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Minimum Wage, Maximum Car Insurance Pain

Keeping even an old beater on the road anywhere will consume a large amount of that bare-bones income. Gasoline is a big expense, but ultimately a controllable one:  You can walk, take the bus, combine your trips, or carpool.

But no one will split the cost of your insurance policy, which as a car owner you are legally required to buy in every state except New Hampshire (and even in New Hampshire, most people buy insurance).  States set their own levels of acceptable coverage. Maine and Alaska demand the most: $50,000 to cover the injuries of anyone you might hit ($100,000 total for any single accident), and $25,000 to cover the damage to other cars you cause.

There are very few trade-offs available to save money.

For example, you can't reduce your limits below these minimum amounts. Mostly these state-mandated policies have coverage limits that are very low anyway -- the $10,000 property damage limit required in many states wouldn't come close to replacing a newer-model car.

And you can't raise your deductible. There are no deductibles on liability insurance.

What you can do

The cost of liability insurance has more to do with the driver than the car. (The insurance company isn't going to fix your car, just the person's you hit.) In your search for affordable auto insurance, these are the factors you have some control over:

  • Your driving record: More than one violation or accident is going to hurt.
  • Your credit: If it's dismal, you're seen as a bigger risk of a claim and thus charged more in many states. (See "The double-whammy of bad credit.")
  • Your mileage: The less you drive,  the less risk of your hitting someone. (See "Plug in, drive less, save more.")
  • Your insurance history: If you've let your policy lapse, even for a few days, you'll pay about 5 percent more than you would have otherwise, according to Insurance.com.
  • Your insurance company: No two insurers offer identical rates, and even on state-minimum policies,  premiums can differ by hundreds of dollars a year.

Insurers do look at your car, and if it has a significantly higher rate of claims than most (because, say, it's driven mostly by young drivers), your liability rates will reflect that risk.

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