Liability-Only auto insurance refers to a policy where you are covered if you're at fault. If you hit another car, a pedestrian, or damage someone else's property, your coverage will kick in and you will not be held responsible for the other party's bills.
However, the big warning for this type of policy is that you and your car will not be covered. If you cause the accident, you'll need to take care of all the damages on your own. If someone else causes the accident, then you'll need to hope they have enough coverage for your injuries and property.
Let's look at when this policy is worth it.
You Have A Car You Can Lose
People who buy Liability-Only often do so because it's the least expensive form of car insurance. The affordable monthly payments are just too good to pass up — especially if you're on a cash-strapped budget. But this is only recommended if you have a car that you're comfortable losing. Maybe it's an old car that you didn't pay very much for to begin with. Maybe it's a car that was passed down to you and is largely only good for running local errands. If you know you can buy another inexpensive car right away, then Liability-Only may be worth it.
You've Planned Ahead
There's more to a total loss accident than just losing your car. If you're involved in a wreck, you've effectively squashed your freedom at the same time. Unless you live in a place with tremendous public transportation, then you'll need to find another way to get to work, head to the grocery store, or just generally get on with your day. But if you have a back-up plan in place in case you won't have a car for a few days (or even weeks), liability may be worth it.
For some people, the amount they save per month is worth a car insurance policy of Liability-Only. If you're saving $100 a month and your car only cost $1,000, then it only takes 10 months before you'd have enough to pay for a new car in the event the old one wrecks. But for many people, their car is worth more to them than that. Many also don't have a solid back-up plan if their car is destroyed — making it worth buying a more effective policy.
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