I have an older car whose current market value is very low – do I really need to purchase automobile insurance?

This is a two part answer!

Most states have enacted compulsory insurance laws that require drivers to purchase liability insurance (Part A) minimum limits established by law. These laws were enacted to ensure that victims of accidents are compensated when their losses are caused by someone else being negligent. Most people purchase limits well above and beyond the minimum amounts established by their state legislature. This makes sense since the price to increase is very reasonable, and most minimum limit requirements don’t come close to protecting you adequately in the event of a lawsuit.

The second part of this question has one answer: “It depends!” You need to determine the current market value of the vehicle in question in order to determine if it makes sense for you to purchase collision and other than collision (comprehensive) coverage on the vehicle. By way of example, say you own a 1998 vehicle that has an actual cash value (ACV) of $2,000 and the cost for collision coverage is $500. You also have a deductible of $500. If you total the vehicle the insurance company would pay you $1,500 leaving you with a net of $1,000. (remember the cost of the coverage?). Bottom line-spend your money wisely when it comes to the purchase of insurance coverages.