amount. Such a policy would not protect you from (1) injuries caused to another driver that is greater than $15,000 or greater than $30,000 if more than one person was injured; (2) for damage to vehicles greater than $10,000; (3) from drivers that caused your injuries or property damage if they and not you were at-fault, or (4) for injuries you incurred that are greater than the amount of his/her (other driver’s) insurance coverage.
If the damage or injuries you caused exceeds the amount of your policy coverage, you are personally liable for the difference. Personal liability for the excess amount can lead to wage garnishment, bank garnishment and even the sale of your vehicles or house (in some instances). This is exposure to damages you may have caused. Also, “cheap” insurance does not protect you against damages another driver may inflict upon you. For example, if you have no collision coverage on your vehicle, you may have to pay for your property damage should the other driver have no insurance (uninsured) or only minimum limits for property damage ($10,000). If the driver that struck you caused damage to your vehicle and other vehicles in the same accident, all of you would be claimants on the same $10,000. Thus, you may be stuck paying the difference out of your pocket. Also, if you were injured by an uninsured driver, there would be no coverage available to compensate you for your medical bills, pain and suffering and other damages you would ordinarily be entitled to under Arizona law. Uninsured motorist coverage in a sufficient amount would protect you against this possibility. Also, if the driver that injured you only carried “cheap” insurance with minimum limits, any expenses and injuries more than $15,000, would have to be paid for by you. Purchasing underinsured motorist coverage in a sufficient amount would protect against this possibility. In addition, underinsured motorist coverage follows you, not the vehicle. This means that if you were injured by another motorist, even if you were not in a vehicle (i.e. riding a bicycle or walking), underinsured motorist coverage would protect you if the at-fault driver had a policy with limits that could not cover for the full amount of your bodily injuries.
Paying for cheap coverage is perfectly fine as long as you can see the future and know that your future is accident-free. Unfortunately, we live in a world where most people drive vehicles, are not adequately insured, and cause accidents. Saving money on auto insurance is not a financially sound decision.