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Is It Worth Getting Cheap Auto Insurance In Miami With Bare Bones Coverage?

it's your faultIf you’re thinking about buying cheap auto insurance in Miami FL with the absolute minimum coverage, then read this article to make sure you don’t do something you might regret in the future. Yes, you’ll save some bucks, but at what cost? The three major elements to consider when shopping for good but cheap auto insurance are Personal Injury Protection (PIP) insurance, Property Damage Liability (PDL) insurance, and your personal net worth.

If you didn’t know already, Florida is classified as a no-fault state for auto insurance purposes. Some states fall into the fault category, and yet others have hybrid insurance systems. I’ll explain all of this in greater detail shortly. Plus I’ll enlighten you on some of the pertinent terminology you need to know, and lay out the advantages and disadvantages of going with a minimum coverage policy. After reading what I have to say, you should have a good idea as to whether you should get affordable carĀ  insurance with bare bones coverage is the right strategy for you.

How Does Insurance Work in Florida and What Is a No-Fault State vs Fault State?

As previously mentioned, Florida is a no-fault state. What this means is that no matter who is at fault in an car or truck accident, your insurance company will pay for the damages to your personal property and personal injuries. The maximum that your insurer pays is determined by the limits set forth in your insurance policy.

As an example, another driver runs a red light, totals your car, and injures you and two other people in your car. Even though the other driver is responsible for the accident, you would submit a claim to YOUR insurance company to seek compensation. Your insurance company will review the claim amounts against the coverage you have on your vehicle and for medical expenses, including passengers. If all is in order, they will cut you a check, excluding the deductible.

So, let’s say that your medical expenses totaled $15,000, but your policy limited your medical coverage to $10,000 per accident. The difference of $5,000 would come out of your pocket. Of course, if you have medical coverage as part of your job, that may help. Check your employer healthcare policy. But it’s something to think about if you have insurance with low coverage limits.

Under the no-fault system, you are not allowed to sue the person who was at fault for additional medical costs or pain and suffering unless there were extenuating circumstances. This rule would be waived if your injuries or those of your passengers were very severe. Examples would include death, dismemberment, or disfigurement. At this point, you’d probably want to hire a personal injury attorney.

Now, if the accident occurred in a fault state, you would exchange insurance information with the other party. You would then file a claim with their insurance company. And although specific laws will vary from state to state, there are no restrictions on whether you can sue the other party to recover much more money in a fault state.

What is Personal Injury Protection (PIP) Insurance and Why Does the State Force Me to Buy It When Obtaining Even the Cheapest Car Insurance in Miami?

Personal Injury Protection (PIP) insurance (along with PDL insurance discussed below) is the minimum type of insurance that you can have in Florida. If you don’t have these, you can’t register a car.

PIP insurance covers two things. The first is your personal medical expenses in the event you’re injured in a car accident. The second thing it covers is lost wages, due to you being unable to work as a result of the accident. It doesn’t cover damage to your vehicle or anything else.

The minimum amount of Personal Injury Protection coverage that you can have when shopping for auto insurance in South Florida is $10,000. But again, if your injuries exceed this amount, you may not be able to sue the other party for more money.

What is Property Damage Liability (PDL) Insurance and Why Does It Have to Be Part of My Policy When Getting Cheap Auto Insurance?

As mentioned above, Florida law requires you to have both PIP and PDL insurance. PDL insurance indemnifies or covers damage that you cause to another person’s property during an auto accident. This can include their car as well as lamp posts, buildings, fencing, etc.

So when you purchase auto insurance in Miami, the minimum amount of Property Damage Liability coverage that you can have is $10,000.

What Is Net Worth?

net worthYour net worth is the total dollar amount you end up with when you take the current value of everything you own (your assets) and subtract everything you owe (your debts/bills).

As an example, let’s say that you own a $200,000 home, but you still need $125,000 to pay off the mortgage. You have a car that is paid off, but if you sold it today, it would fetch $5,000. You have $25,000 in cash and investments. Finally, you have $10,000 in credit card and other debt.

So your assets would be ($200,000 home + $5,000 car + $25,000 cash/investments = $230,000). And your debts or liabilities would be ($125,000 mortgage + $10,000 credit cards = $135,000). Now calculate the difference ($230,000 assets – $135,000 debts = $95,000 net worth)

What Does Net Worth Have to Do With Getting Cheap Car Insurance?

Your net worth may be much higher or much lower than the above example. The point is once you know this number; even roughly, you have something objective to use in making a buying decision.

Your net worth is what you’re putting at risk if you’re involved in an accident and you only have the minimum insurance coverage to fall back on. You may have to purchase another car out of your own pocket, if the accident was your fault.

You’ll also have to figure out how to pay for excess medical costs beyond your policy limit. Perhaps your healthcare policy from work might fill the gap. But what about the other injured passengers in your car? They’ll have no choice but to sue you for everything you own.

The bottom line is that you should make sure that your insurance coverage is in line with your net worth.

Now let’s say that your net worth is zero or negative, meaning you have more debts than assets. Plus you have an old car that is only worth a couple thousand dollars. In this case, you might have a good argument for getting inexpensive car insurance in Miami Dade County with the minimum coverage. You have no assets to lose and if anyone tried to sue you there wouldn’t be much for them to collect.

So now you’re aware of what it means to have the absolute minimum insurance coverage in Florida. And of course, the cost for such coverage will be quite low. But your job is use the above information to decide if the minimum if right for you and other people who might drive your car. If you’re married or have children, keep them in mind as you consider the pluses and minuses of proceeding down the path of obtaining cheap auto insurance in Miami.